SEC Filing - CTO Realty Growth

Six Months Ended

June 30, 2023

June 30, 2022

Supplemental Disclosure of Cash Flow Information:

Cash Paid for Taxes, Net of Refunds Received

Cash Paid for Interest ⁽¹⁾

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-11350

CTO REALTY GROWTH, INC.

(Exact name of registrant as specified in its charter)


Maryland		59-0483700
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

369 N. New York Avenue, Suite 201
Winter Park, Florida		32789
(Address of principal executive offices)		(Zip Code)

(407) 904-3324

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbols	Name of each exchange on which registered:
Common Stock, $0.01 par value per share	CTO	NYSE
6.375% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	CTO PrA	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☒

Non-accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 20, 2023, there were 22,698,072 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

Table of Contents

INDEX


		Page
		No.
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets – June 30, 2023 (Unaudited) and December 31, 2022		3

Consolidated Statements of Operations – Three and six months ended June 30, 2023 and 2022 (Unaudited)		4

Consolidated Statements of Comprehensive Income – Three and six months ended June 30, 2023 and 2022 (Unaudited)		5

Consolidated Statements of Stockholders’ Equity – Three and six months ended June 30, 2023 and 2022 (Unaudited)		6

Consolidated Statements of Cash Flows – Six months ended June 30, 2023 and 2022 (Unaudited)		8

Notes to Consolidated Financial Statements (Unaudited)		10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		38

Item 3. Quantitative and Qualitative Disclosures About Market Risk		51

Item 4. Controls and Procedures		51

PART II—OTHER INFORMATION		51

Item 1. Legal Proceedings		51

Item 1A. Risk Factors		51

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		52

Item 3. Defaults Upon Senior Securities		52

Item 4. Mine Safety Disclosures		52

Item 5. Other Information		52

Item 6. Exhibits		53

SIGNATURES		54

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CTO REALTY GROWTH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	As of
	(Unaudited) June 30, 2023		December 31, 2022
ASSETS
Real Estate:
Land, at Cost	$	249,607	$	233,930
Building and Improvements, at Cost		600,249		530,029
Other Furnishings and Equipment, at Cost		847		748
Construction in Process, at Cost		3,557		6,052
Total Real Estate, at Cost		854,260		770,759
Less, Accumulated Depreciation		(48,198)		(36,038)
Real Estate—Net		806,062		734,721
Land and Development Costs		682		685
Intangible Lease Assets—Net		113,083		115,984
Assets Held for Sale—See Note 23		1,115		—
Investment in Alpine Income Property Trust, Inc.		37,906		42,041
Mitigation Credits		1,950		1,856
Mitigation Credit Rights		—		725
Commercial Loans and Investments		46,483		31,908
Cash and Cash Equivalents		7,312		19,333
Restricted Cash		2,755		1,861
Refundable Income Taxes		145		448
Deferred Income Taxes—Net		2,423		2,530
Other Assets—See Note 11		41,596		34,453
Total Assets	$	1,061,512	$	986,545
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	3,980	$	2,544
Accrued and Other Liabilities—See Note 17		18,347		18,028
Deferred Revenue—See Note 18		6,890		5,735
Intangible Lease Liabilities—Net		11,960		9,885
Long-Term Debt		541,768		445,583
Total Liabilities		582,945		481,775
Commitments and Contingencies—See Note 21
Stockholders’ Equity:
Preferred Stock – 100,000,000 shares authorized; $0.01 par value, 6.375% Series A Cumulative Redeemable Preferred Stock, $25.00 Per Share Liquidation Preference, 2,999,254 shares issued and outstanding at June 30, 2023 and 3,000,000 shares issued and outstanding at December 31, 2022		30		30
Common Stock – 500,000,000 shares authorized; $0.01 par value, 22,691,598 shares issued and outstanding at June 30, 2023 and 22,854,775 shares issued and outstanding at December 31, 2022		227		229
Additional Paid-In Capital		168,103		172,471
Retained Earnings		291,958		316,279
Accumulated Other Comprehensive Income		18,249		15,761
Total Stockholders’ Equity		478,567		504,770
Total Liabilities and Stockholders’ Equity	$	1,061,512	$	986,545

The accompanying notes are an integral part of these consolidated financial statements.

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Revenues
Income Properties	$	22,758	$	16,367	$	45,190	$	31,535
Management Fee Income		1,102		948		2,200		1,884
Interest Income From Commercial Loans and Investments		1,056		1,290		1,851		2,008
Real Estate Operations		1,131		858		1,523		1,246
Total Revenues		26,047		19,463		50,764		36,673
Direct Cost of Revenues
Income Properties		(6,670)		(4,812)		(13,823)		(8,828)
Real Estate Operations		(639)		(228)		(724)		(279)
Total Direct Cost of Revenues		(7,309)		(5,040)		(14,547)		(9,107)
General and Administrative Expenses		(3,327)		(2,676)		(7,054)		(5,719)
Provision for Impairment		—		—		(479)		—
Depreciation and Amortization		(10,829)		(6,727)		(21,145)		(13,096)
Total Operating Expenses		(21,465)		(14,443)		(43,225)		(27,922)
Gain (Loss) on Disposition of Assets		1,101		—		1,101		(245)
Other Gains and Income (Loss)		1,101		—		1,101		(245)
Total Operating Income		5,683		5,020		8,640		8,506
Investment and Other Income (Loss)		1,811		(1,311)		(2,480)		(3,205)
Interest Expense		(5,211)		(2,277)		(9,843)		(4,179)
Income (Loss) Before Income Tax Benefit (Expense)		2,283		1,432		(3,683)		1,122
Income Tax Benefit (Expense)		(483)		(214)		(510)		298
Net Income (Loss) Attributable to the Company		1,800		1,218		(4,193)		1,420
Distributions to Preferred Stockholders		(1,195)		(1,196)		(2,390)		(2,391)
Net Income (Loss) Attributable to Common Stockholders	$	605	$	22	$	(6,583)	$	(971)

Per Share Information—See Note 13:
Basic and Diluted Net Income (Loss) Attributable to Common Stockholders	$	0.03	$	0.00	$	(0.29)	$	(0.05)

Weighted Average Number of Common Shares
Basic and Diluted		22,482,957		18,012,534		22,593,280		17,870,394

The accompanying notes are an integral part of these consolidated financial statements.

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net Income (Loss) Attributable to the Company	$	1,800	$	1,218	$	(4,193)	$	1,420
Other Comprehensive Income:
Cash Flow Hedging Derivative - Interest Rate Swaps		7,379		2,611		2,488		10,623
Total Other Comprehensive Income		7,379		2,611		2,488		10,623
Total Comprehensive Income (Loss)	$	9,179	$	3,829	$	(1,705)	$	12,043

The accompanying notes are an integral part of these consolidated financial statements.

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

For the three months ended June 30, 2023:


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders' Equity
Balance April 1, 2023	$	30	$	227	$	167,436	$	300,066	$	10,870	$	478,629
Net Income Attributable to the Company		—		—		—		1,800		—		1,800
Stock Repurchase		—		—		(76)		—		—		(76)
Payment of Equity Issuance Costs		—		—		(51)		—		—		(51)
Stock-Based Compensation Expense		—		—		794		—		—		794
Preferred Stock Dividends Declared for the Period		—		—		—		(1,195)		—		(1,195)
Common Stock Dividends Declared for the Period		—		—		—		(8,713)		—		(8,713)
Other Comprehensive Income		—		—		—		—		7,379		7,379
Balance June 30, 2023	$	30	$	227	$	168,103	$	291,958	$	18,249	$	478,567

For the three months ended June 30, 2022:


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders' Equity
Balance April 1, 2022	$	30	$	60	$	81,092	$	339,828	$	9,529	$	430,539
Net Income Attributable to the Company		—		—		—		1,218		—		1,218
Stock Repurchase		—		—		(1,147)		—		—		(1,147)
Exercise of Stock Options and Stock Issuance to Directors		—		—		88		—		—		88
Stock Issuance, Net of Equity Issuance Costs		—		1		5,689		—		—		5,690
Stock-Based Compensation Expense		—		—		625		—		—		625
Preferred Stock Dividends Declared for the Period		—		—		—		(1,196)		—		(1,196)
Common Stock Dividends Declared for the Period		—		—		—		(6,934)		—		(6,934)
Other Comprehensive Income		—		—		—		—		2,611		2,611
Balance June 30, 2022	$	30	$	61	$	86,347	$	332,916	$	12,140	$	431,494

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited, in thousands)

For the six months ended June 30, 2023:


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders' Equity
Balance January 1, 2023	$	30	$	229	$	172,471	$	316,279	$	15,761	$	504,770
Net Loss Attributable to the Company		—		—		—		(4,193)		—		(4,193)
Stock Repurchase		—		(3)		(5,082)		—		—		(5,085)
Vested Restricted Stock and Performance Shares		—		1		(1,029)		—		—		(1,028)
Exercise of Stock Options and Stock Issuance to Directors		—		—		241		—		—		241
Payment of Equity Issuance Costs		—		—		(122)		—		—		(122)
Stock-Based Compensation Expense		—		—		1,624		—		—		1,624
Preferred Stock Dividends Declared for the Period		—		—		—		(2,390)		—		(2,390)
Common Stock Dividends Declared for the Period		—		—		—		(17,738)		—		(17,738)
Other Comprehensive Income		—		—		—		—		2,488		2,488
Balance June 30, 2023	$	30	$	227	$	168,103	$	291,958	$	18,249	$	478,567

For the six months ended June 30, 2022:


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders' Equity
Balance January 1, 2022	$	30	$	60	$	85,414	$	343,459	$	1,517	$	430,480
Net Income Attributable to the Company		—		—		—		1,420		—		1,420
Adjustment to Equity Component of Convertible Debt Upon Adoption of ASU 2020-06		—		—		(7,034)		4,022		—		(3,012)
Stock Repurchase		—		—		(1,147)		—		—		(1,147)
Vested Restricted Stock and Performance Shares		—		—		(845)		—		—		(845)
Exercise of Stock Options and Common Stock Issuance		—		—		237		—		—		237
Stock Issuance, Net of Equity Issuance Costs		—		1		8,478		—		—		8,479
Stock-Based Compensation Expense		—		—		1,244		—		—		1,244
Preferred Stock Dividends Declared for the Period		—		—		—		(2,391)		—		(2,391)
Common Stock Dividends Declared for the Period		—		—		—		(13,594)		—		(13,594)
Other Comprehensive Income		—		—		—		—		10,623		10,623
Balance June 30, 2022	$	30	$	61	$	86,347	$	332,916	$	12,140	$	431,494

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Six Months Ended
	June 30, 2023		June 30, 2022
Cash Flow from Operating Activities:
Net Income (Loss) Attributable to the Company	$	(4,193)	$	1,420
Adjustments to Reconcile Net Income (Loss) Attributable to the Company to Net Cash Provided by Operating Activities:
Depreciation and Amortization		21,145		13,096
Amortization of Intangible Liabilities to Income Property Revenue		1,306		978
Amortization of Deferred Financing Costs to Interest Expense		482		337
Amortization of Discount on Convertible Debt		79		109
Loss (Gain) on Disposition of Real Estate and Intangible Lease Assets and Liabilities		(1,101)		66
Loss on Disposition of Commercial Loans and Investments		—		179
Provision for Impairment		479		—
Accretion of Commercial Loans and Investments Origination Fees		(66)		(79)
Non-Cash Imputed Interest		(15)		(107)
Deferred Income Taxes		107		(589)
Unrealized Loss on Investment Securities		6,092		4,348
Extinguishment of Contingent Obligation		(2,300)		—
Non-Cash Compensation		1,934		1,611
Decrease (Increase) in Assets:
Refundable Income Taxes		302		157
Land and Development Costs		3		6
Mitigation Credits and Mitigation Credit Rights		631		266
Other Assets		(4,623)		(2,802)
Increase in Liabilities:
Accounts Payable		1,437		650
Accrued and Other Liabilities		2,167		1,915
Deferred Revenue		1,155		852
Net Cash Provided By Operating Activities		25,021		22,413
Cash Flow from Investing Activities:
Acquisition of Real Estate and Intangible Lease Assets and Liabilities		(89,574)		(29,621)
Acquisition of Commercial Loans and Investments		(17,427)		(46,876)
Proceeds from Disposition of Property, Plant, and Equipment, Net, and Assets Held for Sale		2,303		6,754
Principal Payments Received on Commercial Loans and Investments		986		17,182
Acquisition of Investment Securities		(2,712)		(1,797)
Net Cash Used In Investing Activities		(106,424)		(54,358)
Cash Flow From Financing Activities:
Proceeds from Long-Term Debt		115,500		55,000
Payments on Long-Term Debt		(19,600)		(11,000)
Cash Paid for Loan Fees		(40)		(148)
Cash Received Exercise of Stock Options and Common Stock Issuance		241		172
Cash Used to Purchase Common and Preferred Stock		(5,085)		(1,147)
Cash Paid for Vesting of Restricted Stock		(1,028)		(845)
Proceeds from (Cash Paid for) Issuance of Common Stock, Net		(122)		8,478
Dividends Paid - Preferred Stock		(2,390)		(2,391)
Dividends Paid - Common Stock		(17,200)		(13,197)
Net Cash Provided By Financing Activities		70,276		34,922
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash		(11,127)		2,977
Cash, Cash Equivalents and Restricted Cash, Beginning of Period		21,194		31,349
Cash, Cash Equivalents and Restricted Cash, End of Period	$	10,067	$	34,326

Reconciliation of Cash to the Consolidated Balance Sheets:
Cash and Cash Equivalents	$	7,312	$	7,137
Restricted Cash		2,755		27,189
Total Cash	$	10,067	$	34,326

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited, in thousands)