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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

OR

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.

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

2

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.

3

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.

4

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.

5

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

6

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.

7

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