Company Quick10K Filing
Consolidated Tomoka Land
Price58.72 EPS6
Shares5 P/E10
MCap297 P/FCF18
Net Debt272 EBIT42
TEV569 TEV/EBIT14
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-06
10-Q 2019-09-30 Filed 2019-10-23
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10-Q 2019-03-31 Filed 2019-04-30
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10-Q 2018-09-30 Filed 2018-10-26
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10-K 2012-12-31 Filed 2013-03-08
10-Q 2012-09-30 Filed 2012-11-07
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10-Q 2010-08-16 Filed 2010-08-16
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10-K 2009-12-31 Filed 2010-03-12
8-K 2020-07-29 Earnings, Regulation FD, Exhibits
8-K 2020-06-30 Officers, Regulation FD, Exhibits
8-K 2020-04-29
8-K 2020-04-28
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8-K 2020-02-21
8-K 2020-02-12
8-K 2020-02-12
8-K 2020-02-03
8-K 2020-01-24
8-K 2019-12-09
8-K 2019-11-26
8-K 2019-10-23
8-K 2019-10-18
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8-K 2019-02-05
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8-K 2018-10-17
8-K 2018-10-17
8-K 2018-10-17
8-K 2018-07-18
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8-K 2018-04-25
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8-K 2018-04-17
8-K 2018-04-17
8-K 2018-04-09
8-K 2018-02-21
8-K 2018-02-07
8-K 2018-02-07

CTO 10Q Quarterly Report

Part I—Financial Information
Item 1. Financial Statements
Note 1. Description of Business and Principles of Interim Statements
Note 2. Revenue Recognition
Note 3. Income Properties and Leases
Note 4. Commercial Loan Investments
Note 5. Related Party Management Services Business
Note 6. Real Estate Operations
Note 7. Investments in Joint Ventures
Note 8. Investment Securities
Note 9. Fair Value of Financial Instruments
Note 10. Intangible Lease Assets and Liabilities
Note 11. Impairment of Long - Lived Assets
Note 12. Other Assets
Note 13. Common Stock and Earnings per Share
Note 14. Treasury Stock
Note 15. Long - Term Debt
Note 16. Interest Rate Swaps
Note 17. Accrued and Other Liabilities
Note 18. Deferred Revenue
Note 19. Stock - Based Compensation
Note 20. Income Taxes
Note 21. Commitments and Contingencies
Note 22. Business Segment Data
Note 24. Subsequent Events
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Item 4. Controls and Procedures
Part Ii—Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 cto-20200331ex3111fb920.htm
EX-31.2 cto-20200331ex31261ecda.htm
EX-32.1 cto-20200331ex32176265f.htm
EX-32.2 cto-20200331ex322112c7e.htm

Consolidated Tomoka Land Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
58546835123411702012201420172020
Assets, Equity
504030201002012201420172020
Rev, G Profit, Net Income
45243-18-39-602012201420172020
Ops, Inv, Fin

10-Q 1 cto-20200331x10q.htm 10-Q cto_Current_Folio_10Q

 

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 March 31, 2020

 

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 01-11350

 


 

CONSOLIDATED-TOMOKA LAND CO.

(Exact name of registrant as specified in its charter)

 


 

 

 

 

Florida

    

59-0483700

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

1140 N. Williamson Blvd., Suite 140

 

 

Daytona Beach, Florida

 

32114

(Address of principal executive offices)

 

(Zip Code)

 

(386) 274-2202

(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 Symbol

    

Name of each exchange on which registered:

COMMON STOCK, $1.00 PAR VALUE

 

CTO

 

NYSE American

 

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  

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class of Common Stock Outstanding

May 1, 2020

$1.00 par value 4,713,261

 

 

INDEX

 

 

 

 

 

 

Page

 

    

No.

PART I—FINANCIAL INFORMATION 

 

 

 

 

 

Item 1.      Financial Statements 

 

 

 

 

 

Consolidated Balance Sheets – March 31, 2020 (Unaudited) and December 31, 2019

 

3

 

 

 

Consolidated Statements of Operations – Three months ended March 31, 2020 and 2019 (Unaudited) 

 

4

 

 

 

Consolidated Statements of Comprehensive Income – Three months ended March 31, 2020 and 2019 (Unaudited) 

 

5

 

 

 

Consolidated Statements of Shareholders’ Equity – Three months ended March 31, 2020 and 2019 (Unaudited) 

 

6

 

 

 

Consolidated Statements of Cash Flows – Three months ended March 31, 2020 and 2019 (Unaudited) 

 

7

 

 

 

Notes to Consolidated Financial Statements (Unaudited) 

 

9

 

 

 

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

 

46

 

 

 

Item 3.      Quantitative and Qualitative Disclosures About Market Risks 

 

62

 

 

 

Item 4.      Controls and Procedures 

 

63

 

 

 

PART II—OTHER INFORMATION 

 

63

 

 

 

Item 1.      Legal Proceedings 

 

63

 

 

 

Item 1A.   Risk Factors 

 

63

 

 

 

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

 

67

 

 

 

Item 3.      Defaults Upon Senior Securities 

 

67

 

 

 

Item 4.      Mine Safety Disclosures 

 

67

 

 

 

Item 5.      Other Information 

 

67

 

 

 

Item 6.      Exhibits 

 

68

 

 

 

SIGNATURES 

 

69

 

 

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

    

(Unaudited) March 31,
2020

    

December 31,
2019

ASSETS

 

 

 

 

 

 

Property, Plant, and Equipment:

 

 

 

 

 

 

Income Properties, Land, Buildings, and Improvements

 

$

508,205,557

 

$

392,841,899

Other Furnishings and Equipment

 

 

739,011

 

 

733,165

Construction in Progress

 

 

24,788

 

 

24,788

Total Property, Plant, and Equipment

 

 

508,969,356

 

 

393,599,852

Less, Accumulated Depreciation and Amortization

 

 

(23,865,921)

 

 

(23,008,382)

Property, Plant, and Equipment—Net

 

 

485,103,435

 

 

370,591,470

Land and Development Costs

 

 

6,805,176

 

 

6,732,291

Intangible Lease Assets—Net

 

 

65,638,034

 

 

49,022,178

Assets Held for Sale—See Note 23

 

 

4,633,801

 

 

833,167

Investment in Joint Ventures

 

 

55,741,248

 

 

55,736,668

Investment in Alpine Income Property Trust, Inc.

 

 

25,108,018

 

 

38,814,425

Mitigation Credits

 

 

2,559,434

 

 

2,322,596

Commercial Loan Investments

 

 

39,658,204

 

 

34,625,173

Cash and Cash Equivalents

 

 

18,593,046

 

 

6,474,637

Restricted Cash

 

 

2,910,392

 

 

128,430,049

Other Assets—See Note 12

 

 

10,284,943

 

 

9,703,549

Total Assets

 

$

717,035,731

 

$

703,286,203

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts Payable

 

$

1,239,274

 

$

1,385,739

Accrued and Other Liabilities—See Note 17

 

 

8,574,703

 

 

5,687,192

Deferred Revenue—See Note 18

 

 

5,634,425

 

 

5,830,720

Intangible Lease Liabilities—Net

 

 

27,207,594

 

 

26,198,248

Liabilities Held for Sale—See Note 23

 

 

831,320

 

 

831,320

Income Taxes Payable

 

 

998,519

 

 

439,086

Deferred Income Taxes—Net

 

 

86,969,609

 

 

90,282,173

Long-Term Debt

 

 

313,372,702

 

 

287,218,303

Total Liabilities

 

 

444,828,146

 

 

417,872,781

Commitments and Contingencies—See Note 21

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

Common Stock – 25,000,000 shares authorized; $1 par value, 6,105,763 shares issued and 4,716,106 shares outstanding at March 31, 2020; 6,076,813 shares issued and 4,770,454 shares outstanding at December 31, 2019

 

 

6,044,971

 

 

6,017,218

Treasury Stock – 1,389,657 shares at March 31, 2020 and 1,306,359 shares at December 31, 2019

 

 

(77,355,328)

 

 

(73,440,714)

Additional Paid-In Capital

 

 

32,190,616

 

 

26,689,795

Retained Earnings

 

 

312,626,687

 

 

326,073,199

Accumulated Other Comprehensive Income (Loss)

 

 

(1,299,361)

 

 

73,924

Total Shareholders’ Equity

 

 

272,207,585

 

 

285,413,422

Total Liabilities and Shareholders’ Equity

 

$

717,035,731

 

$

703,286,203

 

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

3

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

March 31,

 

    

2020

    

2019

Revenues

 

 

 

 

 

 

Income Properties

 

$

11,003,031

 

$

10,724,418

Management Fee Income

 

 

702,601

 

 

 —

Interest Income from Commercial Loan Investments

 

 

1,052,049

 

 

 —

Real Estate Operations

 

 

80,751

 

 

234,901

Total Revenues

 

 

12,838,432

 

 

10,959,319

Direct Cost of Revenues

 

 

 

 

 

 

Income Properties

 

 

(2,113,095)

 

 

(1,932,488)

Real Estate Operations

 

 

(1,524,366)

 

 

(46,167)

Total Direct Cost of Revenues

 

 

(3,637,461)

 

 

(1,978,655)

General and Administrative Expenses

 

 

(3,091,740)

 

 

(2,501,620)

Impairment Charges

 

 

(1,904,500)

 

 

 —

Depreciation and Amortization

 

 

(4,552,471)

 

 

(3,346,287)

Total Operating Expenses

 

 

(13,186,172)

 

 

(7,826,562)

Gain on Disposition of Assets

 

 

 —

 

 

6,869,957

Gain on Extinguishment of Debt

 

 

636,937

 

 

 —

Other Gains and Income

 

 

636,937

 

 

6,869,957

Total Operating Income

 

 

289,197

 

 

10,002,714

Investment and Other Income (Loss)

 

 

(13,186,398)

 

 

38,755

Interest Expense

 

 

(3,452,598)

 

 

(2,923,229)

Income (Loss) from Continuing Operations Before Income Tax Expense

 

 

(16,349,799)

 

 

7,118,240

Income Tax Benefit (Expense) from Continuing Operations

 

 

4,087,940

 

 

(1,774,640)

Income (Loss) from Continuing Operations

 

 

(12,261,859)

 

 

5,343,600

Income from Discontinued Operations (Net of Income Tax)—See Note 23

 

 

 —

 

 

1,124,499

Net Income (Loss)

 

$

(12,261,859)

 

$

6,468,099

 

 

 

 

 

 

 

Per Share Information—See Note 13:

 

 

 

 

 

 

Basic and Diluted

 

 

 

 

 

 

Net Income (Loss) from Continuing Operations

 

$

(2.60)

 

$

1.00

Net Income from Discontinued Operations (Net of Income Tax)

 

 

 —

 

 

0.21

Basic and Diluted Net Income (Loss) per Share

 

$

(2.60)

 

$

1.21

 

 

 

 

 

 

 

Dividends Declared and Paid

 

$

0.25

 

$

0.10

 

 

 

 

 

 

 

 

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

4

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

    

March 31,
2020

    

March 31,
2019

Net Income (Loss)

 

$

(12,261,859)

 

$

6,468,099

Other Comprehensive Loss

 

 

 

 

 

 

Cash Flow Hedging Derivative - Interest Rate Swap (Net of Income Tax of $(457,059) and $(43,732), respectively)

 

 

(1,373,285)

 

 

(128,814)

Total Other Comprehensive Loss, Net of Income Tax

 

 

(1,373,285)

 

 

(128,814)

Total Comprehensive Income (Loss)

 

$

(13,635,144)

 

$

6,339,285

 

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

5

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

For the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

Common

 

Treasury

 

Paid-In

 

Retained

 

Comprehensive

 

Shareholders’

 

    

Stock

    

Stock

    

Capital

    

Earnings

    

Income (Loss)

    

Equity

Balance January 1, 2020

 

$

6,017,218

 

$

(73,440,714)

 

$

26,689,795

 

$

326,073,199

 

$

73,924

 

$

285,413,422

Net Loss

 

 

 —

 

 

 —

 

 

 —

 

 

(12,261,859)

 

 

 —

 

 

(12,261,859)

Stock Repurchase

 

 

 —

 

 

(3,914,614)

 

 

 —

 

 

 —

 

 

 —

 

 

(3,914,614)

Equity Component of Convertible Debt

 

 

 —

 

 

 —

 

 

5,247,550

 

 

 —

 

 

 —

 

 

5,247,550

Exercise of Stock Options

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Vested Restricted Stock and Performance Shares

 

 

23,892

 

 

 —

 

 

(561,973)

 

 

 —

 

 

 —

 

 

(538,081)

Stock Issuance

 

 

3,861

 

 

 —

 

 

237,280

 

 

 —

 

 

 —

 

 

241,141

Stock Compensation Expense from Restricted Stock Grants and Equity Classified Stock Options

 

 

 —

 

 

 —

 

 

577,964

 

 

 —

 

 

 —

 

 

577,964

Cash Dividends ($0.25 per share)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,184,653)

 

 

 —

 

 

(1,184,653)

Other Comprehensive Loss, Net of Income Tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,373,285)

 

 

(1,373,285)

Balance March 31, 2020

 

$

6,044,971

 

$

(77,355,328)

 

$

32,190,616

 

$

312,626,687

 

$

(1,299,361)

 

$

272,207,585

 

For the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Treasury Stock

 

Additional Paid-In Capital

 

Retained Earnings

 

Accumulated Other Comprehensive Income (Loss)

 

Shareholders’ Equity

Balance January 1, 2019

 

$

5,995,257

 

$

(32,345,002)

 

$

24,326,778

 

$

213,297,897

 

$

486,543

 

$

211,761,473

Net Income

 

 

 —

 

 

 —

 

 

 —

 

 

6,468,099

 

 

 —

 

 

6,468,099

Stock Repurchase

 

 

 —

 

 

(4,125,194)

 

 

 —

 

 

 —

 

 

 —

 

 

(4,125,194)

Exercise of Stock Options

 

 

12,957

 

 

 —

 

 

(316,272)

 

 

 —

 

 

 —

 

 

(303,315)

Stock Issuance

 

 

4,779

 

 

 —

 

 

267,352

 

 

 —

 

 

 —

 

 

272,131

Stock Compensation Expense from Restricted Stock Grants and Equity Classified Stock Options

 

 

 —

 

 

 —

 

 

539,470

 

 

 —

 

 

 —

 

 

539,470

Cash Dividends ($0.10  per share)

 

 

 —

 

 

 —

 

 

 —

 

 

(534,896)

 

 

 —

 

 

(534,896)

Other Comprehensive Loss, Net of Income Tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(128,814)

 

 

(128,814)

Balance March 31, 2019

 

$

6,012,993

 

$

(36,470,196)

 

$

24,817,328

 

$

219,231,100

 

$

357,729

 

$

213,948,954

 

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

6

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

March 31,

 

    

2020

    

2019

Cash Flow from Operating Activities:

 

 

 

 

 

 

Net Income (Loss)

 

$

(12,261,859)

 

$

6,468,099

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:

 

 

 

 

 

 

Depreciation and Amortization

 

 

4,552,471

 

 

3,346,287

Amortization of Intangible Liabilities to Income Property Revenue

 

 

(474,023)

 

 

(580,655)

Loan Cost Amortization

 

 

149,503

 

 

105,841

Amortization of Discount on Convertible Debt

 

 

503,987

 

 

331,260

Gain on Disposition of Assets Held for Sale

 

 

 —

 

 

(6,869,957)

Gain on Extinguishment of Debt

 

 

(636,937)

 

 

 —

Impairment Charges

 

 

1,904,500

 

 

 —

Accretion of Commercial Loan Origination Fees

 

 

(87,590)

 

 

 —

Non-Cash Imputed Interest on Commercial Loan Investment

 

 

(95,566)

 

 

 —

Deferred Income Taxes

 

 

(6,472,549)

 

 

981,616

Unrealized Loss on Investment Securities

 

 

13,706,407

 

 

 —

Non-Cash Compensation

 

 

577,964

 

 

811,601

Decrease (Increase) in Assets:

 

 

 

 

 

 

Refundable Income Taxes

 

 

 —

 

 

225,024

Assets Held for Sale

 

 

(204)

 

 

(218,215)

Land and Development Costs

 

 

(72,885)

 

 

19,151

Mitigation Credits

 

 

(236,838)

 

 

14,444

Other Assets

 

 

(581,394)

 

 

(626,572)

Increase (Decrease) in Liabilities:

 

 

 

 

 

 

Accounts Payable

 

 

(146,465)

 

 

(46,184)

Accrued and Other Liabilities

 

 

2,887,511

 

 

(928,957)

Deferred Revenue

 

 

(196,295)

 

 

(579,351)

Liabilities Held for Sale

 

 

 —

 

 

294,689

Income Taxes Payable

 

 

559,433

 

 

1,465,653

Net Cash Provided By Operating Activities

 

 

3,579,171

 

 

4,213,774

Cash Flow from Investing Activities:

 

 

 

 

 

 

Acquisition of Property, Plant, and Equipment and Intangible Lease Assets and Liabilities

 

 

(137,997,353)

 

 

(188,112)

Acquisition of Commercial Loan Investments

 

 

(6,754,375)

 

 

 —

Cash Contribution for Interest in Joint Venture

 

 

(4,580)

 

 

(9,515)

Proceeds from Disposition of Property, Plant, and Equipment, Net, and Assets Held for Sale

 

 

 —

 

 

24,004,060

Net Cash Provided By (Used In) Investing Activities

 

 

(144,756,308)

 

 

23,806,433

Cash Flow from Financing Activities:

 

 

 

 

 

 

Proceeds from Long-Term Debt

 

 

56,641,000

 

 

3,000,000

Payments on Long-Term Debt

 

 

(21,589,269)

 

 

(44,070,200)

Cash Paid for Loan Fees

 

 

(1,879,635)

 

 

 —

Cash Proceeds from Exercise of Stock Options and Stock Issuance

 

 

241,141

 

 

 —

Cash Used to Purchase Common Stock

 

 

(3,914,614)

 

 

(4,125,194)

Cash Paid for Vesting of Restricted Stock

 

 

(538,081)

 

 

(303,315)

Dividends Paid

 

 

(1,184,653)

 

 

(534,896)

Net Cash Provided By (Used In) Financing Activities

 

 

27,775,889

 

 

(46,033,605)

Net Decrease in Cash

 

 

(113,401,248)

 

 

(18,013,398)

Cash, Beginning of Year

 

 

134,904,686

 

 

22,031,964

Cash, End of Period

 

$

21,503,438

 

$

4,018,566

 

 

 

 

 

 

 

 

Reconciliation of Cash to the Consolidated Balance Sheets:

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

18,593,046

 

$

2,682,205

Restricted Cash

 

 

2,910,392

 

 

1,336,361

Total Cash as of March 31, 2020 and 2019, respectively

 

$

21,503,438

 

$

4,018,566

 

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

7

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 

Supplemental Disclosure of Cash Flows:

 

Income taxes refunded totaled approximately $5,000 and $687,000 during the three months ended March 31, 2020 and 2019, respectively. No payments were made during the three months ended March 31, 2020 and 2019.

 

Interest totaling approximately $3.1 million and $3.4 million was paid during the three months ended March 31, 2020 and 2019, respectively. No interest was capitalized during the three months ended March 31, 2020 or 2019.

 

On February 4, 2020, in connection with the issuance of the 2025 Notes, hereinafter defined in Note 15, “Long-Term Debt”, the Company exchanged approximately $57.4 million of 2020 Notes for the 2025 Notes. This non-cash transaction was not reflected within the consolidated statement of cash flows as it was effectively a non-cash replacement of debt for equal principal value. The remaining approximately $17.6 million is reflected as proceeds from and payments on long-term debt to complete the retirement of the remaining 2020 Notes and issue the remaining 2025 Notes. In addition, in connection with the $75.0 million 2020 Notes, approximately $5.2 million of the 2025 Issuance was allocated to the equity component for the conversion option. This non-cash allocation was reflected on the consolidated balance sheet as a decrease in the long-term debt of approximately $7 million and an increase in deferred income taxes of approximately $1.8 million.

 

Discontinued operations provided approximately $1.7 million of the net cash flows provided by operating activities for the three months ended March 31, 2019, which consists of approximately $1.9 million in cash flow from discontinued real estate operations offset by approximately $215,000 of net cash outflows related to discontinued golf operations.

 

In connection with the Company’s implementation of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) Topic 842, Leases, effective January 1, 2019, the Company recorded an increase in right-of-use assets and lease liabilities for leases for which the Company is the lessee. The amount of the adjustment totaled approximately $681,000 and was reflected as an increase in Other Assets and Accrued and Other Liabilities for corporate leases totaling approximately $473,000 and an increase in Assets Held for Sale and Liabilities Held for Sale for golf operations segment leases totaling approximately $208,000.

 

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

 

 

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. DESCRIPTION OF BUSINESS AND PRINCIPLES OF INTERIM STATEMENTS

 

COVID-19 PANDEMIC

 

In March 2020, the agency of the United Nations, responsible for international public health, declared the outbreak of the novel coronavirus as a pandemic (the “COVID-19 Pandemic”), which has spread throughout the United States. The spread of the COVID-19 Pandemic has caused significant volatility in the U.S. and international markets and in many industries, business activity has virtually shut-down entirely. There is significant uncertainty around the duration and severity of business disruptions related to the COVID-19 Pandemic, as well as its impact on the U.S. economy and international economies. As such, the Company is not yet able to determine the full impact of the COVID-19 Pandemic on its operations and therefore, the potential that such impact will be material.

The actions taken by federal, state, and local governments to mitigate the spread of the COVID-19 Pandemic by ordering closure of nonessential businesses and ordering residents to generally stay at home has resulted in many of our tenants temporarily closing their businesses, and/or expressing concerns about their ability to pay rent. These economic hardships have adversely impacted our business, and we expect them to have a negative effect on our financial results. We expect such negative effects to be greater during the quarter ending June 30, 2020 than they were during the quarter ended March 31, 2020.

An assessment of the current or identifiable potential financial and operational impact on the Company as a result of the COVID-19 Pandemic is as follows:

·

Based on April 2020 contractual base rent, of the Company’s portfolio, 62% has remained open since the onset, of the COVID-19 Pandemic, with 27% operating on a limited basis.

·

The Company was contacted by certain of its tenants who are seeking rent relief through possible deferrals or other potential modifications of lease terms, beginning with the April 2020 rent. The rent payable for April 2020 from the Company’s tenants seeking rent relief represents approximately 37% of April 2020 contractual base rent. We expect that our rent collections will be below our tenants’ contractual rent obligations for so long as governmental orders require non-essential businesses to remain closed and residents to stay at home, which will adversely impact our results of operations. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted. April collections and rent relief requests to-date may not be indicative of collections or requests in any future period. Depending upon the duration of tenant closures and the overall economic downturn resulting from the COVID-19 Pandemic, we may find deferred rents difficult to collect.

·

The Company believes certain of the programs available under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) may provide tenants with the ability to obtain proceeds from loans provided by the Federal government which could provide liquidity that would allow the tenant to pay its near-term rent. However, no assurances can be given that the tenants will seek to access or will receive funds from these programs or will be able to use the proceeds to pay their rent in the near-term or otherwise.

·

Given uncertainty surrounding the depth, duration, and geographic impact of the COVID-19 Pandemic, as a precautionary measure intended to support the Company’s liquidity, the Company, in March 2020, drew $20 million of available capacity on its $200 million Credit Facility (hereinafter defined in Note 15, “Long-Term Debt”). As a result, the Company, as of March 31, 2020, has approximately $19 million in cash on hand with approximately $199 million outstanding on the Credit Facility.

·

The total borrowing capacity on the Credit Facility, based on the assets currently in the borrowing base, is approximately $200 million, and as such, the Company has the borrowing capacity of approximately $1 million on the Credit Facility. Pursuant to the terms of the Credit Facility, any property in the borrowing base with a tenant that is more than 60 days past due on its contractual rent obligations would be automatically removed from the borrowing base and the Company’s borrowing capacity would be reduced. The Company believes that certain modifications, including a deferral of current rent that is paid later in 2020, do not meet with the past due terms of the Credit Facility and thus, any of the Company’s applicable properties would not be required to be removed from the borrowing base. 

9

·

As are result of the outbreak of the COVID-19 Pandemic, the federal government and the State of Florida issued orders encouraging everyone to remain in their residence and not go into work. In response to these orders and in the best interest of our employees and directors, we have implemented significant preventative measures to ensure the health and safety of our employees and Board of Directors (the “Board”), including: i) conducting all meetings of our Board and Committees of the Board telephonically or via a visual conferencing service, permitting our employees to work from home at their election, enforcement of appropriate social distancing practices in our office, encouraging our employees to wash their hands often and providing hand sanitizer throughout our office, requiring employees who do not feel well in any capacity to stay at home, and requiring all third-party delivery services (e.g. mail, food delivery, etc.) to complete their service outside the front door of our offices. These preventative measures, including the transition to a remote workforce, have not had any material adverse impact on our financial reporting systems, internal controls over financial reporting or disclosure controls and procedures. At this time, we have not laid off, furloughed, or terminated any employee in response to the COVID-19 Pandemic. The Compensation Committee of our Board may reevaluate the performance goals and other aspects of the compensation arrangements of our executive officers later in 2020 as more information about the effects of the COVID-19 Pandemic become known.

A prolonged period of mandated closures or other social-distancing guidelines may adversely impact our tenants’ ability to generate sufficient revenues, and could force tenants to default on their leases, or result in the bankruptcy or insolvency of tenants, which would diminish the rental revenue we receive under our leases. The uncertainty surrounding the pandemic precludes any prediction as to the ultimate adverse impact on the Company. Nevertheless, the COVID-19 Pandemic presents material uncertainty and risk with respect to our performance, business or financial condition, results from operations and cash flows. The extent of the effects of the COVID-19 Pandemic on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K and in this 10-Q in Part II – Item 1A. Risk Factors. However, we believe the actions we are taking will help minimize interruptions to our operations and will put us in the best position to participate in the recovery when the time comes. Management and the Board will continue to actively monitor the effects of the pandemic, including governmental directives in the jurisdictions in which we operate and the recommendations of public health authorities, and will, as needed, take further measures to adapt our business in the best interests of our shareholders and personnel.

Description of Business

 

The terms “us,” “we,” “our,” and “the Company” as used in this report refer to Consolidated-Tomoka Land Co. together with our consolidated subsidiaries.

 

We are a diversified real estate operating company. We own and manage, sometimes utilizing third-party property management companies, thirty-six commercial real estate properties in twelve states in the United States. As of March 31, 2020, we owned twenty-nine single-tenant and seven multi-tenant income-producing properties with approximately 2.3 million square feet of gross leasable space. See Note 24, “Subsequent Events”, for information related to the two single-tenant income properties sold subsequent to March 31, 2020. 

 

In addition to our income property portfolio, as of March 31, 2020, our business included the following:

 

Management Services: 

 

·

A fee-based management business that is engaged in managing Alpine Income Property Trust, Inc. (“PINE”) and the entity that holds the approximately 4,900 acres of undeveloped land in Daytona Beach, Florida (the “Land JV”), see Note 5, “Related Party Management Services Business”.

 

Commercial Loan Investments: 

 

·

A portfolio of commercial loan investments.

 

 

 

 

 

10

Real Estate Operations: 

 

·

A portfolio of mineral interests consisting of approximately 455,000 subsurface acres in 20 counties in the State of Florida and a portfolio of mitigation credits;

 

·

A retained interest in the Land JV which is seeking to sell approximately 4,900 acres of undeveloped land in Daytona Beach, Florida; and

 

·

An interest in a joint venture (the “Mitigation Bank JV”) that owns an approximately 2,500 acre parcel of land in the western part of Daytona Beach, Florida which is engaged in the operation of a mitigation bank, which, pursuant to a mitigation plan approved by the applicable state and federal authorities, produces mitigation credits that are marketed and sold to developers of land in the Daytona Beach area for the purpose of enabling the developers to obtain certain regulatory permits.

Our business also includes, as outlined above, our initial investment in PINE of approximately $38.8 million, or approximately 22.5% of the PINE’s outstanding equity, including the units of limited partnership interest (“OP Units”) we hold in Alpine Income Property OP, LP (the “Operating Partnership”), which are exchangeable into common stock of PINE on a one-for-one basis, at PINE’s election. Our investment in PINE should generate investment income through the dividends distributed by PINE. In addition to the dividends we receive from PINE, our investment in PINE may benefit from any appreciation in PINE’s stock price, although no assurances can be provided that such appreciation will occur, the amount by which our investment will increase in value, or the timing thereof. Any dividends received from PINE are included in Investment Income on the accompanying statement of operations. 

Discontinued Operations. The Company reports the historical financial position and results of operations of disposed businesses as discontinued operations when it has no continuing interest in the business. On October 16, 2019, the Company sold a controlling interest in its wholly owned subsidiary that held approximately 5,300 acres of undeveloped land in Daytona Beach, Florida. On October 17, 2019, the Company sold its interest in the LPGA golf operations. For the three months ended March 31, 2019, the Company has reported the historical financial position and the results of operations related to the Land JV and the golf operations as discontinued operations (see Note 23, “Assets and Liabilities Held for Sale and Discontinued Operations”). The cash flows related to discontinued operations have been disclosed.

 

 

Interim Financial Information

 

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and the results of operations for the interim periods.

 

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020.  See Note 24, “Subsequent Events” for the Company’s disclosure related to the impact of the COVID-19 Pandemic on its business. 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and other entities in which we have a controlling interest. Any real estate entities or properties included in the consolidated financial statements have been consolidated only for the periods that such entities or properties were owned or under control by us. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements. The Company has retained interests in the Land JV and the Mitigation Bank JV, as well as an equity investment in PINE. The Company has concluded that these entities are variable interest entities of which the Company is not the primary beneficiary and as a result, these entities are not consolidated.

 

 

11

Use of Estimates in Preparation of Financial Statements

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Because of the fluctuating market conditions that currently exist in the Florida and national real estate markets, and the volatility and uncertainty in the financial and credit markets, it is possible that the estimates and assumptions, most notably those related to the Company’s investment in income properties, could change materially during the time span associated with the continued volatility of the real estate and financial markets or as a result of a significant dislocation in those markets.

 

Recently Issued Accounting Standards

 

Lease Modifications. In April 2020, the Financial Accounting Standards Board (“FASB”) issued interpretive guidance relating to the accounting for lease concessions provided as a result of the COVID-19 Pandemic. In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract. This guidance is only applicable to lease concessions related to the COVID-19 Pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We are currently evaluating the impact of this guidance and whether we will make this policy election for lease concessions such as rent deferrals for the quarter ended June 30, 2020.

 

Tax Cuts and Jobs Act. In February 2018, the FASB issued Accounting Standards Update (“ASU”)  2018-02, which amends the guidance allowing for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act effective January 1, 2018 (the “2018 Tax Cuts and Jobs Act”). The amendments in this update are effective for annual reporting periods beginning after December 15, 2018. The Company implemented ASU 2018-02 effective January 1, 2019 and there were no such reclassifications related to the Tax Cuts and Jobs Act.

 

ASC Topic 326, Financial Instruments-Credit Losses. In June 2016, the FASB issued ASU 2016-13, which amends its guidance on the measurement of credit losses on financial instruments. The amendments in this update are effective for annual reporting periods beginning after December 31, 2019. ASU 2016-13 affects entities holding financial assets that are not accounted for at fair value through net income, including but not limited to, loans, trade receivables, and net investments in leases. The Company adopted the changes to FASB Accounting Standards Codification (“ASC”) 326, Financial Instruments-Credit Losses on January 1, 2020. The Company’s evaluation of current expected credit losses (“CECL”) resulted in a reserve of approximately $252,000 on the Company’s Commercial Loan Investment portfolio during the three months ended March 31, 2020. See Note 4, “Commercial Loan Investments” for further information.

 

ASC Topic 842, Leases. In February 2016, the FASB issued ASU 2016-02, which requires entities to recognize assets and liabilities that arise from financing and operating leases and to classify those finance and operating lease payments in the financing or operating sections, respectively, of the statement of cash flows pursuant to FASB ASC Topic 842, Leases. The amendments in this update are effective for annual reporting periods beginning after December 15, 2018.

 

The Company’s implemented ASC 842 effective January 1, 2019 and has elected to follow the practical expedients and accounting policies below:

 

·

The Company, as lessee and as lessor, will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases or (iii) initial direct costs for any expired or existing leases.

 

·

The Company, as lessee, will not apply the recognition requirements of ASC 842 to short-term (twelve months or less) leases. Instead, the Company, as lessee, will recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. As of the date of this report, the Company has no such short-term leases.

 

12

·

The Company, as lessor, will not separate nonlease components from lease components and, instead, will account for each separate lease component and the nonlease components associated with that lease as a single component if the nonlease components otherwise would be accounted for under ASC Topic 606. The primary reason for this election is related to instances where common area maintenance is, or may be, a component of base rent within a lease agreement.

 

At the beginning of the period of adoption, January 1, 2019, through a cumulative-effect adjustment, the Company increased right-of use assets and lease liabilities for operating leases for which the Company is the lessee. The amount of the adjustment totaled approximately $681,000 and was reflected as an increase in Other Assets and Accrued and Other Liabilities for corporate leases totaling approximately $473,000 and an increase in Assets Held for Sale and Liabilities Held for sale for golf operations segment leases totaling approximately $208,000. There were no adjustments related to the leases for which the Company is the lessor.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, bank demand accounts, and money market accounts having original maturities of 90 days or less. The Company’s bank balances as of March 31, 2020 include certain amounts over the Federal Deposit Insurance Corporation limits.

 

Restricted Cash

 

Restricted cash totaled approximately $2.9 million at March 31, 2020 of which approximately $1.5 million is being held in a general tenant improvement reserve account with Wells Fargo in connection with our financing of the property located in Raleigh, NC leased to Wells Fargo (“Wells Fargo Raleigh”); approximately $0.9 million is being held in reserves for the $8.0 million first mortgage loan originated in June 2019, the $3.5 million first mortgage loan originated in January 2020, and the $3.4 million first mortgage loan originated in February 2020; approximately $273,000 is being held in a capital replacement reserve account in connection with our financing of six income properties with Wells Fargo Bank, NA (“Wells Fargo”); approximately $84,000 of cash is being held in multiple separate escrow accounts to be reinvested through the like-kind exchange structure into other income properties; and approximately $78,000 is being held in an escrow account related to a separate land transaction which closed in February 2017.

 

Derivative Financial Instruments and Hedging Activity

 

Interest Rate Swaps. In conjunction with the variable-rate mortgage loan secured by Wells Fargo Raleigh, the Company entered into an interest rate swap to fix the interest rate (the “Wells Interest Rate Swap”). Effective March 31, 2020, in conjunction with the variable-rate Credit Facility (hereinafter defined in Note 15, “Long-Term Debt”), the Company entered into an interest rate swap to fix $100 million of the outstanding facility balance to fix the interest rate (the “Credit Facility Interest Rate Swap”). The Company accounts for its cash flow hedging derivatives in accordance with FASB ASC Topic 815-20, Derivatives and Hedging. Depending upon the hedge’s value at each balance sheet date, the derivatives are included in either Other Assets or Accrued and Other Liabilities on the consolidated balance sheet at its fair value. On the date the Interest Rate Swap was entered into, the Company designated the derivatives as a hedge of the variability of cash flows to be paid related to the recognized long-term debt liabilities.

 

The Company formally documented the relationship between the hedging instruments and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transactions. At the hedges’ inception, the Company formally assessed whether the derivatives that are used in hedging the transactions are highly effective in offsetting changes in cash flows of the hedged items, and we will continue to do so on an ongoing basis. As the terms of the Wells Interest Rate Swap and Credit Facility Interest Rate Swap and the associated debts are identical, both hedging instruments qualify for the shortcut method, therefore, it is assumed that there is no hedge ineffectiveness throughout the entire term of the hedging instruments.

 

Changes in fair value of the hedging instruments that are highly effective and designated and qualified as cash-flow hedges are recorded in other comprehensive income and loss, until earnings are affected by the variability in cash flows of the designated hedged items.

13

Fair Value of Financial Instruments

 

The carrying amounts of the Company’s financial assets and liabilities including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued and other liabilities at March 31, 2020 and December 31, 2019, approximate fair value because of the short maturity of these instruments. The carrying value of the Company’s Credit Facility, as defined in Note 15, “Long-Term Debt,” approximates current market rates for revolving credit arrangements with similar risks and maturities. The face value of the Company’s fixed rate commercial loan investments held as of March 31, 2020 and December 31, 2019 and the mortgage notes and convertible debt held as of March 31, 2020 and December 31, 2019 are measured at fair value based on current market rates for financial instruments with similar risks and maturities. See Note 9, “Fair Value of Financial Instruments.”

 

Fair Value Measurements

 

The Company’s estimates of fair value of financial and non-financial assets and liabilities is based on the framework established by GAAP. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. GAAP describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels:

 

·

Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities.

 

·

Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques.

 

Recognition of Interest Income from Commercial Loan Investments

Interest income on commercial loan investments includes interest payments made by the borrower and the accretion of purchase discounts and loan origination fees, offset by the amortization of loan costs. Interest payments are accrued based on the actual coupon rate and the outstanding principal balance and purchase discounts and loan origination fees are accreted into income using the effective yield method, adjusted for prepayments.

 

Mitigation Credits

 

Mitigation credits are stated at historical cost. As these assets are sold, the related revenues and cost basis are reported as revenues from, and direct costs of, real estate operations, respectively, in the consolidated statements of operations.

 

Accounts Receivable

 

Accounts receivable related to income properties, which are classified in other assets on the consolidated balance sheets, primarily consist of tenant reimbursable expenses. Receivables related to tenant reimbursable expenses totaled approximately $1.4 million and $533,000 as of March 31, 2020 and December 31, 2019, respectively. The increase of approximately $878,000 is primarily attributable to accrued receivables related to property taxes.

 

Accounts receivable related to real estate operations, which are classified in other assets on the consolidated balance sheets, totaled approximately $1.6 million as of March 31, 2020 and December 31, 2019. The accounts receivable as of March 31, 2020 and December 31, 2019 are primarily related to the reimbursement of certain infrastructure costs completed by the Company in conjunction with two land sale transactions that closed during the fourth quarter of 2015 as more fully described in Note 12, “Other Assets.”

14

Trade accounts receivable primarily consists of receivables related to golf operations, which were classified in Assets Held for Sale on the consolidated balance sheets as of December 31, 2018 and thereafter until the sale of the golf operations during the fourth quarter of 2019. As of March 31, 2020, approximately $527,000 is due from the buyer of the golf operations for the rounds surcharge the Company paid to the City of Daytona Beach.

 

The collectability of the aforementioned receivables is determined based on a review of specifically identified accounts using judgments. As of March 31, 2020 and December 31, 2019, the Company recorded an allowance for doubtful accounts of approximately $49,000 and $14,000, respectively.

 

Purchase Accounting for Acquisitions of Real Estate Subject to a Lease

 

In accordance with the FASB guidance on business combinations, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values.

 

The fair value of the tangible assets of an acquired leased property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and tenant improvements based on the determination of the fair values of these assets.

 

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease, including the probability of renewal periods. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless the Company believes that it is likely that the tenant will renew the option, whereby the Company amortizes the value attributable to the renewal over the renewal period.

 

The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off. The value of tenant relationships is reviewed on individual transactions to determine if future value was derived from the acquisition.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations which clarified the definition of a business. Pursuant to ASU 2017-01, the acquisition of an income property subject to a lease no longer qualifies as a business combination, but rather an asset acquisition, accordingly, acquisition costs have been capitalized.

 

Sales of Real Estate

 

Gains and losses on sales of real estate are accounted for as required by FASB ASC Topic 606, Revenue from Contracts with Customers. The Company recognizes revenue from the sales of real estate when the Company transfers the promised goods and/or services in the contract based on the transaction price allocated to the performance obligations within the contract. As market information becomes available, real estate cost basis is analyzed and recorded at the lower of cost or market.

 

Income Taxes

 

The Company uses the asset and liability method to account for income taxes. Deferred income taxes result primarily from the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes (see Note 20, “Income Taxes”.) In June 2006, the FASB issued additional guidance, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements included in income taxes. The interpretation prescribes a recognition threshold and measurement

15

attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure and transition. In accordance with FASB guidance included in income taxes, the Company has analyzed its various federal and state filing positions and believes that its income tax filing positions and deductions are well documented and supported. Additionally, the Company believes that its accruals for tax liabilities are adequate. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to the FASB guidance.

 

NOTE 2. REVENUE RECOGNITION

 

The Company implemented FASB ASC Topic 606, Revenue from Contracts with Customers effective January 1, 2018 utilizing the modified retrospective method.

 

The following table summarizes the Company’s revenue from continuing operations by segment, major good and/or service, and the related timing of revenue recognition for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Properties ($000's)

 

Management Services ($000's)

 

Commercial Loan Investments ($000's)

 

Real Estate Operations ($000's)

 

Total Revenues ($000's)

Major Good / Service:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Revenue - Base Rent

 

$

 8,751

 

$

 —

 

$

 —

 

$

 —

 

$

 8,751

 

Lease Revenue - CAM

 

 

 784

 

 

 —

 

 

 —

 

 

 —

 

 

 784

 

Lease Revenue - Reimbursements

 

 

 790

 

 

 —

 

 

 —

 

 

 —

 

 

 790

 

Lease Revenue - Billboards

 

 

 44

 

 

 —

 

 

 —

 

 

 —

 

 

 44

 

Above / Below Market Lease Accretion

 

 

 474

 

 

 —

 

 

 —

 

 

 —

 

 

 474

 

Contributed Leased Assets Accretion

 

 

 43

 

 

 —

 

 

 —

 

 

 —

 

 

 43

 

Management Services

 

 

 —

 

 

 702

 

 

 —

 

 

 —

 

 

 702

 

Commercial Loan Investments

 

 

 —

 

 

 —

 

 

 1,052

 

 

 —

 

 

 1,052

 

Mitigation Credit Sales

 

 

 —

 

 

 —

 

 

 —

 

 

 4

 

 

 4

 

Subsurface Revenue - Other

 

 

 —

 

 

 —

 

 

 —

 

 

 77

 

 

 77

 

Interest and Other Revenue

 

 

 117

 

 

 —

 

 

 —

 

 

 —

 

 

 117

 

Total Revenues

 

$

 11,003

 

$

 702

 

$

 1,052

 

$

 81

 

$

 12,838