SEC Filing - CTO Realty Growth

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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 September 30, 2022

☐	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)

1140 N. Williamson Blvd., Suite 140 Daytona Beach, FL 32114

(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 October 21, 2022, there were 18,800,010 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 – September 30, 2022 (Unaudited) and December 31, 2021		3

Consolidated Statements of Operations – Three and nine months ended September 30, 2022 and 2021 (Unaudited)		4

Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2022 and 2021 (Unaudited)		5

Consolidated Statements of Stockholders’ Equity – Three and nine months ended September 30, 2022 and 2021 (Unaudited)		6

Consolidated Statements of Cash Flows – Nine months ended September 30, 2022 and 2021 (Unaudited)		8

Notes to Consolidated Financial Statements (Unaudited)		10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		40

Item 3. Quantitative and Qualitative Disclosures About Market Risk		51

Item 4. Controls and Procedures		52

PART II—OTHER INFORMATION		52

Item 1. Legal Proceedings		52

Item 1A. Risk Factors		52

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		53

Item 3. Defaults Upon Senior Securities		53

Item 4. Mine Safety Disclosures		53

Item 5. Other Information		53

Item 6. Exhibits		54

SIGNATURES		56

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) September 30, 2022		December 31, 2021
ASSETS
Real Estate:
Land, at Cost	$	209,298	$	189,589
Building and Improvements, at Cost		377,758		325,418
Other Furnishings and Equipment, at Cost		746		707
Construction in Process, at Cost		10,717		3,150
Total Real Estate, at Cost		598,519		518,864
Less, Accumulated Depreciation		(31,278)		(24,169)
Real Estate—Net		567,241		494,695
Land and Development Costs		685		692
Intangible Lease Assets—Net		87,671		79,492
Assets Held for Sale—See Note 24		—		6,720
Investment in Alpine Income Property Trust, Inc.		35,260		41,037
Mitigation Credits		2,846		3,702
Mitigation Credit Rights		19,999		21,018
Commercial Loans and Investments		46,201		39,095
Cash and Cash Equivalents		9,532		8,615
Restricted Cash		37,292		22,734
Refundable Income Taxes		448		442
Deferred Income Taxes—Net		61		—
Other Assets—See Note 12		38,536		14,897
Total Assets	$	845,772	$	733,139
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	1,136	$	676
Accrued and Other Liabilities—See Note 18		18,149		13,121
Deferred Revenue—See Note 19		5,840		4,505
Intangible Lease Liabilities—Net		5,995		5,601
Deferred Income Taxes—Net		—		483
Long-Term Debt		370,248		278,273
Total Liabilities		401,368		302,659
Commitments and Contingencies—See Note 22
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, 3,000,000 shares issued and outstanding at September 30, 2022 and December 31, 2021		30		30
Common Stock – 500,000,000 shares authorized; $0.01 par value, 18,796,612 shares issued and outstanding at September 30, 2022 and 17,748,678 shares issued and outstanding at December 31, 2021		188		60
Additional Paid-In Capital		97,419		85,414
Retained Earnings		329,317		343,459
Accumulated Other Comprehensive Income		17,450		1,517
Total Stockholders’ Equity		444,404		430,480
Total Liabilities and Stockholders’ Equity	$	845,772	$	733,139

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

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Revenues
Income Properties	$	17,694	$	13,734	$	49,229	$	36,757
Management Fee Income		951		940		2,835		2,361
Interest Income From Commercial Loans and Investments		1,323		726		3,331		2,136
Real Estate Operations		3,149		1,177		4,395		4,318
Total Revenues		23,117		16,577		59,790		45,572
Direct Cost of Revenues
Income Properties		(5,115)		(3,984)		(13,943)		(9,688)
Real Estate Operations		(1,661)		(252)		(1,940)		(867)
Total Direct Cost of Revenues		(6,776)		(4,236)		(15,883)		(10,555)
General and Administrative Expenses		(3,253)		(2,680)		(8,972)		(8,477)
Impairment Charges		—		—		—		(16,527)
Depreciation and Amortization		(7,305)		(5,567)		(20,401)		(15,428)
Total Operating Expenses		(17,334)		(12,483)		(45,256)		(50,987)
Gain on Disposition of Assets		4,973		22,666		4,728		28,106
Loss on Extinguishment of Debt		—		—		—		(641)
Other Gains and Income		4,973		22,666		4,728		27,465
Total Operating Income		10,756		26,760		19,262		22,050
Investment and Other Income (Loss)		(3,065)		(797)		(6,270)		8,438
Interest Expense		(3,037)		(1,986)		(7,216)		(6,851)
Income Before Income Tax Benefit (Expense)		4,654		23,977		5,776		23,637
Income Tax Benefit (Expense)		163		(30)		461		4,371
Net Income Attributable to the Company		4,817		23,947		6,237		28,008
Distributions to Preferred Stockholders		(1,195)		(1,129)		(3,586)		(1,129)
Net Income Attributable to Common Stockholders	$	3,622	$	22,818	$	2,651	$	26,879

Per Share Information—See Note 14:
Basic Net Income Attributable to Common Stockholders	$	0.20	$	1.29	$	0.15	$	1.52
Diluted Net Income Attributable to Common Stockholders	$	0.19	$	1.29		0.15		1.52

Weighted Average Number of Common Shares
Basic		18,386,435		17,703,284		18,044,299		17,678,701
Diluted		21,505,460		17,703,284		18,044,299		17,678,701

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				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net Income Attributable to the Company	$	4,817	$	23,947	$	6,237	$	28,008
Other Comprehensive Income:
Cash Flow Hedging Derivative - Interest Rate Swaps		5,310		217		15,933		1,387
Total Other Comprehensive Income		5,310		217		15,933		1,387
Total Comprehensive Income	$	10,127	$	24,164	$	22,170	$	29,395

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 September 30, 2022:


	Preferred Stock		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders' Equity
Balance July 1, 2022	$	30	$	61	$	—	$	86,347	$	332,916	$	12,140	$	431,494
Net Income Attributable to the Company		—		—		—		—		4,817		—		4,817
Three-for-One Stock Split		—		122		—		(122)		—		—		—
Stock Repurchase		—		(1)		—		(1,644)		—		—		(1,645)
Exercise of Stock Options and Stock Issuance to Directors		—		—		—		11		—		—		11
Stock Issuance, Net of Equity Issuance Costs		—		6		—		12,082		—		—		12,088
Stock-Based Compensation Expense		—		—		—		745		—		—		745
Preferred Stock Dividends Declared for the Period		—		—		—		—		(1,195)		—		(1,195)
Common Stock Dividends Declared for the Period		—		—		—		—		(7,221)		—		(7,221)
Other Comprehensive Income		—		—		—		—		—		5,310		5,310
Balance September 30, 2022	$	30	$	188	$	—	$	97,419	$	329,317	$	17,450	$	444,404

For the three months ended September 30, 2021:


	Preferred Stock		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stockholders' Equity
Balance July 1, 2021	$	—	$	60	$	—	$	13,676	$	331,895	$	(740)	$	344,891
Net Income Attributable to the Company		—		—		—		—		23,947		—		23,947
Issuance of Preferred Stock, Net of Underwriting Discount and Expenses		30		—		—		72,640		—		—		72,670
Exercise of Stock Options and Common Stock Issuance		—		—		—		(83)		—		—		(83)
Stock-Based Compensation Expense		—		—		—		666		—		—		666
Preferred Stock Dividends Declared for the Period		—		—		—		—		(1,129)		—		(1,129)
Common Stock Dividends Declared for the Period		—		—		—		—		(6,032)		—		(6,032)
Other Comprehensive Income		—		—		—		—		—		217		217
Balance September 30, 2021	$	30	$	60	$	—	$	86,899	$	348,681	$	(523)	$	435,147

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(Unaudited, in thousands)

For the nine months ended September 30, 2022:


	Preferred Stock		Common Stock		Treasury 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		—		—		—		—		6,237		—		6,237
Three-for-One Stock Split		—		122		—		(122)		—		—		—
Adjustment to Equity Component of Convertible Debt Upon Adoption of ASU 2020-06		—		—		—		(7,034)		4,022		—		(3,012)
Stock Repurchase		—		(1)		—		(2,791)		—		—		(2,792)
Vested Restricted Stock and Performance Shares		—		—		—		(845)		—		—		(845)
Exercise of Stock Options and Stock Issuance to Directors		—		—		—		248		—		—		248
Stock Issuance, Net of Equity Issuance Costs		—		7		—		20,560		—		—		20,567
Stock-Based Compensation Expense		—		—		—		1,989		—		—		1,989
Preferred Stock Dividends Declared for the Period		—		—		—		—		(3,586)		—		(3,586)
Common Stock Dividends Declared for the Period		—		—		—		—		(20,815)		—		(20,815)
Other Comprehensive Income		—		—		—		—		—		15,933		15,933
Balance September 30, 2022	$	30	$	188	$	—	$	97,419	$	329,317	$	17,450	$	444,404

For the nine months ended September 30, 2021:


	Preferred Stock		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity
Balance January 1, 2021	$	—	$	7,250	$	(77,541)	$	83,183	$	339,917	$	(1,910)	$	350,899
Net Income Attributable to the Company		—		—		—		—		28,008		—		28,008
Vested Restricted Stock and Performance Shares		—		—		—		(436)		—		—		(436)
Issuance of Preferred Stock, Net of Underwriting Discount and Expenses		30		—		—		72,409		—		—		72,439
Exercise of Stock Options and Common Stock Issuance		—		—		—		289		—		—		289
Equity Issuance Costs		—		—		—		(197)		—		—		(197)
Stock-Based Compensation Expense		—		—		—		2,002		—		—		2,002
Par Value $0.01 per Share and Treasury Stock Derecognized at January 29, 2021		—		(7,190)		77,541		(70,351)		—		—		—
Preferred Stock Dividends Declared for the Period		—		—		—		—		(1,129)		—		(1,129)
Common Stock Dividends Declared for the Period		—		—		—		—		(18,115)		—		(18,115)
Other Comprehensive Income		—		—		—		—		—		1,387		1,387
Balance September 30, 2021	$	30	$	60	$	—	$	86,899	$	348,681	$	(523)	$	435,147

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)


	Nine Months Ended
	September 30, 2022		September 30, 2021
Cash Flow from Operating Activities:
Net Income Attributable to the Company	$	6,237	$	28,008
Adjustments to Reconcile Net Income Attributable to the Company to Net Cash Provided by Operating Activities:
Depreciation and Amortization		20,401		15,428
Amortization of Intangible Liabilities to Income Property Revenue		1,485		(820)
Amortization of Deferred Financing Costs to Interest Expense		515		444
Amortization of Discount on Convertible Debt		149		951
Gain on Disposition of Assets		(3,921)		(28,106)
Gain on Disposition of Commercial Loans and Investments		(807)		—
Loss on Extinguishment of Debt		—		641
Impairment Charges		—		16,527
Accretion of Commercial Loans and Investments Origination Fees		(150)		(1)
Non-Cash Imputed Interest		(119)		(330)
Deferred Income Taxes		(544)		(3,736)
Unrealized (Gain) Loss on Investment Securities		8,102		(6,894)
Non-Cash Compensation		2,423		2,434
Decrease (Increase) in Assets:
Refundable Income Taxes		(5)		(830)
Assets Held for Sale		—		(1)
Land and Development Costs		7		381
Mitigation Credits and Mitigation Credit Rights		1,876		(16,007)
Other Assets		(7,895)		(945)
Increase in Liabilities:
Accounts Payable