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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, 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-PA

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 19, 2023, there were 22,686,444 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, 2023 (Unaudited) and December 31, 2022

3

Consolidated Statements of Operations – Three and nine months ended September 30, 2023 and 2022 (Unaudited)

4

Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2023 and 2022 (Unaudited)

5

Consolidated Statements of Stockholders’ Equity – Three and nine months ended September 30, 2023 and 2022 (Unaudited)

6

Consolidated Statements of Cash Flows – Nine months ended September 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

39

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

52

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

55

2

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,
2023

    

December 31,
2022

ASSETS

Real Estate:

Land, at Cost

$

235,880

$

233,930

Building and Improvements, at Cost

588,224

530,029

Other Furnishings and Equipment, at Cost

851

748

Construction in Process, at Cost

4,127

6,052

Total Real Estate, at Cost

829,082

770,759

Less, Accumulated Depreciation

(50,117)

(36,038)

Real Estate—Net

778,965

734,721

Land and Development Costs

698

685

Intangible Lease Assets—Net

105,851

115,984

Assets Held for Sale—See Note 23

14,504

Investment in Alpine Income Property Trust, Inc.

38,162

42,041

Mitigation Credits

1,872

1,856

Mitigation Credit Rights

725

Commercial Loans and Investments

46,572

31,908

Cash and Cash Equivalents

7,015

19,333

Restricted Cash

22,618

1,861

Refundable Income Taxes

430

448

Deferred Income Taxes—Net

2,363

2,530

Other Assets—See Note 11

47,323

34,453

Total Assets

$

1,066,373

$

986,545

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Accounts Payable

$

3,969

$

2,544

Accrued and Other Liabilities—See Note 17

18,660

18,028

Deferred Revenue—See Note 18

6,251

5,735

Intangible Lease Liabilities—Net

11,203

9,885

Long-Term Debt

548,219

445,583

Total Liabilities

588,302

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, 2,993,206 shares issued and outstanding at September 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, 22,701,072 shares issued and outstanding at September 30, 2023 and 22,854,775 shares issued and outstanding at December 31, 2022

227

229

Additional Paid-In Capital

168,875

172,471

Retained Earnings

284,789

316,279

Accumulated Other Comprehensive Income

24,150

15,761

Total Stockholders’ Equity

478,071

504,770

Total Liabilities and Stockholders’ Equity

$

1,066,373

$

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

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

    

2023

    

2022

    

2023

    

2022

Revenues

Income Properties

$

25,183

$

17,694

$

70,373

$

49,229

Management Fee Income

1,094

951

3,294

2,835

Interest Income From Commercial Loans and Investments

1,114

1,323

2,965

3,331

Real Estate Operations

1,079

3,149

2,602

4,395

Total Revenues

28,470

23,117

79,234

59,790

Direct Cost of Revenues

Income Properties

(7,060)

(5,115)

(20,883)

(13,943)

Real Estate Operations

(152)

(1,661)

(876)

(1,940)

Total Direct Cost of Revenues

(7,212)

(6,776)

(21,759)

(15,883)

General and Administrative Expenses

(3,439)

(3,253)

(10,493)

(8,972)

Provision for Impairment

(929)

(1,408)

Depreciation and Amortization

(11,669)

(7,305)

(32,814)

(20,401)

Total Operating Expenses

(23,249)

(17,334)

(66,474)

(45,256)

Gain on Disposition of Assets

2,464

4,973

3,565

4,728

Other Gains and Income

2,464

4,973

3,565

4,728

Total Operating Income

7,685

10,756

16,325

19,262

Investment and Other Income (Loss)

1,184

(3,065)

(1,296)

(6,270)

Interest Expense

(6,318)

(3,037)

(16,161)

(7,216)

Income (Loss) Before Income Tax Benefit (Expense)

2,551

4,654

(1,132)

5,776

Income Tax Benefit (Expense)

135

163

(375)

461

Net Income (Loss) Attributable to the Company

2,686

4,817

(1,507)

6,237

Distributions to Preferred Stockholders

(1,195)

(1,195)

(3,585)

(3,586)

Net Income (Loss) Attributable to Common Stockholders

$

1,491

$

3,622

$

(5,092)

$

2,651

Per Share Information—See Note 13:

Basic Net Income (Loss) Attributable to Common Stockholders

$

0.07

$

0.20

$

(0.23)

$

0.15

Diluted Net Income (Loss) Attributable to Common Stockholders

$

0.07

$

0.19

(0.23)

0.15

Weighted Average Number of Common Shares

Basic

22,484,561

18,386,435

22,556,642

18,044,299

Diluted

22,484,561

21,505,460

22,556,642

18,044,299

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, 2023

    

September 30, 2022

    

September 30, 2023

    

September 30, 2022

Net Income (Loss) Attributable to the Company

$

2,686

$

4,817

$

(1,507)

$

6,237

Other Comprehensive Income:

Cash Flow Hedging Derivative - Interest Rate Swaps

5,901

5,310

8,389

15,933

Total Other Comprehensive Income

5,901

5,310

8,389

15,933

Total Comprehensive Income

$

8,587

$

10,127

$

6,882

$

22,170

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

5

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

For the three months ended September 30, 2023:

Preferred Stock

Common Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Income

Stockholders' Equity

Balance July 1, 2023

$

30

$

227

$

168,103

$

291,958

$

18,249

$

478,567

Net Income Attributable to the Company

2,686

2,686

Stock Repurchase

(87)

(87)

Exercise of Stock Options and Stock Issuance to Directors

67

67

Payment of Equity Issuance Costs

(8)

(8)

Stock-Based Compensation Expense

800

800

Preferred Stock Dividends Declared for the Period

(1,195)

(1,195)

Common Stock Dividends Declared for the Period

(8,660)

(8,660)

Other Comprehensive Income

5,901

5,901

Balance September 30, 2023

$

30

$

227

$

168,875

$

284,789

$

24,150

$

478,071

For the three months ended September 30, 2022:

Preferred Stock

Common 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

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited, in thousands)

For the nine months ended September 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

(1,507)

(1,507)

Stock Repurchase

(3)

(5,169)

(5,172)

Vested Restricted Stock and Performance Shares

1

(1,029)

(1,028)

Exercise of Stock Options and Stock Issuance to Directors

308

308

Payment of Equity Issuance Costs

(130)

(130)

Stock-Based Compensation Expense

2,424

2,424

Preferred Stock Dividends Declared for the Period

(3,585)

(3,585)

Common Stock Dividends Declared for the Period

(26,398)

(26,398)

Other Comprehensive Income

8,389

8,389

Balance September 30, 2023

$

30

$

227

$

168,875

$

284,789

$

24,150

$

478,071

For the nine months ended September 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

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 Common Stock Issuance

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

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

7

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended

September 30, 2023

September 30, 2022

Cash Flow from Operating Activities:

Net Income (Loss) Attributable to the Company

$

(1,507)

$

6,237

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

Depreciation and Amortization

32,814

20,401

Amortization of Intangible Liabilities to Income Property Revenue

1,793

1,485

Amortization of Deferred Financing Costs to Interest Expense

724

515

Amortization of Discount on Convertible Debt

119

149

Gain on Disposition of Real Estate and Intangible Lease Assets and Liabilities

(3,565)

(3,921)

Gain on Disposition of Commercial Loans and Investments

(807)

Provision for Impairment

1,408

Accretion of Commercial Loans and Investments Origination Fees

(105)

(150)

Non-Cash Imputed Interest

(22)

(119)

Deferred Income Taxes

167

(544)

Unrealized Loss on Investment Securities

5,663

8,102

Extinguishment of Contingent Obligation

(2,300)

Non-Cash Compensation

2,802

2,423

Decrease (Increase) in Assets:

Refundable Income Taxes

18

(5)

Land and Development Costs

(13)

7

Mitigation Credits and Mitigation Credit Rights

709

1,876

Other Assets

(3,792)

(7,895)

Increase in Liabilities:

Accounts Payable

1,424

460

Accrued and Other Liabilities

3,092

4,531

Deferred Revenue

516

1,335

Net Cash Provided By Operating Activities

39,945

34,080

Cash Flow from Investing Activities:

Acquisition of Real Estate and Intangible Lease Assets and Liabilities

(100,588)

(112,843)

Acquisition of Commercial Loans and Investments

(17,477)

(50,130)

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

21,689

40,777

Principal Payments Received on Commercial Loans and Investments

986

44,079

Acquisition of Investment Securities, Net of Proceeds from Sales

(2,883)

(2,253)

Net Cash Used In Investing Activities

(98,273)

(80,370)

Cash Flow From Financing Activities:

Proceeds from Long-Term Debt

132,850

218,500

Payments on Long-Term Debt

(30,600)

(147,000)

Cash Paid for Loan Fees

(132)

(2,610)

Cash Received Exercise of Stock Options and Common Stock Issuance

308

(177)

Cash Used to Purchase Common and Preferred Stock

(5,172)

(2,792)

Cash Paid for Vesting of Restricted Stock

(1,028)

(845)

Proceeds from (Cash Paid for) Issuance of Common Stock, Net