CTO Realty Growth(CTO) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2025, and 2024 Consolidated Balance Sheets - Total assets increased to $1.23 billion as of June 30, 2025, from $1.18 billion at December 31, 2024, driven by growth in net real estate assets. Total liabilities also increased to $659.2 million from $568.8 million, primarily due to a rise in long-term debt[7] Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,233,226 | $1,181,644 | | Real Estate—Net | $952,013 | $901,338 | | Cash and Cash Equivalents | $8,551 | $9,017 | | Total Liabilities | $659,164 | $568,846 | | Long-Term Debt—Net | $605,351 | $518,993 | | Total Stockholders' Equity | $574,062 | $612,798 | Consolidated Statements of Operations - The company reported a net loss of $23.4 million for Q2 2025, a significant shift from a net income of $1.2 million in Q2 2024. This was primarily driven by a $20.4 million loss on the extinguishment of debt. Total revenues grew 30.5% year-over-year to $37.6 million[8] Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $37,638 | $28,845 | $73,449 | $56,972 | | Income Properties Revenue | $33,375 | $25,878 | $65,047 | $50,501 | | Total Operating Income (Loss) | $(12,678) | $5,431 | $(4,805) | $19,954 | | Loss on Extinguishment of Debt | $(20,396) | $— | $(20,396) | $— | | Net Income (Loss) Attributable to the Company | $(23,418) | $1,183 | $(21,157) | $7,025 | | Basic and Diluted EPS | $(0.77) | $(0.03) | $(0.78) | $0.17 | Consolidated Statements of Cash Flows - For the six months ended June 30, 2025, net cash from operating activities increased to $32.2 million from $24.6 million year-over-year. Net cash used in investing activities rose significantly to $88.4 million, primarily due to real estate acquisitions and fewer proceeds from dispositions. Net cash from financing activities was a source of $57.7 million, driven by proceeds from long-term debt[15] Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $32,237 | $24,640 | | Net Cash Used In Investing Activities | $(88,449) | $(40,745) | | Acquisition of Real Estate | $(80,022) | $(72,659) | | Proceeds from Disposition of Property | $— | $19,527 | | Net Cash Provided By Financing Activities | $57,693 | $4,443 | | Proceeds from Long-Term Debt | $157,000 | $71,000 | | Payments on Long-Term Debt | $(56,272) | $(84,000) | | Dividends Paid - Common Stock | $(24,430) | $(17,309) | Notes to Consolidated Financial Statements - The company operates as a self-managed equity REIT focused on high-quality retail and mixed-use properties, with segments including income properties, management services, commercial loans and investments, and real estate operations[20][21][28] - During the first six months of 2025, the company acquired Ashley Park in Georgia for $80.0 million, with no income properties disposed of during this period[60][61] - The company settled its remaining $51.0 million of 3.875% Convertible Notes in April 2025 via cash and common stock, resulting in a $20.4 million loss on extinguishment of debt[150][151][152] - As of June 30, 2025, total face value long-term debt was $606.8 million with a weighted average interest rate of 4.44%, including a $224.0 million credit facility balance[131] - The investment in Alpine Income Property Trust, Inc. (PINE) had a fair value of $34.8 million as of June 30, 2025, representing 15.4% of PINE's equity, with a $4.7 million unrealized loss recognized in Q2 2025[24][85][219] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance for the three and six months ended June 30, 2025, highlighting revenue growth, net loss from debt extinguishment, liquidity, and non-GAAP measures Results of Operations Revenue Variance - Q2 2025 vs Q2 2024 (in thousands) | Operating Segment | Q2 2025 | Q2 2024 | $ Variance | % Variance | | :--- | :--- | :--- | :--- | :--- | | Income Properties | $33,375 | $25,878 | $7,497 | 29.0% | | Management Services | $1,247 | $1,131 | $116 | 10.3% | | Commercial Loans and Investments | $3,016 | $1,441 | $1,575 | 109.3% | | Real Estate Operations | $— | $395 | $(395) | (100.0)% | | Total Revenue | $37,638 | $28,845 | $8,793 | 30.5% | - The $24.6 million decrease in net income for Q2 2025 compared to Q2 2024 is primarily due to the $20.4 million loss on extinguishment of debt related to the 2025 Notes settlement[222][223] - General and Administrative expenses increased by 28.6% in Q2 2025 year-over-year, attributed to a higher employee count and compensation increases[214][215] Liquidity and Capital Resources - The company believes it has sufficient liquidity for the next twelve months, citing cash on hand, operating cash flow, $76.0 million of undrawn credit facility capacity, and $216.5 million availability under its 2024 ATM Program[252] - As of June 30, 2025, the company has a remaining $17.6 million commitment for capital improvements and an unfunded construction loan commitment of $29.6 million[250][251] - The 2025 investment guidance for income-producing properties and structured investments ranges from $100.0 million to $200.0 million, expected to be funded through cash, dispositions, and credit facilities[248] Non-U.S. GAAP Financial Measures Non-GAAP Performance Measures Per Diluted Share | Metric per Share | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | FFO Attributable to Common Stockholders | $(0.17) | $0.44 | $0.29 | $0.90 | | Core FFO Attributable to Common Stockholders | $0.45 | $0.45 | $0.90 | $0.93 | | AFFO Attributable to Common Stockholders | $0.47 | $0.48 | $0.96 | $1.00 | - Core FFO per diluted share was flat at $0.45 for Q2 2025 compared to Q2 2024, while AFFO per diluted share slightly decreased to $0.47 from $0.48 over the same period[268] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from variable-rate debt, with a hypothetical 100 basis point change impacting results by $0.7 million - The principal market risk is interest rate risk from variable-rate debt, which the company mitigates using interest rate swaps[272][273] - As of June 30, 2025, $74.0 million of the company's debt was exposed to variable interest rates, with a 1% (100 basis point) change impacting financial results by approximately $0.7 million[273] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[274] - No material changes in internal control over financial reporting occurred during Q2 2025[274] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings not expected to materially affect its financial condition or results of operations - The company does not expect any ongoing legal proceedings to have a material impact on its financial condition or operations[275] Item 1A. Risk Factors No material changes to the company's risk factors were reported from those disclosed in its Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Form 10-K were reported for the period ended June 30, 2025[277] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 1,089,555 common shares in April 2025 to settle $35.2 million of 2025 Notes and repurchased 2,251 shares - On April 3, 2025, the company issued 1,089,555 shares of common stock to settle $35.2 million of its 2025 Notes in a private transaction[278] Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Remaining Authorization ($000's) | | :--- | :--- | :--- | :--- | | April 2025 | 2,251 | $16.34 | $4,300 | | May 2025 | — | — | — | | June 2025 | — | — | — | | Total | 2,251 | $16.34 | $4,300 | Item 5. Other Information This section notes recent tax law changes under the OBBBA, affecting REITs by increasing the TRS asset test and making the 20% REIT dividend deduction permanent - The OBBBA, signed into law on July 4, 2025, increased the REIT asset test limitation for TRS securities from 20% to 25% of total assets, effective after December 31, 2025[280] - The new tax law also made the 20% deduction for qualified REIT dividends permanent for individuals, trusts, and estates[280] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and SOX certifications - Lists all exhibits filed with the report, including corporate governance documents and required SOX certifications[282]