CTO Realty Growth(CTO) - 2023 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended March 31, 2023 Consolidated Financial Statements For Q1 2023, CTO Realty Growth reported total assets of $981.3 million, a net loss of $7.2 million, and $9.3 million in operating cash flow Consolidated Balance Sheets (Unaudited) | | March 31, 2023 (In thousands) | December 31, 2022 (In thousands) | | :--- | :--- | :--- | | Total Assets | $981,254 | $986,545 | | Total Liabilities | $502,625 | $481,775 | | Total Stockholders' Equity | $478,629 | $504,770 | | Total Liabilities and Stockholders' Equity | $981,254 | $986,545 | Consolidated Statements of Operations (Unaudited) | | Three Months Ended March 31, 2023 (In thousands) | Three Months Ended March 31, 2022 (In thousands) | | :--- | :--- | :--- | | Total Revenues | $24,717 | $17,210 | | Total Operating Income | $2,957 | $3,486 | | Net Income (Loss) Attributable to the Company | $(5,993) | $202 | | Net Loss Attributable to Common Stockholders | $(7,188) | $(993) | | Basic and Diluted Net Loss Per Share | $(0.32) | $(0.06) | Consolidated Statements of Cash Flows (Unaudited) | | Three Months Ended March 31, 2023 (In thousands) | Three Months Ended March 31, 2022 (In thousands) | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $9,327 | $11,428 | | Net Cash Used In Investing Activities | $(25,559) | $(16) | | Net Cash Provided By (Used In) Financing Activities | $3,650 | $(6,926) | | Net (Decrease) Increase in Cash | $(12,582) | $4,486 | Notes to Consolidated Financial Statements The notes detail accounting policies, business segments, acquisition activities, related-party transactions, and debt/equity structure - The company is a self-managed equity REIT focused on retail and mixed-use properties, owning 23 properties (3.7 million sq. ft.) and managing other segments including services for PINE, commercial loans, and subsurface mineral interests[21][22][23] - In Q1 2023, the company acquired one property for $3.3 million, contrasting with Q1 2022 acquisitions of one property for $39.1 million and sales of two properties for $24.0 million[58][60][61] - The commercial loan and investment portfolio increased to a carrying value of $47.1 million as of March 31, 2023, up from $31.9 million at year-end 2022, driven by a new $15.0 million mortgage loan origination[63][70] - The company earned $1.1 million in management fees from PINE in Q1 2023, up from $0.9 million in Q1 2022, with CTO's investment in PINE valued at $39.3 million (14.8% of PINE's equity) as of March 31, 2023[73][77] - In Q1 2023, the company repurchased 303,354 shares of its common stock for $5.0 million, and declared dividends of $0.38 per common share and $0.40 per preferred share[110][119][120] Long-Term Debt Face Value as of March 31, 2023 | Debt Instrument | Face Value (In thousands) | | :--- | :--- | | Credit Facility | $133,150 | | 2026 Term Loan | $65,000 | | 2027 Term Loan | $100,000 | | 2028 Term Loan | $100,000 | | 3.875% Convertible Senior Notes due 2025 | $51,034 | | Mortgage Note Payable | $17,800 | | Total Long-Term Face Value Debt | $466,984 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial results, highlighting revenue growth, net loss drivers, liquidity, and non-GAAP performance measures Comparison of the Three Months Ended March 31, 2023 and 2022 Total revenue increased by 43.6% to $24.7 million due to income property growth, but a net loss of $6.0 million resulted from higher expenses and an unrealized loss on PINE investment Revenue Variance by Segment (Q1 2023 vs Q1 2022) | Operating Segment | Q1 2023 (In thousands) | Q1 2022 (In thousands) | $ Variance | % Variance | | :--- | :--- | :--- | :--- | :--- | | Income Properties | $22,432 | $15,168 | $7,264 | 47.9% | | Management Services | $1,098 | $936 | $162 | 17.3% | | Commercial Loans and Investments | $795 | $718 | $77 | 10.7% | | Real Estate Operations | $392 | $388 | $4 | 1.0% | | Total Revenue | $24,717 | $17,210 | $7,507 | 43.6% | - Depreciation and amortization increased by $3.9 million due to growth in the income property portfolio[199] - An unrealized, non-cash loss of $4.9 million was recorded on the investment in PINE, compared to a $2.5 million loss in the prior-year period[203] - Interest expense increased by $2.7 million, primarily from higher balances and rates on the Credit Facility and new term loan debt[205] Liquidity and Capital Resources As of March 31, 2023, the company had $7.0 million in cash and $166.8 million available on its credit facility, with a 2023 investment target of $100-$200 million - Cash flow from operating activities decreased by $2.1 million to $9.3 million in Q1 2023, primarily due to a $3.2 million increase in cash paid for interest[208][209] - The company has $166.8 million of undrawn commitment under its $300.0 million Credit Facility as of March 31, 2023[212] - 2023 investment guidance ranges from $100.0 million to $200.0 million, expected to be funded by cash, operations, dispositions (via 1031 exchanges), and credit facility borrowings[214] Contractual Commitments as of March 31, 2023 | Commitment Type | Remaining Amount (In thousands) | | :--- | :--- | | Capital Improvements | $19,270 | | Construction Loan Funding | $4,300 | Non-U.S. GAAP Financial Measures The company uses non-GAAP measures like FFO, Core FFO, and AFFO to assess operating performance, with Q1 2023 AFFO at $0.43 per diluted share - The company uses FFO, Core FFO, and AFFO as supplemental measures to assess operating performance, excluding items like real estate depreciation and certain non-cash revenues and expenses[224][226][227] Non-U.S. GAAP Measures per Diluted Share | Per Share Data | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | FFO Attributable to Common Stockholders | $0.36 | $0.44 | | Core FFO Attributable to Common Stockholders | $0.39 | $0.46 | | AFFO Attributable to Common Stockholders | $0.43 | $0.49 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk on its variable-rate Credit Facility, partially mitigated by interest rate swaps - The primary market risk is interest rate risk on the variable-rate Credit Facility[236][237] - As of March 31, 2023, $33.2 million of the Credit Facility balance was not fixed by an interest rate swap, with a hypothetical 1% rate change impacting results by $0.3 million[237] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective[238] - There were no material changes in internal control over financial reporting during Q1 2023[238] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to materially affect its financial condition or results of operations - The company does not expect any current legal proceedings to have a material impact on its financial condition or operations[239] Item 1A. Risk Factors There have been no material changes to the company's risk factors from those disclosed in its 2022 Annual Report on Form 10-K - There have been no material changes in risk factors from those set forth in the company's 2022 Annual Report on Form 10-K[241] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2023, the company repurchased 303,354 shares of its common stock for $5.0 million under a publicly announced program Share Repurchases in Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2023 | — | — | | Feb 2023 | — | — | | Mar 2023 | 303,354 | $16.48 | | Total | 303,354 | $16.48 | Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and Sarbanes-Oxley Act certifications - The exhibits filed with the report include corporate bylaws, a form of a performance share award agreement, and certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act[244]