CTO Realty Growth, Inc. — Q1 2019 Form 10-Q Summary
Issuer identification: The supplied filing is for Consolidated-Tomoka Land Co. (commission file No. 01-11350), not an entity named CTO Realty Growth, Inc. Investors should confirm the filing and issuer identity before relying on this summary.
Business context and reporting period
The filing covers the three months ended March 31, 2019, with balance-sheet comparisons to December 31, 2018 and operating comparisons to Q1 2018. The company reported 46 commercial properties across 14 states, approximately 2.3 million square feet of leasable space, and about 5,400 acres of undeveloped land in Daytona Beach, Florida. The LPGA International Golf Club was classified as held for sale, with its results reported as discontinued operations.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Total revenue | $14.26 million | $23.50 million |
| Operating income | $11.72 million | $17.12 million |
| Net income | $6.47 million | $10.91 million |
| Diluted EPS | $1.21 | $1.96 |
| Operating cash flow | $4.21 million | $10.64 million |
| Capital expenditures | $0.93 million | $30.03 million |
| Cash and cash equivalents | $2.68 million | $2.31 million at Dec. 31, 2018 |
| Restricted cash | $1.34 million | $19.72 million at Dec. 31, 2018 |
| Total assets | $518.51 million | $556.33 million at Dec. 31, 2018 |
| Long-term debt, carrying value | $206.99 million | $247.62 million at Dec. 31, 2018 |
Q1 2019 included a $6.87 million gain on the sale of the Whole Foods-anchored Sarasota property; reported operating income therefore includes a material disposition gain. Interest expense was $2.92 million, up from $2.56 million. Dividends declared and paid were $0.10 per share, versus $0.06 a year earlier.
At March 31, face-value debt was approximately $209.2 million: $79.8 million on the revolving credit facility, $54.4 million in mortgage debt, and $75 million principal on 4.50% convertible notes due March 2020. The company reported compliance with debt covenants. Its stated $150 million revolver had $65.8 million of available capacity based on borrowing-base assets; elsewhere, management cited approximately $70.2 million available.
Material changes versus Q1 2018
- Revenue declined 39%, primarily because Q1 2018 included a $13.9 million Buc-ee’s land sale, compared with $3.3 million of land-sale revenue in Q1 2019. Real estate operations revenue fell 75%; income-property revenue rose 16% to $10.72 million.
- Net income fell 41% and diluted EPS declined from $1.96 to $1.21. The larger $6.87 million Whole Foods sale gain in 2019 partly offset lower land-sale revenue; the comparable 2018 period included a $3.65 million gain on sale of four office properties.
- Operating cash flow decreased by $6.4 million, which management attributed principally to lower land-sale proceeds. Investing activities generated $23.8 million, including Whole Foods sale proceeds; financing activities used $46.0 million, including approximately $41.1 million of net debt repayments and $4.1 million of share repurchases.
- Debt fell by approximately $41.1 million during the quarter. Assets held for sale also declined following the Whole Foods sale. The company repurchased 70,708 shares for approximately $4.1 million at an average $58.34 per share.
Outlook, risks, contingencies, and unusual items
- Management’s 2019 investment guidance was $80 million to $120 million for income-producing properties. Expected funding sources included revolver capacity, operating cash, land-sale proceeds, property dispositions, and potentially subsurface-interest proceeds.
- The company reported 14 potential land-sale transactions covering approximately 3,203 acres, with stated aggregate consideration of approximately $93.0 million and estimated closings in 2019–2020. Transactions remained subject to due diligence, permits, approvals, and other conditions; the filing cautions that timing and completion are uncertain.
- After quarter-end, the company repurchased 320,741 shares—about 6% of outstanding shares—from its largest shareholder for approximately $18.4 million, funded with revolver borrowing. It also reported a $20 million revolver draw associated with this repurchase; by April 30, the facility balance was $102.8 million with about $42.8 million available. A further $3 million of capacity was used by April 18, including for repurchases under the existing program.
- The remaining estimated wetlands-restoration liability was approximately $713,000. Management said the estimate could change within a year and could materially affect the balance sheet and future cash flows. Other disclosed commitments included $560,000 of remaining golf-course per-round surcharges and approximately $648,000 of remaining tenant-improvement allowances.
- The golf operation had a Q1 operating loss of approximately $215,000 before income taxes, versus about $27,000 a year earlier; management cited approximately $196,000 of required repairs and maintenance as a negative factor. Its sale, if completed, could improve cash flow.
- Interest-rate exposure is concentrated in the variable-rate revolver. The company estimated that a 100-basis-point rate change would affect financial position, results, and cash flows by approximately $798,000. A swap fixed the rate on the $24.4 million Raleigh mortgage at 3.17% through April 2021.
- The company adopted lease-accounting Topic 842 on January 1, 2019, recording approximately $681,000 of right-of-use assets and lease liabilities. No impairment charges were recorded in Q1 2019 or Q1 2018. Management stated it believed liquidity was sufficient for the next 12 months and foreseeable future.
Most important facts for investors to verify
- Confirm that this Consolidated-Tomoka Land Co. filing is the intended issuer and period for the requested CTO Realty Growth, Inc. summary.
- Reconcile the filing’s differing available-revolver-capacity figures: $65.8 million in the debt note, approximately $70.2 million in the liquidity discussion, and approximately $42.8 million at April 30 after subsequent borrowing.
- Track the $75 million convertible notes due in March 2020 and the company’s ability to refinance or repay them.
- Assess how much of the approximately $93.0 million land-sale pipeline closes, and whether required approvals, permits, and restoration obligations affect proceeds or timing.
- Distinguish recurring property earnings and cash generation from land sales and property-disposition gains when evaluating performance.