CTO Realty Growth, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. CTO is a self-managed equity REIT focused primarily on retail and mixed-use real estate in growth markets. It reported 23 properties across nine states, totaling approximately 3.7 million square feet.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $82.3 million | $70.3 million |
| Operating income | $10.7 million | $23.3 million |
| Net income attributable to CTO | $3.2 million | $29.9 million |
| Net income (loss) attributable to common stockholders | $(1.6) million; $(0.09) per share | $27.6 million; $1.56 per share |
| FFO attributable to common stockholders | $30.1 million; $1.62 per share | $19.7 million; $1.12 per share |
| AFFO attributable to common stockholders | $33.9 million; $1.83 per share | $25.7 million; $1.45 per share |
| Cash provided by operating activities | $56.1 million | $27.6 million |
| Cash, including restricted cash | $21.2 million | $31.3 million |
| Long-term debt, carrying value | $445.6 million | $278.3 million |
| Total assets / stockholders’ equity | $986.5 million / $504.8 million | $733.1 million / $430.5 million |
Revenue increased 17.1%, while operating income fell to about 13.0% of revenue from about 33.2%. Common-stockholder GAAP earnings were negative after preferred dividends. FFO and AFFO are non-GAAP measures and should not be treated as substitutes for net income or operating cash flow.
Cash used in investing activities was $267.6 million and cash provided by financing activities was $201.4 million. At year-end, the $300 million revolving credit facility had $113.8 million drawn and $186.2 million of reported available capacity, subject to the borrowing base. The company declared and paid $1.49 per common share and $1.59 per Series A preferred share during 2022.
Material changes versus 2021
- Income-property revenue rose 35.9% to $68.9 million, principally reflecting acquisitions. CTO acquired four multi-tenant properties and a three-property single-tenant portfolio for total acquisition cost of $315.6 million; it sold six properties for $81.1 million.
- Multi-tenant economic occupancy increased to 89% from 86%; physical occupancy was 86%, compared with 85%. Single-tenant economic and physical occupancy remained 100%.
- Real estate operations revenue declined to $5.5 million from $13.4 million, largely because 2021 included a non-recurring land sale. Commercial loan and investment interest income increased to $4.2 million from $2.9 million; management-fee income increased to $3.8 million from $3.3 million.
- Operating results included a $7.0 million net loss on dispositions in 2022, versus a $28.3 million net gain in 2021. The 2022 amount included an $11.9 million loss on sale of the mitigation-bank entity, partly offset by gains on property sales. There were no impairment charges in 2022; 2021 included $17.6 million of impairment charges.
- Interest expense rose to $11.1 million from $8.9 million, reflecting higher leverage and rates on variable-rate borrowings. Depreciation and amortization increased to $28.9 million from $20.6 million as the property portfolio expanded.
- CTO raised $62.4 million net from a common-stock offering and $32.9 million net through ATM sales, while long-term debt increased by $167.3 million on a carrying-value basis. Common shares outstanding at year-end were 22.9 million, versus 17.7 million a year earlier; the filing also reports a three-for-one stock split in 2022.
Outlook, commentary, risks and unusual items
No quantified earnings or FFO guidance is provided in the supplied filing text. Management said it expects sufficient liquidity for operations, capital needs and debt service through the next 12 months and foreseeable future, using cash, operating cash flow and available revolver capacity. Its stated strategy is to grow and diversify income-producing properties, especially multi-tenant retail, using acquisitions, dispositions, like-kind exchanges and financing as available.
- Debt includes $51.0 million face value of 3.875% convertible senior notes due 2025, term loans due 2026–2028, and a $113.8 million revolving-facility balance. The revolver and term loans have variable-rate pricing; swaps hedge specified term-loan balances. A 100-basis-point rate change was estimated to affect annual results and cash flows by $1.1 million on the unhedged revolver balance at year-end.
- Capital commitments included $21.2 million remaining for property improvements and $5.6 million of unfunded construction-loan commitments. Management reported compliance with debt covenants at year-end.
- Key risks include tenant credit and retail-market conditions, geographic concentration, interest rates and refinancing, access to capital, real-estate illiquidity, environmental and weather exposure, REIT qualification and tax requirements, and reliance on management-fee income and its investment in PINE. PINE represented 14.6% of its outstanding equity and had a $42.0 million fair value at year-end; its market-price movements affect reported investment income.
- The company’s PINE management agreement generated $3.8 million in 2022 base fees; no incentive fee was earned in 2022 or 2021. The filing identifies potential conflicts of interest in the relationship.
- The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded controls were effective. The auditor identified acquisition-date fair-value estimates for acquired real estate and leases as a critical audit matter.
Investor verification priorities
- Review the debt schedule, interest-rate swap terms, covenant headroom, and refinancing or repayment plan for the 2025 notes and subsequent maturities.
- Assess whether recent acquisitions are delivering expected occupancy, rent and cash returns, and examine lease expirations—including the 2026 and 2028 rent concentrations shown in the filing.
- Reconcile cash available for dividends and investment after property-improvement and construction-loan commitments; compare distributions with operating cash flow and AFFO.
- Examine the mitigation-bank sale accounting and retained mitigation-credit assets, including the $11.9 million reported loss.
- Evaluate PINE investment-value exposure, management-fee dependence, related-party governance, and the effect of common-equity issuance on per-share measures.