Business context and reporting period
Unaudited Form 10-Q for the quarter ended March 31, 2020. The filing names the registrant as Consolidated-Tomoka Land Co. It describes a diversified real estate operator with 36 income-producing properties in 12 states, approximately 2.3 million square feet, management services, commercial loans, and Florida subsurface and mitigation-credit interests. The company reported 29 single-tenant and seven multi-tenant properties at quarter-end.
Key financial results and position
| Metric | Q1 2020 | Q1 2019 / prior period |
|---|---|---|
| Total revenue | $12.84 million | $10.96 million |
| Operating income | $0.29 million | $10.00 million |
| Net income (loss) | $(12.26) million | $6.47 million |
| Diluted EPS | $(2.60) | $1.21 |
| Operating cash flow | $3.58 million | $4.21 million |
- Income-property revenue was $11.00 million; segment operating income was $8.89 million, approximately 81% of segment revenue.
- Cash and cash equivalents were $18.59 million and restricted cash was $2.91 million at March 31. Cash flow statement total cash, including restricted cash, was $21.50 million.
- Long-term debt was $313.37 million carrying value and $322.56 million face value; total shareholders’ equity was $272.21 million. The company reported compliance with debt covenants.
- Net cash used in investing was $144.76 million, principally reflecting property acquisitions and loan investments; financing provided $27.78 million. Cash, including restricted cash, declined by $113.40 million during the quarter.
- The company declared and paid $0.25 per share in dividends, versus $0.10 in Q1 2019.
Material changes versus the prior comparable period
- Revenue increased 17%, led by $4.88 million of revenue from recent property acquisitions, management fees of $0.70 million, and commercial-loan interest income of $1.05 million. Income-property revenue increased only $0.28 million overall because acquisitions were partly offset by prior-year property dispositions.
- Results swung to a net loss, primarily due to a $13.71 million non-cash unrealized loss on the company’s PINE investment as its share price fell. The investment’s reported fair value decreased to $25.11 million from $38.81 million at December 31, 2019.
- Other notable Q1 items included a $1.90 million impairment charge on commercial loans, about $1.5 million of mitigation-credit costs described as nonrecurring, and a $0.64 million gain on extinguishment of debt. Q1 2019 included a $6.87 million property-sale gain and $1.12 million of discontinued-operations income.
- Interest expense rose to $3.45 million from $2.92 million, reflecting higher credit-facility borrowing and convertible-debt discount amortization.
Outlook, risks, contingencies and unusual items
- Management expected COVID-19-related negative effects to be greater in Q2 than in Q1 and said the full impact was not yet determinable. In April, tenants seeking rent relief represented approximately 37% of contractual base rent; 62% of the portfolio was reported open and 27% operating on a limited basis. Management warned collections could fall below contractual rent and deferred rent could prove difficult to collect.
- At March 31, the company had approximately $19 million of cash on hand, about $199 million drawn on its $200 million credit facility, and approximately $1.2 million of available capacity based on borrowing-base assets. Properties with tenants more than 60 days past due could be removed from the borrowing base, reducing capacity. Management stated it expected sufficient liquidity for the next 12 months, but this depended partly on cash flows and limited remaining facility availability.
- 2020 investment guidance was $160 million to $210 million for income-producing properties. Q1 acquisitions were two multi-tenant properties for a combined purchase price of approximately $137.2 million: Crossroads Towne Center in Arizona and Perimeter Place in Georgia.
- The company refinanced its maturing 2020 convertible notes with 3.875% notes due 2025 and repurchased $5 million principal in March. Subsequent to quarter-end, it repurchased another $5 million principal by May 6, leaving $65 million outstanding.
- After quarter-end, the company sold two single-tenant properties for approximately $15.2 million and $6.0 million, respectively, and estimated after-tax gains of $0.8 million and $1.8 million. Share repurchases also continued after quarter-end.
- Potential obligations include a mitigation-credit put right with maximum potential future payments of approximately $27 million, subject to credit sales and contractual terms. An environmental restoration accrual of approximately $87,000 remained; the company said it could change within one year. The filing reported no other legal proceedings expected to have a material effect.
Most important facts for investors to verify
- Actual rent collections, deferrals, abatements, tenant defaults and occupancy after March 31, particularly against the April rent-relief requests.
- Borrowing-base availability and covenant headroom if tenant delinquencies reduce eligible collateral; the reported remaining facility capacity was limited.
- Whether property investment guidance remains achievable and how acquisitions, post-quarter sales and like-kind exchanges affect liquidity and earnings.
- Realized recovery value and timing for the commercial-loan portfolio, which was marketed ahead of maturities and impaired in Q1.
- Further changes in PINE’s market value and their effect on reported earnings, as well as the company’s mitigation-credit put-right exposure.