CTO Realty Growth Reports Fourth Quarter and Full Year 2020 Operating Results

Select Highlights

• Announced successful completion of the Company’s real estate investment trust (“REIT”) conversion and payment of the previously declared special distribution on the Company’s shares of common stock through an aggregate of $5.6 million in cash and the issuance of 1,198,963 shares of the Company’s common stock.
• Reported Net Income per diluted share of $16.60 and $16.69 for the quarter and year ended December 31, 2020, respectively.
• Reported FFO per diluted share of $2.11 and $5.84 for the quarter and year ended December 31, 2020, respectively.
• Reported AFFO per diluted share of $2.20 and $5.57 for the quarter and year ended December 31, 2020, respectively.
• Paid a regular cash dividend for the fourth quarter of 2020 of $1.00 per share on November 30, 2020 to shareholders of record as of November 16, 2020.
• Collected 99% of the Contractual Base Rent (“CBR”) (as defined below) due for the three months ended December 31, 2020.
• During the fourth quarter of 2020, sold three income properties and one vacant land parcel for $34.9 million, representing a weighted average exit cap rate of 6.1%.
• During the fourth quarter of 2020, the Land JV (as defined below) sold 86 acres for $11.5 million.
• Sold eight billboard sites during the fourth quarter of 2020 for a sales price of $1.5 million, resulting in a gain equal to the sales price.
• Total real estate transaction activity for 2020, which includes income property acquisitions and dispositions, as well as vacant land sales of the Land JV (as defined below), totaled a Company record $336.0 million.
• Book value per share outstanding as of December 31, 2020 was $59.32.
• Collected 99% of CBR (as defined below) due in January 2021.
• On January 28, 2021, the Company sold approximately 25,000 acres of subsurface oil, gas and mineral rights for $1.9 million, resulting in a gain on the sale of $1.8 million.
• Declared a regular cash dividend for the first quarter of 2021 of $1.00 per share, representing an annualized yield of 8.1% based on the closing price of CTO common stock on February 17, 2021.

CEO Comments

“We are pleased with the progress we made during 2020 as we accomplished a record number of company-specific operational and transactional initiatives, with our fourth quarter REIT conversion representing the culmination of our multi-year process to reposition CTO Realty Growth into a high-quality, publicly traded diversified REIT,” said John P. Albright, President and Chief Executive Officer of CTO Realty Growth. “This was a terrific year of execution for our team as we managed $336 million of real estate transaction activity, maintained strong cash flow in the face of the unprecedented pandemic, delivered year-over-year FFO per share growth of more than 90%, and completed our REIT conversion, which we believe provides the most tax-efficient organizational structure for our stockholders, and will allow us to provide them with an attractive and sustainable dividend.”

Quarterly Financial Results Highlights

The tables below provide a summary of the Company’s operating results for the three months ended December 31, 2020:

The increase in total revenue was primarily attributable to income produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period and revenue from management fee income, the majority of which was from the external management of PINE that did not commence until late in the fourth quarter of 2019.

The operating results for the quarter ended December 31, 2020 were impacted by $0.4 million of general and administrative expenses primarily related to legal, audit, and other professional fees incurred in connection with the Company’s 2020 REIT conversion.

(1)See the “Non-GAAP Financial Measures” section and tables at the end of this press release for a discussion and reconciliation of Net Income to non-GAAP financial measures, including FFO, FFO per diluted share, AFFO and AFFO per diluted share.

(2)Includes the payment of the Company’s previously announced special distribution in an aggregate amount of approximately $55.8 million (the “Special Distribution”). The Special Distribution is intended to ensure that the Company has distributed all of its previously undistributed earnings and profits attributable to taxable periods ended on or prior to December 31, 2019, as required in connection with the Company’s election to be taxable as a REIT commencing with its taxable year ended December 31, 2020. The Special Distribution was paid through an aggregate of approximately $5.6 million in cash and the issuance of 1,198,963 shares of the Company’s common stock.

Net income for the quarter ended December 31, 2020 includes an increase in deferred income tax benefit of $82.5 million related to the de-recognition of certain deferred tax assets and liabilities as a result of the Company’s conversion to a REIT. Additionally, net income for the fourth quarter of 2020 includes an increase of $1.3 million in gains on disposition of income producing properties, a vacant land parcel, and billboard sales from the comparative period in 2019, which gains were impacted by a non-cash impairment charge of ($7.2) million primarily related to an impairment of the Company’s retained interest in the Land JV and a decrease in the closing stock price of PINE resulting in a non-cash, unrealized loss of ($1.1) million on the mark-to-market of the Company’s investment in PINE. Net income for the fourth quarter of 2019 includes $95.5 million attributable to discontinued operations, including the Company’s former land holdings and golf operations.

Annual Financial Results Highlights

The tables below provide a summary of the Company’s operating results for the year ended December 31, 2020:

The increase in total revenue year-over-year was primarily attributable to income produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period, income from commercial loan and master lease investments that were originated during and subsequent to the second quarter of 2019, and revenue from management fee income, the majority of which was from the external management of PINE, which did not commence until late in the fourth quarter of 2019.

The operating results for the year ended December 31, 2020 were impacted by a 17.8% increase in total general and administrative expenses, primarily related to legal, audit, and other professional fees incurred in connection with the Company’s 2020 REIT conversion and increased audit, tax and legal fees, primarily attributable to the Company’s Land JV and the asset portfolio sale to PINE, for which fees were incurred primarily during the first quarter of 2020.

(1)See the “Non-GAAP Financial Measures” section and tables at the end of this press release for a discussion and reconciliation of Net Income to non-GAAP financial measures, including FFO, FFO per diluted share, AFFO and AFFO per diluted share.

(2)Includes the payment of the Special Distribution in an aggregate amount of approximately $55.8 million. The Special Distribution is intended to ensure that the Company has distributed all of its previously undistributed earnings and profits attributable to taxable periods ended on or prior to December 31, 2019, as required in connection with the Company’s election to be taxable as a REIT commencing with its taxable year ended December 31, 2020. The Special Distribution was paid through an aggregate of approximately $5.6 million in cash and the issuance of 1,198,963 shares of the Company’s common stock.

Net income for the year ended December 31, 2020 includes an increase in deferred income tax benefit of $82.5 million related to the de-recognition of certain deferred tax assets and liabilities as a result of the Company’s conversion to a REIT. Net income for the year ended December 31, 2020 also includes a decrease of ($12.2) million from the year-over-year difference in gains on disposition of income producing properties, a vacant land parcel, and billboard sales, a non-cash impairment charges of ($9.1) million primarily related to an impairment of the Company’s retained interest in the Land JV, a decrease in the closing stock price of PINE resulting in a non-cash, unrealized loss of ($8.2) million on the mark-to-market of the Company’s investment in PINE, and an aggregate loss of ($2.1) million related to the Company’s commercial loan portfolio that included the impairment charge recognized in the first quarter of 2020 related to the Company’s disposition of four of its commercial loan investments. These losses were offset by an increase in gain on extinguishment of debt of $1.1 million related to the repurchase of $12.5 million aggregate amount of the Company’s convertible notes. Net income for the year ended December 31, 2019 includes $98.4 million attributable to discontinued operations, including the Company’s former land holdings and golf operations.

Acquisitions

During the year ended December 31, 2020, the Company acquired three retail properties and one office property for total acquisition volume of $185.1 million, reflecting a weighted average going-in cap rate of 7.8%.

Dispositions

During the three months ended December 31, 2020, the Company sold three income properties and one vacant land parcel for total disposition volume of $34.9 million, reflecting a weighted average exit cap rate of 6.1%. The sale of the properties generated a gain of $0.9 million.

During the fourth quarter and full year of 2020, the Company sold eight billboard sites for a sales price of $1.5 million, resulting in a gain equal to the sales price.

During the year ended December 31, 2020, the Company sold 11 income properties and one vacant land parcel for total disposition volume of $86.5 million, reflecting a weighted average exit cap rate of 5.2%. The sale of the properties generated a gain of $8.6 million.

On January 20, 2021, the Company completed the sale of the property located in Brandon, Florida leased to two tenants operating as World of Beer and Fuzzy’s Taco Shop for a sale price of $2.3 million, of which proceeds are expected to be a part of a 1031 like-kind exchange transaction. The gain on the sale was approximately $0.6 million.

Income Property Portfolio

As of December 31, 2020, the Company’s portfolio had economic occupancy of 93.0% and physical occupancy of 92.6%.

The Company’s income property portfolio consisted of the following as of December 31, 2020:

Square feet in thousands.

(1)The 21 single-tenant properties include (i) a property leased to The Carpenter Hotel which is under a long-term ground lease and includes two tenant-repurchase options and (ii) a property in Hialeah leased to a master tenant which includes three tenant-repurchase options. Pursuant to FASB ASC Topic 842, Leases, the $16.3 and $21.0 million investments, respectively, have been recorded in the Company’s consolidated balance sheet as of December 31, 2020 as Commercial Loan and Master Lease Investments.

Operational Highlights

During the fourth quarter of 2020, CTO signed leases totaling approximately 155,300 square feet. A summary of the Company’s leasing activity is as follows:

In thousands except for per square foot and lease term data.

COVID-19 Pandemic and Rent Collection Update

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus as a pandemic (the “COVID-19 Pandemic”), which has spread throughout the United States. The spread of the COVID-19 Pandemic has continued to cause significant volatility in the U.S. and international markets, and in many industries, business activity has experienced periods of almost complete shutdown. There continues to be uncertainty around the duration and severity of business disruptions related to the COVID-19 Pandemic, as well as its impact on the U.S. economy and international economies.

Q4 2020 Rent Status: The Company collected 99% of the CBR due for the three months ended December 31, 2020. CBR represents the amount owed to the Company under the current terms of its lease agreements in each respective month. The Company has previously agreed to defer or abate certain CBRs in exchange for additional lease term or other lease enhancing additions. In general, the repayment of the deferred CBR began in the third quarter of 2020, with ratable payments continuing, in some cases, into 2023. The Company has not yet reached an agreement with certain tenants responsible for 1% of CBR due during the three months ended December 31, 2020.

2021 Rent Status: As of February 17, 2021, the Company has received payments for CBR due in January 2021 from tenants representing 99% of the CBR due during such period. An assessment of the current or identifiable potential financial and operational impacts on the Company as a result of the COVID-19 Pandemic are as follows:

• The total borrowing capacity on the Company’s revolving credit facility is based on the assets currently in the borrowing base, as defined by the Company’s revolving credit facility agreement. Pursuant to the terms of the revolving credit facility agreement, any property in the borrowing base with a tenant that is more than 60 days past due on its contractual rent obligations would be automatically removed from the borrowing base and the Company’s borrowing capacity would be reduced. For the tenants requesting rent relief with which the Company has reached an agreement, such deferral and/or abatement agreements for current rent, under the terms of the credit facility, would not be past due if the tenants adhere to such modifications, and thus those properties would not be required to be removed from the borrowing base. The Company’s available borrowing capacity has not been limited as a result of the referenced terms of the revolving credit facility.
• As a result of the outbreak of the COVID-19 Pandemic, the federal government and the state of Florida issued orders encouraging everyone to remain in their residence and not go into work. In response to these orders and in the best interest of our employees and directors, we have implemented significant preventative measures to ensure the health and safety of our employees and Board of Directors (the “Board”), including: (i) conducting all meetings of the Board and Committees of the Board telephonically or via a visual conferencing service, (ii) permitting the Company’s employees to work from home at their election, (iii) enforcing appropriate social distancing practices in the Company’s office, (iv) encouraging the Company’s employees to wash their hands often and use face masks, (v) providing hand sanitizer and other disinfectant products throughout the Company’s office, (vi) requiring employees who do not feel well in any capacity to stay at home, and (vii) requiring all third-party delivery services (e.g. mail, food delivery, etc.) to complete their service outside the front door of the Company’s office. The Company also offered COVID-19 testing to its employees to ensure a safe working environment. These preventative measures have not had any material adverse impact on the Company’s financial reporting systems, internal controls over financial reporting or disclosure controls and procedures. At this time, we have not laid off, furloughed, or terminated any employee in response to the COVID-19 Pandemic.

Land Joint Venture

During the three months ended December 31, 2020, the venture formed when the Company sold its controlling interest in the entity that owned the Company’s remaining land portfolio, of which the Company has a retained interest (the “Land JV”) sold 86 acres for $11.5 million. From inception through December 31, 2020, the Land JV has sold approximately 3,800 acres for $79.7 million, which has resulted in distributions to the joint venture partner that reduced the partner’s capital balance to $32.4 million as of December 31, 2020.

Following these transactions, the Land JV has approximately 1,600 acres of undeveloped land, or an estimated $70.0 million to $95.0 million of potential value remaining. Following the repayment of the Land JV partner’s capital balance, the Company is scheduled to receive 90% of the additional proceeds under the terms of the Land JV agreement.

The Land JV’s current transaction pipeline related to the remaining 1,600 acres includes 55 acres of potential land sales that total $5.0 million. The buyers of these parcels include in-state and out-of-state developers.

Commercial Loan Investments

During the three months ended December 31, 2020, the Company completed the following commercial loan transactions:

• Invested approximately $0.4 million in one commercial loan provided to the buyer of a vacant land parcel located in Dallas, Texas. The loan has an initial term of 2.5 years and an interest rate of 7.5%.
• Generated proceeds of $2.0 million in connection with the borrower’s repayment of the Company’s loan made to the buyer of the Company’s former golf operations.

During the year ended December 31, 2020, the Company sold four of its commercial loan investments generating aggregate proceeds of approximately $20.0 million, received a $2.0 million repayment, and invested $0.4 million in one commercial loan.

The following is a summary of the Company’s commercial loan investment as of December 31, 2020:

Subsurface Interests

During the year ended December 31, 2020, the Company sold 345 acres of subsurface interests totaling $0.6 million. As of December 31, 2020, the Company owns full or fractional subsurface oil, gas, and mineral interests underlying approximately 454,000 “surface” acres of land owned by others in 20 counties in Florida.

On January 28, 2021, the Company sold approximately 25,000 acres of subsurface oil, gas and mineral rights for $1.9 million, resulting in a gain on the sale of $1.8 million.

REIT Conversion and NYSE Uplisting

During the third quarter of 2020, the Company’s Board unanimously approved a plan for the Company to elect to be subject to tax as a REIT for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2020. In connection with the REIT conversion, the Company’s Board declared a special distribution on its shares of common stock in an aggregate amount of $55.8 million (the “Special Distribution”), payable in cash and shares of the Company’s common stock. The Special Distribution was paid on December 21, 2020 to shareholders of record as of the close of business on November 19, 2020 through an aggregate of $5.6 million in cash and the issuance of 1,198,963 shares of the Company’s common stock.

On February 1, 2020, the Company announced the completion of a merger that was undertaken in connection with the Company’s previously announced plan for the Company to elect to be subject to tax as a REIT for U.S. federal income tax purposes (the “Merger”).

As a result of the Merger, the Company is a corporation organized in the state of Maryland and the Company’s charter includes certain standard REIT provisions, including ownership limitations and transfer restrictions applicable to the Company’s capital stock.

Following the completion of the Merger, the Company’s common stock began trading on the New York Stock Exchange on February 1, 2021 under the ticker symbol “CTO.”

Capital Markets and Balance Sheet

During the year ended December 31, 2020, the Company completed the following notable capital markets transactions:

• Exchanged or refinanced the $75.0 million of convertible notes due in March 2020 that carried a coupon rate of 4.50% with a new issuance of $75.0 million in convertible notes that mature in April 2025 and have a coupon rate of 3.875% (the “2025 Notes”).
• Repurchased $12.5 million aggregate principal amount of the Company’s 2025 Notes at a $2.6 million cash discount, resulting in a gain on the extinguishment of debt of $1.1 million.
• Under the Company’s $10.0 million buyback program, the Company repurchased 88,565 shares for approximately $4.1 million with an average purchase price of $46.29 per share. The per share purchase price is unadjusted for the Company’s Special Distribution in connection with its REIT Conversion.

The following table provides a summary of the Company’s long-term debt, at face value, as of December 31, 2020:

(1)Effective March 31, 2020, the Company utilized an interest rate swap to achieve a fixed LIBOR rate of 0.7325% plus the applicable spread on $100.0 million of the outstanding balance on the revolving credit facility.

(2)Effective August 31, 2020, the Company utilized an interest rate swap to achieve a fixed LIBOR rate of 0.2200% plus the applicable spread on $50.0 million of the outstanding balance on the revolving credit facility.

(3)The mortgage note payable is subject to an interest rate swap to achieve a fixed interest rate of 3.17%.

Dividends

On October 28, 2020, the Company announced a regular cash dividend for the fourth quarter of 2020 of $1.00 per share, payable on November 30, 2020 to stockholders of record as of the close of business on November 16, 2020. The 2020 fourth quarter cash dividend represented a 150.0% increase over the Company’s previous quarterly regular cash dividend and a payout ratio of 47% of Q4 2020 FFO per share and 45% of Q4 2020 AFFO per share.

On December 21, 2020, the Company announced the completion of the Special Distribution of $11.98 per share in connection with its REIT conversion, paid on December 21, 2020 to shareholders of record as of the close of business on November 19, 2020.

During year ended December 31, 2020, the Company paid regular cash dividends of $1.90 per share and total dividends, including the Special Distribution in connection with its REIT conversion, of $13.88 per share.

On February 16, 2021, the Company announced a regular cash dividend for the first quarter of 2021 of $1.00 per share, payable on March 31, 2021 to stockholders of record as of the close of business on March 22, 2021. The 2021 first quarter cash dividend represents an annualized yield of 8.1% based on the closing price of the Company’s common stock on February 17, 2021.

2021 Outlook

The Company’s outlook and guidance for 2021 assumes improvement in economic activity, stable or positive business trends related to each of our tenants and other significant assumptions. The Company’s outlook for 2021 is as follows:

(1) Includes the disposition of one property subsequent to December 31, 2020, as described above under “Dispositions.”

The Company’s outlook and guidance for 2021 is based on current plans and assumptions, and subject to risks and uncertainties more fully described in this press release and the Company’s reports filed with the Securities and Exchange Commission (the “SEC”).

CEO Comments

“With our focus now on 2021, we are encouraged with our leasing activity and the opportunity to continue to monetize non-core and non-income producing properties to drive additional cash flow for our stockholders,” said John P. Albright, President and Chief Executive Officer of CTO Realty Growth. “As we look at our growth strategy for 2021 and beyond, we believe we can drive organic growth by selling some of our existing single tenant, net leased assets and reinvesting the proceeds in multi-tenant properties that we think have the potential to provide more attractive risk-adjusted returns.”

4th Quarter Earnings Conference Call & Webcast

The Company will host a conference call to present its operating results for the quarter and year ended December 31, 2020, on Friday, February 19, 2021, at 9:00 AM ET. Stockholders and interested parties may access the earnings call via teleconference or webcast:

Please dial in at least fifteen minutes prior to the scheduled start time and use the code 0116865 when prompted.

A webcast of the call can be accessed at: https://services.choruscall.com/links/cto210219.html.

To access the webcast, log on to the web address noted above or go to http://www.ctorealtygrowth.com and log in at the investor relations section. Please log in to the webcast at least ten minutes prior to the scheduled time of the Earnings Call.

About CTO Realty Growth, Inc.

CTO Realty Growth, Inc. is a publicly traded diversified REIT that owns and operates a diversified portfolio of income properties comprising approximately 2.5 million square feet in the United States. CTO also owns an approximate 23.5% interest in Alpine Income Property Trust, Inc., a publicly traded net lease real estate investment trust (NYSE: PINE).

We encourage you to review our most recent investor presentation, which is available on our website at www.ctorealtygrowth.com.

Safe Harbor

Certain statements contained in this press release (other than statements of historical fact) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by words such as “believe,” “estimate,” “expect,” “intend,” “anticipate,” “will,” “could,” “may,” “should,” “plan,” “potential,” “predict,” “forecast,” “project,” and similar expressions, as well as variations or negatives of these words.

Although forward-looking statements are made based upon management’s present expectations and reasonable beliefs concerning future developments and their potential effect upon the Company, a number of factors could cause the Company’s actual results to differ materially from those set forth in the forward-looking statements. Such factors may include, but are not limited to: the Company’s ability to remain qualified as a REIT; the Company’s exposure to U.S. federal and state income tax law changes, including changes to the REIT requirements; general adverse economic and real estate conditions; the ultimate geographic spread, severity and duration of pandemics such as the recent outbreak of the novel coronavirus, actions that may be taken by governmental authorities to contain or address the impact of such pandemics, and the potential negative impacts of such pandemics on the global economy and the Company’s financial condition and results of operations; the inability of major tenants to continue paying their rent or obligations due to bankruptcy, insolvency or a general downturn in their business; the loss or failure, or decline in the business or assets of PINE or the venture formed when the Company sold its controlling interest in the entity that owned the Company’s remaining land portfolio, of which the Company has a retained interest; the completion of 1031 exchange transactions; the availability of investment properties that meet the Company’s investment goals and criteria; the uncertainties associated with obtaining required governmental permits and satisfying other closing conditions for planned acquisitions and sales; and the uncertainties and risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, each as filed with the SEC.

There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.

Non-GAAP Financial Measures

Our reported results are presented in accordance with GAAP. We also disclose Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”), both of which are non-GAAP financial measures. We believe these two non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.

FFO and AFFO do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operating activities as reported on our statement of cash flows as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.

We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate related depreciation and amortization, including the pro rata share of such adjustments of unconsolidated subsidiaries. The Company also excludes the gains or losses from sales of assets incidental to the primary business of the REIT which specifically include the sales of mitigation credits, impact fee credits, subsurface sales, and the land sales gains included in discontinued operations. To derive AFFO, we modify the NAREIT computation of FFO to include other adjustments to GAAP net income related to non-cash revenues and expenses such as straight-line rental revenue, amortization of deferred financing costs, amortization of capitalized lease incentives and above- and below-market lease related intangibles, and non-cash compensation. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We use AFFO as one measure of our performance when we formulate corporate goals.

FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other companies.

CTO Realty Growth, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)

CTO Realty Growth, Inc.
Consolidated Statements of Operations
(In thousands, except share, per share and dividend data)

CTO Realty Growth, Inc.
Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share data)

Contact:
Matthew M. Partridge
Senior Vice President and Chief Financial Officer
(386) 944-5643
mpartridge@ctorealtygrowth.com