# CTO Realty Growth, Inc. (CTO) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CTO Realty Growth, Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/23795/000155837023001933/cto-20221231x10k.htm
Accession: 0001558370-23-001933
Filing date: 2023-02-23
Report date: 2022-12-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Company profile: /company/CTO/
All MD&A years: /company/CTO/mda/
Previous year: /company/CTO/mda/fy2021/ (FY 2021)
Next year: /company/CTO/mda/fy2023/ (FY 2023)

ITEM 7.              MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Forward-Looking Statements

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When the Company uses any words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, the Company is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon current expectations and reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements. Certain factors or risks that could cause actual results or events to differ materially from those the Company anticipates or projects are described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Given these uncertainties, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Annual Report on Form 10-K or any document incorporated herein by reference. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this Annual Report on Form 10-K.

Our Business

We are a publicly traded, self-managed equity REIT that focuses on the ownership, management, and repositioning of high-quality retail and mixed-use properties located primarily in what we believe to be faster growing, business-friendly markets exhibiting accommodative business tax policies, outsized relative job and population growth, and where retail demand exceeds supply. We have pursued our investment strategy by investing primarily through fee simple ownership of our properties, commercial loans and preferred equity.

We own and manage, sometimes utilizing third-party property management companies, 23 commercial real estate properties in 9 states in the United States. As of December 31, 2022, we owned 8 single-tenant and 15 multi-tenant income-producing properties comprising 3.7 million square feet of gross leasable space.

In addition to our income property portfolio, as of December 31, 2022, our business included the following:

Management Services:

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[[GREPCENT_TABLE]]
[["","\u25cf","A fee-based management business that is engaged in managing PINE, see Note 5, \u201cRelated Party Management Services Business\u201d in the notes to the consolidated financial statements in Item 8."]]
[[/GREPCENT_TABLE]]

Commercial Loans and Investments:

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[[GREPCENT_TABLE]]
[["","\u25cf","A portfolio of three commercial loan investments and one preferred equity investment which is classified as a commercial loan investment."]]
[[/GREPCENT_TABLE]]

Real Estate Operations:

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[[GREPCENT_TABLE]]
[["","\u25cf","A portfolio of subsurface mineral interests associated with approximately 355,000 surface acres in 19 counties in the State of Florida (\u201cSubsurface Interests\u201d); and"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","An inventory of mitigation credits as well as mitigation credits to be produced by the Company\u2019s formerly owned mitigation bank."]]
[[/GREPCENT_TABLE]]

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On December 10, 2021, the entity that held approximately 1,600 acres of undeveloped land in Daytona Beach, Florida (the “Land JV”), of which the Company previously held a 33.5% retained interest, completed the sale of all of its remaining land holdings for $66.3 million to Timberline Acquisition Partners, LLC an affiliate of Timberline Real Estate Partners (the “Land JV Sale”). Proceeds to the Company after distributions to the other member of the Land JV, and before taxes, were $24.5 million. Prior to the completion of the Land JV Sale, the Company was engaged in managing the Land JV, as further described in Note 5, “Related Party Management Services Business” in the notes to the consolidated financial statements in Item 8. As a result of the Land JV Sale and corresponding dissolution of the Land JV, the Company no longer holds a retained interest in the Land JV as of December 31, 2021.

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Our business also includes our investment in PINE. As of December 31, 2022, the fair value of our investment totaled $42.0 million, or 14.6% of PINE’s outstanding equity, including the units of limited partnership interest (“OP Units”) we hold in Alpine Income Property OP, LP (the “PINE Operating Partnership”), which are redeemable for cash, based upon the value of an equivalent number of shares of PINE common stock at the time of the redemption, or shares of PINE common stock on a one-for-one basis, at PINE’s election. Our investment in PINE generates investment income through the dividends distributed by PINE. In addition to the dividends we receive from PINE, our investment in PINE may benefit from any appreciation in PINE’s stock price, although no assurances can be provided that such appreciation will occur, the amount by which our investment will increase in value, or the timing thereof. Any dividends received from PINE are included in investment and other income (loss) on the accompanying consolidated statements of operations.

The Company operates in four primary business segments: income properties, management services, commercial loans and investments, and real estate operations.

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REIT Conversion

As of December 31, 2020, the Company had completed certain internal reorganization transactions necessary to begin operating in compliance with the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2020. See Item 1, “Business” for information related to the Company’s REIT conversion and related transactions. On January 29, 2021, in connection with the REIT conversion, the Company completed the Merger in order to reincorporate in Maryland and facilitate its ongoing compliance with the REIT requirements.

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Selected Historical Financial Information

The following table summarizes our selected historical financial information for each of the last five fiscal years (in thousands except per share amounts). The selected financial information has been derived from our audited consolidated financial statements. Additional data for fiscal years 2022, 2021, and 2020 is included elsewhere in this report.

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","Fiscal Years Ended"],["\u200b","","2022","","2021","","2020","","2019","","2018"],["Total Revenues","\u200b","$","82,320","\u200b","$","70,272","\u200b","$","56,381","\u200b","$","44,941","\u200b","$","43,658"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating Income","\u200b","$","10,667","\u200b","$","23,345","\u200b","$","12,280","\u200b","$","34,199","\u200b","$","31,385"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net Income Attributable to the Company","\u200b","$","3,158","\u200b","$","29,940","\u200b","$","78,509","\u200b","$","114,973","\u200b","$","37,168"],["Distributions to Preferred Stockholders","\u200b","\u200b","(4,781)","\u200b","\u200b","(2,325)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Net Income (Loss) Attributable to Common Stockholders","\u200b","$","(1,623)","\u200b","$","27,615","\u200b","$","78,509","\u200b","$","114,973","\u200b","$","37,168"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Per Share Information:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Basic:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Income (Loss) From Continuing Operations Attributable to Common Stockholders","\u200b","$","(0.09)","\u200b","$","1.56","\u200b","$","5.56","\u200b","$","1.11","\u200b","$","0.91"],["Income From Discontinued Operations (Net of Income Tax) Attributable to Common Stockholders","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","6.57","\u200b","\u200b","1.35"],["Basic Net Income (Loss) per Share Attributable to Common Stockholders","\u200b","$","(0.09)","\u200b","$","1.56","\u200b","$","5.56","\u200b","$","7.68","\u200b","$","2.26"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Income (Loss) From Continuing Operations Attributable to Common Stockholders","\u200b","$","(0.09)","\u200b","$","1.56","\u200b","$","5.56","\u200b","$","1.11","\u200b","$","0.90"],["Income From Discontinued Operations (Net of Income Tax) Attributable to Common Stockholders","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","6.56","\u200b","\u200b","1.34"],["Diluted Net Income (Loss) per Share Attributable to Common Stockholders","\u200b","$","(0.09)","\u200b","$","1.56","\u200b","$","5.56","\u200b","$","7.67","\u200b","$","2.24"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Dividends Declared and Paid - Preferred Stock","\u200b","$","1.59","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","\u2014"],["Dividends Declared and Paid - Common Stock","\u200b","$","1.49","\u200b","$","1.33","\u200b","$","4.63","\u200b","$","0.15","\u200b","$","0.09"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Summary of Financial Position:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Real Estate\u2014Net","\u200b","$","734,721","\u200b","$","494,695","\u200b","$","442,384","\u200b","$","370,591","\u200b","$","368,751"],["Total Assets","\u200b","$","986,545","\u200b","$","733,139","\u200b","$","666,700","\u200b","$","704,194","\u200b","$","556,841"],["Stockholders\u2019 Equity","\u200b","$","504,770","\u200b","$","430,480","\u200b","$","350,899","\u200b","$","285,413","\u200b","$","211,761"],["Long-Term Debt","\u200b","$","445,583","\u200b","$","278,273","\u200b","$","273,830","\u200b","$","286,310","\u200b","$","247,114"]]
[[/GREPCENT_TABLE]]

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Non-U.S. GAAP Financial Measures

Our reported results are presented in accordance with U.S. GAAP. We also disclose Funds From Operations (“FFO”), Core Funds From Operations (“Core FFO”), and Adjusted Funds From Operations (“AFFO”), each of which are non-U.S. GAAP financial measures. We believe these non-U.S. 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.

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FFO, Core 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, U.S. GAAP financial measures.

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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 U.S. GAAP net income or loss adjusted to exclude extraordinary items (as defined by U.S. 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 land sales, in addition to the mark-to-market of the Company’s investment securities and interest related to the 2025 Notes, if the effect is dilutive. To derive Core FFO, we modify the NAREIT computation of FFO to include other adjustments to U.S. GAAP net income related to gains and losses recognized on the extinguishment of debt, amortization of above- and below-market lease related intangibles, and other unforecastable market- or transaction-driven non-cash items. To derive AFFO, we further modify the NAREIT computation of FFO and Core FFO to include other adjustments to U.S. GAAP net income related to non-cash revenues and expenses such as straight-line rental revenue, non-cash compensation, and other non-cash amortization, as well as adding back the interest related to the 2025 Notes, if the effect is dilutive. 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.

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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 or losses 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 Core FFO and AFFO are additional useful supplemental measures for investors to consider because they will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO, Core FFO, and AFFO may not be comparable to similarly titled measures employed by other companies.

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Reconciliation of Non-U.S. GAAP Measures (in thousands):

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended"],["\u200b","\u200b","December 31, 2022","\u200b","December 31, 2021","\u200b","December 31, 2020"],["Net Income Attributable to the Company","\u200b","$","3,158","\u200b","$","29,940","\u200b","$","78,509"],["Add Back: Effect of Dilutive Interest Related to 2025 Notes (1)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Net Income Attributable to the Company, If-Converted","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Depreciation and Amortization of Real Estate","\u200b","\u200b","28,799","\u200b","\u200b","20,581","\u200b","\u200b","19,063"],["Loss (Gain) on Disposition of Assets, Net of Income Tax","\u200b","\u200b","4,170","\u200b","\u200b","(28,316)","\u200b","\u200b","(9,746)"],["Loss (Gain) on Disposition of Other Assets","\u200b","\u200b","(2,992)","\u200b","\u200b","(4,924)","\u200b","\u200b","2,480"],["Impairment Charges, Net","\u200b","\u200b","\u2014","\u200b","\u200b","13,283","\u200b","\u200b","9,147"],["Unrealized Loss (Gain) on Investment Securities","\u200b","\u200b","1,697","\u200b","\u200b","(10,340)","\u200b","\u200b","8,240"],["Income Tax Expense (Benefit) from Non-FFO Items and De-Recognition of REIT Deferred Tax Assets and Liabilities","\u200b","\u200b","\u2014","\u200b","\u200b","1,840","\u200b","\u200b","(80,225)"],["Funds from Operations","\u200b","\u200b","34,832","\u200b","\u200b","22,064","\u200b","\u200b","27,468"],["Distributions to Preferred Stockholders","\u200b","\u200b","(4,781)","\u200b","\u200b","(2,325)","\u200b","\u200b","\u2014"],["Funds From Operations Attributable to Common Stockholders","\u200b","\u200b","30,051","\u200b","\u200b","19,739","\u200b","\u200b","27,468"],["Loss (Gain) on Extinguishment of Debt","\u200b","\u200b","\u2014","\u200b","\u200b","3,431","\u200b","\u200b","(1,141)"],["Amortization of Intangibles to Lease Income","\u200b","\u200b","2,161","\u200b","\u200b","(404)","\u200b","\u200b","(1,754)"],["Less: Effect of Dilutive Interest Related to 2025 Notes (1)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Core Funds From Operations Attributable to Common Stockholders","\u200b","\u200b","32,212","\u200b","\u200b","22,766","\u200b","\u200b","24,573"],["Adjustments:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Straight-Line Rent Adjustment","\u200b","\u200b","(2,166)","\u200b","\u200b","(2,443)","\u200b","\u200b","(2,564)"],["COVID-19 Rent Repayments (Deferrals), Net","\u200b","\u200b","105","\u200b","\u200b","842","\u200b","\u200b","(1,005)"],["Other Depreciation and Amortization","\u200b","\u200b","(232)","\u200b","\u200b","(676)","\u200b","\u200b","(834)"],["Amortization of Loan Costs and Discount on Convertible Debt, and Capitalized Interest","\u200b","\u200b","774","\u200b","\u200b","1,864","\u200b","\u200b","1,833"],["Non-Cash Compensation","\u200b","\u200b","3,232","\u200b","\u200b","3,168","\u200b","\u200b","2,786"],["Non-Recurring G&A","\u200b","\u200b","\u2014","\u200b","\u200b","155","\u200b","\u200b","1,426"],["Adjusted Funds From Operations Attributable to Common Stockholders","\u200b","$","33,925","\u200b","$","25,676","\u200b","$","26,215"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Weighted Average Number of Common Shares:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Basic","\u200b","\u200b","18,508,201","\u200b","\u200b","17,676,809","\u200b","\u200b","14,114,631"],["Diluted (2)","\u200b","\u200b","18,508,201","\u200b","\u200b","17,676,809","\u200b","\u200b","14,114,631"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Dividends Declared and Paid - Preferred Stock","\u200b","$","1.59","\u200b","$","0.77","\u200b","$","\u2014"],["Dividends Declared and Paid - Common Stock","\u200b","$","1.49","\u200b","$","1.33","\u200b","$","4.63"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","As applicable, includes interest expense, amortization of discount, amortization of fees, and other changes in net income or loss that would result from the assumed conversion of the 2025 Convertible Senior Notes to derive FFO effective January 1, 2022 due to the implementation of ASU 2020-06 which requires presentation on an if-converted basis. For the year ended December 31 2022, a total of $2.2 million of interest was not included, as the impact of the 2025 Notes, if-converted, would be antidilutive to the net loss attributable to common stockholders of $1.6 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(2)","A total of 3.1 million shares, representing the dilutive impact of the 2025 Notes, upon adoption of ASU 2020-06 effective January 1, 2022, were not included in the computation of diluted net loss attributable to common stockholders for the year ended December 31, 2022 because they were antidilutive to the net loss attributable to common stockholders of $1.6 million."]]
[[/GREPCENT_TABLE]]

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48

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Other Data (in thousands except per share data):

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended"],["\u200b","\u200b","December 31, 2022","\u200b","December 31, 2021","\u200b","December 31, 2020"],["FFO Attributable to Common Stockholders","\u200b","$","30,051","\u200b","$","19,739","\u200b","$","27,468"],["FFO Attributable to Common Stockholders per Common Share - Diluted","\u200b","$","1.62","\u200b","$","1.12","\u200b","$","1.95"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Core FFO Attributable to Common Stockholders","\u200b","$","32,212","\u200b","$","22,766","\u200b","$","24,573"],["Core FFO Attributable to Common Stockholders per Common Share - Diluted (1)","\u200b","$","1.74","\u200b","$","1.29","\u200b","$","1.74"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["AFFO Attributable to Common Stockholders","\u200b","$","33,925","\u200b","$","25,677","\u200b","$","26,215"],["AFFO Attributable to Common Stockholders per Common Share - Diluted (1)","\u200b","$","1.83","\u200b","$","1.45","\u200b","$","1.86"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","A total of 3.1 million shares, representing the dilutive impact of the 2025 Notes, upon adoption of ASU 2020-06 effective January 1, 2022, were not included in the computation of diluted net loss attributable to common stockholders for the year ended December 31, 2022 because they were antidilutive to the net loss attributable to common stockholders of $1.6 million."]]
[[/GREPCENT_TABLE]]

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COMPARISON OF THE YEARS ENDED DECEMBER 31, 2022 AND 2021

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Revenue

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Total revenue for the year ended December 31, 2022 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2021 (in thousands):

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating Segment","\u200b","December 31, 2022","\u200b","December 31, 2021","\u200b","$ Variance","\u200b","% Variance"],["Income Properties","\u200b","$","68,857","\u200b","$","50,679","\u200b","$","18,178","\u200b","35.9%"],["Management Services","\u200b","\u200b","3,829","\u200b","\u200b","3,305","\u200b","\u200b","524","\u200b","15.9%"],["Commercial Loans and Investments","\u200b","\u200b","4,172","\u200b","\u200b","2,861","\u200b","\u200b","1,311","\u200b","45.8%"],["Real Estate Operations","\u200b","\u200b","5,462","\u200b","\u200b","13,427","\u200b","\u200b","(7,965)","\u200b","(59.3)%"],["Total Revenue","\u200b","$","82,320","\u200b","$","70,272","\u200b","$","12,048","\u200b","17.1%"]]
[[/GREPCENT_TABLE]]

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Total revenue for the year ended December 31, 2022 increased to $82.3 million, compared to $70.3 million during the year ended December 31, 2021. The increase in total revenue is primarily attributable to increased revenue produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period. Revenues further benefited from increased management fee income from PINE as well as increases in revenue generated from the Company’s portfolio of commercial loans and investments. These increases were offset by an $8.0 million decrease in real estate operations primarily due to a non-recurring land sale during the year ended December 31, 2021.

Income Properties

Revenue and operating income from our income property operations totaled $68.9 million and $48.5 million, respectively, during the year ended December 31, 2022, compared to total revenue and operating income of $50.7 million and $36.9 million, respectively, for the year ended December 31, 2021. The direct costs of revenues for our income property operations totaled $20.4 million and $13.8 million for the years ended December 31, 2022 and 2021, respectively. The increase in revenues of $18.2 million, or 35.9%, during the year ended December 31, 2022 is primarily related to the significant acquisition volume of multi-tenant properties.

49

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Management Services

Revenue from our management services totaled $3.8 million during the year ended December 31, 2022, and was earned from PINE. Revenue from our management services totaled $3.3 million during the year ended December 31, 2021, including $3.2 million and $0.1 million earned from PINE and the Land JV, respectively.

​

Commercial Loans and Investments

​

Interest income from our commercial loans and investments totaled $4.2 million and $2.9 million during the years ended December 31, 2022 and 2021, respectively. The increase is due to the timing of investments and repayments by borrowers within the Company’s commercial loans and investment portfolio.

​

Real Estate Operations

​

During the year ended December 31, 2022, operating income from real estate operations was $3.0 million on revenues totaling $5.5 million. During the year ended December 31, 2021, operating income from real estate operations was $4.8 million on revenues totaling $13.4  million. The operating income during the year ended December 31, 2022 was primarily due to mitigation credit sales and sales of Subsurface Interests. The decreased operating income during the year ended December 31, 2022 is primarily due to the sale of the Daytona Beach Development for $6.25 million which occurred during the year ended December 31, 2021.

​

General and Administrative Expenses

​

Total general and administrative expenses for the year ended December 31, 2022 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2021 (in thousands):

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["General and Administrative Expenses (in thousands)","\u200b","December 31, 2022","\u200b","December 31, 2021","\u200b","$ Variance","\u200b","% Variance"],["Recurring General and Administrative Expenses","\u200b","$","9,667","\u200b","$","7,879","\u200b","$","1,788","\u200b","22.7%"],["Non-Cash Stock Compensation","\u200b","\u200b","3,232","\u200b","\u200b","3,168","\u200b","\u200b","64","\u200b","2.0%"],["REIT Conversion and Other Non-Recurring Items","\u200b","\u200b","\u2014","\u200b","\u200b","155","\u200b","\u200b","(155)","\u200b","(100.0)%"],["Total General and Administrative Expenses","\u200b","$","12,899","\u200b","$","11,202","\u200b","$","1,697","\u200b","15.1%"]]
[[/GREPCENT_TABLE]]

​

Gains (Losses) and Impairment Charges

​

2022 Dispositions. During the year ended December 31, 2022, the Company sold six income properties, including (i) Party City, a single-tenant income property located in Oceanside, New York for $6.9 million, (ii) the Carpenter Hotel ground lease, a single-tenant income property located in Austin, Texas, which was recorded as a commercial loan investment prior to its disposition, for $17.1 million, (iii) the multi-tenant Westland Gateway Plaza located in Hialeah, Florida, which was recorded as a commercial loan investment prior to its disposition, for $22.2 million, (iv) Chuy’s, a single-tenant property, located in Jacksonville, Florida for $5.8 million, (v) Firebirds, a single-tenant property, located in Jacksonville, Florida for $5.5 million, and (vi) 245 Riverside, a multi-tenant office income property located in Jacksonville, Florida for $23.6 million. The sale of these six properties reflect a total disposition volume of $81.1 million, resulting in aggregate gains of $4.7 million.

​

The $4.7 million in aggregate income property sale gains were offset by an $11.9 million loss on the sale of the Company’s Mitigation Bank during the year ended December 31, 2022.

​

2021 Dispositions. During the year ended December 31, 2021, the Company disposed of one multi-tenant income property and 14 single-tenant income properties, including (i) World of Beer/Fuzzy’s Taco Shop, a multi-tenant income property located in Brandon, Florida for $2.3 million, (ii) Moe’s Southwest Grill, a single-tenant income property located in Jacksonville, Florida for $2.5 million, (iii) Burlington, a single-tenant income property located in North Richland Hills, Texas for $11.5 million, (iv) Staples, a single-tenant income property located in Sarasota, Florida for $4.7 million, (v) the CMBS Portfolio, sold to PINE, consisting of six single-tenant income properties for $44.5 million, (vi) Chick-fil-A, a single-tenant property, located in Chandler, Arizona for $2.9 million, (vii) JPMorgan Chase Bank, a single-tenant property, located in Chandler, Arizona for $4.7 million, (viii) Fogo De Chao, a single-tenant property, located in Jacksonville,

50

Table of Contents

Florida for $4.7 million, (ix) Wells Fargo, a single-tenant office income property located in Raleigh, North Carolina for $63.0 million, and (x) 24 Hour Fitness, a single-tenant income property located in Falls Church, VA for $21.5 million. The sale of the properties reflect a total disposition volume of $162.3 million, resulting in aggregate gains of $28.2 million.

​

Impairment Charges. There were no impairment charges on the Company’s undeveloped land holdings, or its income property portfolio, during the years ended December 31, 2022 or 2021. The $17.6 million impairment charge recognized during the year ended December 31, 2021 is related to the Company’s previously held retained interest in the Land JV. The aggregate impairment charge of $17.6 million is a result of eliminating the investment in joint ventures based on the final proceeds received through distributions of the Land JV in connection with closing the sale of substantially all of the Land JV’s remaining land with Timberline, for a final sales price of $66.3 million.

​

Loss on Extinguishment of Debt. During the year ended December 31, 2021, the Company repurchased $11.4 million aggregate principal amount of 2025 Notes at a $1.6 million premium, resulting in a loss on extinguishment of debt of $2.9 million. Additionally, in connection with the disposition of the CMBS Portfolio during the year ended December 31, 2021, and related assumption by the buyer of the Company’s $30.0 million fixed-rate mortgage note payable, the Company recognized a $0.5 million loss on extinguishment of debt related to the write-off of unamortized financing costs. There were no losses on extinguishment of debt during the year ended December 31, 2022.

​

Depreciation and Amortization

​

Depreciation and amortization totaled $28.9 million and $20.6 million during the years ended December 31, 2022 and 2021, respectively. The increase of $8.3 million is primarily due to the increase in the Company’s income property portfolio.

​

Investment and Other Income (Loss)

​

During the year ended December 31, 2022, the closing stock price of PINE decreased by $0.96 per share, with a closing price of $19.08 on December 31, 2022. During the year ended December 31, 2021, the closing stock price of PINE increased by $5.05 per share, with a closing price of $20.04 on December 31, 2021. The increase (decrease) resulted in an unrealized, non-cash gain (loss) on the Company’s investment in PINE of $(1.7) million and $10.3 million which is included in investment and other income (loss) in the consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively.

​

The Company earned dividend income from the investment in PINE of $2.3 million and $2.1 million during the years ended December 31, 2022 and 2021, respectively.

​

Interest Expense

Interest expense totaled $11.1 million and $8.9 million for the years ended December 31, 2022 and 2021, respectively.  The increase of $2.2 million resulted primarily from overall higher leverage as well as higher interest rates than the variable rate Credit Facility.

​

Net Income

​

Net income attributable to the Company totaled $3.2 million and $29.9 million during the years ended December 31, 2022 and 2021, respectively. The decrease in net income is attributable to the factors described above.

​

​

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COMPARISON OF THE YEARS ENDED DECEMBER 31, 2021 AND 2020

​

Revenue

​

Total revenue for the year ended December 31, 2021 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2020 (in thousands):

​

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating Segment","\u200b","December 31, 2021","\u200b","December 31, 2020","\u200b","$ Variance","\u200b","% Variance"],["Income Properties","\u200b","$","50,679","\u200b","$","49,953","\u200b","$","726","\u200b","1.5%"],["Management Services","\u200b","\u200b","3,305","\u200b","\u200b","2,744","\u200b","\u200b","561","\u200b","20.4%"],["Commercial Loans and Investments","\u200b","\u200b","2,861","\u200b","\u200b","3,034","\u200b","\u200b","(173)","\u200b","(5.7)%"],["Real Estate Operations","\u200b","\u200b","13,427","\u200b","\u200b","650","\u200b","\u200b","12,777","\u200b","1965.7%"],["Total Revenue","\u200b","$","70,272","\u200b","$","56,381","\u200b","$","13,891","\u200b","24.6%"]]
[[/GREPCENT_TABLE]]

​

Total revenue for the year ended December 31, 2021 increased to $70.3 million, compared to $56.4 million during the year ended December 31, 2020. The increase in total revenue is primarily attributable to increased revenue from real estate operations related to the sale of the Daytona Beach Development, Subsurface Interests and mitigation credits, as further described below, in addition to increased income produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period. Revenues further benefited from increased management fee income from PINE. These increases were offset by a decrease in revenue generated from the Company’s portfolio of commercial loans and investments.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["Income Property Operations Revenue(in thousands)","\u200b","December 31, 2021","\u200b","December 31, 2020","\u200b","$ Variance","\u200b","% Variance"],["Revenue From Recent Acquisitions","\u200b","$","8,846","\u200b","$","\u2014","\u200b","$","8,846","\u200b","100.0%"],["Revenue From Recent Dispositions","\u200b","\u200b","\u2014","\u200b","\u200b","7,986","\u200b","\u200b","(7,986)","\u200b","(100.0)%"],["Revenue From Remaining Portfolio","\u200b","\u200b","41,429","\u200b","\u200b","40,213","\u200b","\u200b","1,216","\u200b","3.0%"],["Accretion of Above Market/Below Market Intangibles","\u200b","\u200b","404","\u200b","\u200b","1,754","\u200b","\u200b","(1,350)","\u200b","(77.0)%"],["Total Income Property Operations Revenue","\u200b","$","50,679","\u200b","$","49,953","\u200b","$","726","\u200b","1.5%"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["Real Estate Operations Revenue (in thousands)","\u200b","December 31, 2021","\u200b","December 31, 2020","\u200b","$ Variance","\u200b","% Variance"],["Mitigation Credit Sales","\u200b","$","708","\u200b","$","6","\u200b","$","702","\u200b","11700.0%"],["Subsurface Revenue","\u200b","\u200b","4,724","\u200b","\u200b","638","\u200b","\u200b","4,086","\u200b","640.4%"],["Fill Dirt and Other Revenue","\u200b","\u200b","\u2014","\u200b","\u200b","6","\u200b","\u200b","(6)","\u200b","(100.0)%"],["Land Sales Revenue","\u200b","\u200b","7,995","\u200b","\u200b","\u2014","\u200b","\u200b","7,995","\u200b","100.0%"],["Total Real Estate Operations Revenue","\u200b","$","13,427","\u200b","$","650","\u200b","$","12,777","\u200b","1965.7%"]]
[[/GREPCENT_TABLE]]

Income Properties

Revenue and operating income from our income property operations totaled $50.7 million and $36.9 million, respectively, during the year ended December 31, 2021, compared to total revenue and operating income of $50.0 million and $38.0 million, respectively, for the year ended December 31, 2020. The direct costs of revenues for our income property operations totaled $13.8 million and $12.0 million for the years ended December 31, 2021 and 2020, respectively. The increase in revenues of $0.7 million, or 1.5%, during the year ended December 31, 2021 is primarily related to the timing of acquisitions versus dispositions. The slight decrease in operating income from our income property operations reflects increased rent revenues, offset by an increase of $1.8 million in our direct costs of revenues which is also related to the timing of acquisitions versus dispositions.

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Management Services

Revenue from our management services totaled $3.3 million during the year ended December 31, 2021, including $3.2 million and $0.1 million earned from PINE and the Land JV, respectively. Revenue from our management services totaled $2.7 million during the year ended December 31, 2020, including $2.5 million and $0.2 million earned from PINE and the Land JV, respectively

​

Commercial Loans and Investments

​

Interest income from our commercial loans and investments totaled $2.9 million and $3.0 million during the years ended December 31, 2021 and 2020, respectively. The decrease is due to the timing of investments and sales within the Company’s commercial loans and investments portfolio, as further described below.

​

2021 Portfolio. As of December 31, 2021, the Company’s commercial loans and investments portfolio included two commercial loan investments and two commercial properties. The timing of the investments includes (i) the origination of one commercial loan investment during the fourth quarter of 2020, (ii) the origination of one commercial loan investment during the second quarter of 2021, and (iii) the acquisition of two commercial properties during the third quarter of 2020 and 2019, individually, which are accounted for as commercial loan investments due to future repurchase rights.

​

2020 Portfolio. As of December 31, 2020, the Company’s commercial loans and investments portfolio included one commercial loan investment and two commercial properties, of which one was originated during the third quarter of 2019, and two were originated during the third and fourth quarter of 2020. Additionally, during the three months ended June 30, 2020, the Company sold four of its commercial loans and investments in an effort to strengthen the Company’s liquidity in light of the COVID-19 Pandemic.

​

Real Estate Operations

​

During the year ended December 31, 2021, operating income from real estate operations was $4.8 million on revenues totaling $13.4 million. During the year ended December 31, 2020, operating loss from real estate operations was $2.6 million on revenues totaling $0.7 million. The operating income during the year ended December 31, 2021 was primarily due to the sale of the Daytona Beach Development for $6.25 million, in addition to the sale of approximately 84,900 acres of Subsurface Interests totaling $4.6 million and six mitigation credits totaling $0.7 million, which revenues were offset by $8.5 million aggregate cost of sales, as compared to the year ended December 31, 2020 which includes an aggregate charge to cost of sales totaling $3.1 million, primarily comprised of $2.9 million attributable to 42 mitigation credits provided at no cost to buyers in addition to the Company’s purchase of two mitigation credits for $0.2 million.

​

General and Administrative Expenses

​

Total general and administrative expenses for the year ended December 31, 2021 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2020 (in thousands):

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["General and Administrative Expenses","\u200b","December 31, 2021","\u200b","December 31, 2020","\u200b","$ Variance","\u200b","% Variance"],["Recurring General and Administrative Expenses","\u200b","$","7,879","\u200b","$","7,355","\u200b","$","524","\u200b","7.1%"],["Non-Cash Stock Compensation","\u200b","\u200b","3,168","\u200b","\u200b","2,786","\u200b","\u200b","382","\u200b","13.7%"],["REIT Conversion and Other Non-Recurring Items","\u200b","\u200b","155","\u200b","\u200b","1,426","\u200b","\u200b","(1,271)","\u200b","(89.1)%"],["Total General and Administrative Expenses","\u200b","$","11,202","\u200b","$","11,567","\u200b","$","(365)","\u200b","(3.2)%"]]
[[/GREPCENT_TABLE]]

​

Gains (Losses) and Impairment Charges

​

2021 Dispositions. During the year ended December 31, 2021, the Company sold one multi-tenant income property and 14 single-tenant income properties for a total disposition volume of $162.3 million. The sale of the properties generated aggregate gains of $28.2 million.

​

​

​

53

Table of Contents

The income properties disposed of during the year ended December 31, 2021 are described below (in thousands):

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Tenant Description","","Tenant Type","\u200b","Date of Disposition","\u200b","Sales Price","\u200b","Gain on Sale"],["World of Beer/Fuzzy's Taco Shop, Brandon, FL","\u200b","Multi-Tenant","\u200b","01/20/21","\u200b","$","2,310","\u200b","$","599"],["Moe's Southwest Grill, Jacksonville, FL (4)","\u200b","Single-Tenant","\u200b","02/23/21","\u200b","\u200b","2,541","\u200b","\u200b","109"],["Burlington, N. Richland Hills, TX","\u200b","Single-Tenant","\u200b","04/23/21","\u200b","\u200b","11,528","\u200b","\u200b","62"],["Staples, Sarasota, FL","\u200b","Single-Tenant","\u200b","05/07/21","\u200b","\u200b","4,650","\u200b","\u200b","662"],["CMBS Portfolio (1)","\u200b","Single-Tenant","\u200b","06/30/21","\u200b","\u200b","44,500","\u200b","\u200b","3,899"],["Chick-fil-A, Chandler, AZ (4)","\u200b","Single-Tenant (2)","\u200b","07/14/21","\u200b","\u200b","2,884","\u200b","\u200b","1,582"],["JPMorgan Chase Bank, Chandler, AZ (4)","\u200b","Single-Tenant (2)","\u200b","07/27/21","\u200b","\u200b","4,710","\u200b","\u200b","2,738"],["Fogo De Chao, Jacksonville, FL (4)","\u200b","Single-Tenant (3)","\u200b","09/02/21","\u200b","\u200b","4,717","\u200b","\u200b","866"],["Wells Fargo, Raleigh, NC","\u200b","Single-Tenant","\u200b","09/16/21","\u200b","\u200b","63,000","\u200b","\u200b","17,480"],["24 Hour Fitness, Falls Church, VA","\u200b","Single-Tenant","\u200b","12/16/21","\u200b","\u200b","21,500","\u200b","\u200b","212"],["Total","\u200b","$","162,340","\u200b","$","28,209"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","On June 30, 2021, the Company sold the CMBS Portfolio to PINE for an aggregate purchase price of $44.5 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Represents a single-tenant outparcel to Crossroads Towne Center, the Company\u2019s multi-tenant income property located in Chandler, Arizona."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Represents a single-tenant property at The Strand at St. Johns Town Center, the Company\u2019s multi-tenant income property located in Jacksonville, Florida."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Property or outparcel represents a ground lease."]]
[[/GREPCENT_TABLE]]

​

2020 Dispositions. During the year ended December 31, 2020, the Company sold 11 income properties and one vacant land parcel for a total disposition volume of $86.5 million. The sale of the properties generated aggregate gains of $8.6 million. In addition to the income property and vacant land parcel dispositions, the Company sold eight of its remaining nine billboard sites for a sales price of $1.5 million, resulting in a gain equal to the sales price.

​

The income properties disposed of during the year ended December 31, 2020 are described below (in thousands):

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Tenant Description","","Tenant Type","\u200b","Date of Disposition","\u200b","Sales Price","\u200b","Gain (Loss) on Sale"],["CVS, Dallas, TX (1)","\u200b","Single-Tenant","\u200b","04/24/20","\u200b","$","15,222","\u200b","$","854"],["Wawa, Daytona Beach, FL (1)","\u200b","Single-Tenant","\u200b","04/29/20","\u200b","\u200b","6,002","\u200b","\u200b","1,769"],["JPMorgan Chase Bank, Jacksonville, FL (1)","\u200b","Single-Tenant","\u200b","06/18/20","\u200b","\u200b","6,715","\u200b","\u200b","959"],["7-Eleven, Dallas, TX","\u200b","Multi-Tenant","\u200b","06/26/20","\u200b","\u200b","2,400","\u200b","\u200b","(46)"],["Bank of America, Monterey, CA (1)","\u200b","Single-Tenant","\u200b","06/29/20","\u200b","\u200b","9,000","\u200b","\u200b","3,892"],["Wawa, Jacksonville, FL (1)","\u200b","Single-Tenant","\u200b","07/23/20","\u200b","\u200b","7,143","\u200b","\u200b","246"],["Carrabbas, Austin, TX","\u200b","Single-Tenant","\u200b","08/05/20","\u200b","\u200b","2,555","\u200b","\u200b","(84)"],["PDQ, Jacksonville, FL (1)","\u200b","Single-Tenant","\u200b","09/08/20","\u200b","\u200b","2,540","\u200b","\u200b","128"],["Macaroni Grill, Arlington, TX","\u200b","Single-Tenant","\u200b","10/13/20","\u200b","\u200b","2,500","\u200b","\u200b","68"],["Aspen Development, Aspen, CO","\u200b","Single-Tenant","\u200b","12/21/20","\u200b","\u200b","28,500","\u200b","\u200b","501"],["Outback, Austin, TX","\u200b","Single-Tenant","\u200b","12/23/20","\u200b","\u200b","3,402","\u200b","\u200b","222"],["Total","\u200b","$","85,979","\u200b","$","8,509"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Property represents a ground lease."]]
[[/GREPCENT_TABLE]]

​

Commercial Loans and Investments. In light of the COVID-19 Pandemic, during the three months ended March 31, 2020, the Company began marketing its commercial loan portfolio in advance of their upcoming maturities to further strengthen the Company’s liquidity. The Company received multiple bids for the portfolio including a bid offering a value that was at a discount to par. Additionally, the Company implemented the guidance regarding current expected credit losses (“CECL”) effective January 1, 2020, which resulted in an allowance reserve of $0.3 million. The CECL reserve combined with the impairment related to marketing the loan portfolio resulted in an aggregate impairment charge on the loan portfolio of $1.9 million.

​

​

54

Table of Contents

Additionally, during the year ended December 31, 2020, the Company sold four of its commercial loans investments in two separate transactions generating aggregate proceeds of $20.0 million, resulting in a loss of $0.4 million during the three months ended June 30, 2020. The total loss on the loan portfolio disposition, including the impairment and CECL reserve charges in the three months ended March 31, 2020, was $2.1 million.

​

There were no losses on the Company’s commercial loans and investments portfolio during the year ended December 31, 2021.

​

2025 Note Repurchases. During the year ended December 31, 2021, the Company repurchased $11.4 million aggregate principal amount of 2025 Notes at a $1.6 million premium, resulting in a loss on extinguishment of debt of $2.9 million. During the year ended December 31, 2020, the Company repurchased $12.5 million aggregate principal amount of 2025 Notes at a $2.6 million discount, resulting in a gain on extinguishment of debt of $1.1 million.

​

Mortgage Note Payable. In connection with the disposition of the CMBS Portfolio during the second quarter of 2021 and related assumption by the buyer of the Company’s $30.0 million fixed-rate mortgage note payable, the Company recognized a $0.5 million loss on extinguishment of debt related to the write-off of unamortized financing costs.

​

Impairment Charges. There were no impairment charges on the Company’s undeveloped land holdings, or its income property portfolio, during the years ended December 31, 2021 or 2020. The $17.6 million impairment charge recognized during the year ended December 31, 2021, which is comprised of a $16.5 million charge during the three months ended June 30, 2021 and a $1.1 million charge during the three months ended December 31, 2021, is related to the Company’s previously held retained interest in the Land JV. The aggregate impairment charge of $17.6 million is a result of eliminating the investment in joint ventures based on the final proceeds received through distributions of the Land JV in connection with closing the sale of substantially all of the Land JV’s remaining land with Timberline, for a final sales price of $66.3 million.

​

Additionally, during the year ended December 31, 2020, the Company recognized an aggregate $7.2 million impairment charge comprised of a $0.1 million impairment charge on one of the land parcels included in the Daytona Beach Development and a $ 7.1 million impairment charge on the Company’s previously held retained interest in the Land LV. The $7.1 million impairment on the Company’s previously held retained interest in the Land JV was the result of a re-forecast of the anticipated undiscounted future cash flows to be received by the Company based on the estimated timing of future land sales from the Land JV.

​

Depreciation and Amortization

​

Depreciation and amortization totaled $20.6 million and $19.1 million during the years ended December 31, 2021 and 2020, respectively. The increase of $1.5 million is primarily due to the increase in the Company’s income property portfolio.

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Investment and Other Income (Loss)

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During the year ended December 31, 2021, the closing stock price of PINE increased by $5.05 per share, with a closing price of $20.04 on December 31, 2021. During the year ended December 31, 2020, the closing stock price of PINE decreased by $4.04 per share, with a closing price of $14.99 on December 31, 2020. The increase (decrease) resulted in an unrealized, non-cash gain (loss) on the Company’s investment in PINE of $10.3 million and ($8.2) million which is included in investment and other income (loss) in the consolidated statements of operations for the years ended December 31, 2021 and 2020, respectively.

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The Company earned dividend income from the investment in PINE of $2.1 million and $1.7 million during the years ended December 31, 2021 and 2020, respectively.

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Interest Expense

Interest expense totaled $8.9 million and $10.8 million for the years ended December 31, 2021 and 2020, respectively.  The decrease of $1.9 million resulted primarily from (i) the repurchase of $11.4 million aggregate principal amount of 2025 Notes and (ii) the disposition of the CMBS Portfolio under which the buyer assumed a $30.0 million fixed-rate mortgage note.  The assumed $30.0 million mortgage note and the 2025 Notes both had higher interest rates than the Credit Facility and term loans.

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Net Income

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Net income attributable to the Company totaled $29.9 million and $78.5 million during the years ended December 31, 2021 and 2020, respectively. The decrease in net income is attributable to the factors described above in addition to the $83.5 million income tax benefit recorded during the year ended December 31, 2020, primarily related to the de-recognition of the deferred tax assets and liabilities associated with the entities included in the REIT totaling $82.5 million, as a result of the Company’s REIT election.

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LIQUIDITY AND CAPITAL RESOURCES

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Cash totaled $21.2 million at December 31, 2022, including restricted cash of $1.9 million, see Note 2 “Summary of Significant Accounting Policies” under the heading Restricted Cash in the notes to the consolidated financial statements in Item 8 for the Company’s disclosure related to its restricted cash balance at December 31, 2022.

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Our total cash balance at December 31, 2022, reflected cash flows provided by our operating activities totaling $56.1 million during the year ended December 31, 2022, compared to the prior year’s cash flows provided by operating activities totaling $27.6 million for the year ended December 31, 2021, an increase of $28.5 million. The increase of $28.5 million is primarily related to the increase in the cash flows provided by the Company’s portfolio of income properties as a result of the overall growth in 2022 and 2021. Additionally, the Company sold the Mitigation Bank for a sales price of $8.1 million during the year ended December 31, 2022, while the company utilized cash of $16.1 million to purchase the remaining interest in the Mitigation Bank during the year ended December 31, 2021, for an increase in cash of $24.2 million.

Our cash flows used in investing activities totaled $267.6 million for the year ended December 31, 2022, compared to cash flows used in investing activities of $103.0 million for the year ended December 31, 2021, an increase of $164.6 million. The increase in cash used in investing activities of $164.6 million is primarily related to a net increase in cash outflows of $146.2 million during the year ended December 31, 2022 related to the timing of income property acquisitions versus dispositions, which increase in cash outflows was partially offset by $8.6 million in net proceeds received from the related to timing of investing in the Company’s commercial loans and investment portfolio.

Our cash flows provided by financing activities totaled $201.4 million for the year ended December 31, 2022, compared to cash flows provided by financing activities of $72.9 million for the year ended December 31, 2021, an increase in cash of $128.5 million. The increase of $128.5 million is primarily related to an increase in net debt of $146.7 million as well as $21.9 million in increased proceeds from capital markets activity which consisted of a common stock offering and ATM activity during during the year ended December 31, 2022 versus a Series A Preferred Stock offering during the year ended December 31, 2021.

See Note 16, “Long-Term Debt” in the notes to the consolidated financial statements in Item 8 for the Company’s disclosure related to its long-term debt balance at December 31, 2022.

Acquisitions and Investments. The Company acquired four multi-tenant income properties and one portfolio of three single-tenant properties during the year ended December 31, 2022 for an aggregate purchase price of $314.0 million, as further described in Note 3, “Income Properties” in the notes to the consolidated financial statements in Item 8.

We expect to fund future acquisitions utilizing cash on hand, cash from operations, proceeds from the dispositions of income properties through Section 1031 like-kind exchanges, and potentially the sale of all or a portion of our Subsurface Interests, and borrowings on our Credit Facility, if available. We expect dispositions of income properties and Subsurface Interests will qualify under the like-kind exchange deferred-tax structure, and additional financing sources.

Dispositions. During the year ended December 31, 2022, the Company sold six properties, two of which were classified as a commercial loan investment due to the respective tenants’ repurchase options, for $81.1 million. The sale of the properties generated aggregate gains of $4.7 million.

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Contractual Obligations. The Company has committed to fund the following capital improvements. The improvements, which are related to several properties, are estimated to be generally completed within twelve months. These commitments, as of December 31, 2022, are as follows (in thousands):

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(1)     Commitment includes tenant improvements, leasing commissions, rebranding, facility expansion and other capital improvements.

In addition, the Company is committed to fund the two construction loans as described in Note 4, “Commercial Loans and Investments”. The unfunded portion of the construction loans totaled $5.6 million of December 31, 2022.

The Company is also contractually obligated under its various long-term debt and operating lease agreements. In the aggregate, the Company is obligated under such agreements to repay $447.6 million being long-term to be repaid in excess of one year.

As of December 31, 2022, we have no other contractual requirements to make capital expenditures.

Other Matters. None.

We believe we will have sufficient liquidity to fund our operations, capital requirements, maintenance, and debt service requirements over the next twelve months and into the foreseeable future, with cash on hand, cash flow from our operations and $186.2 million available capacity on the existing $300.0 million Credit Facility, based on our current borrowing base of income properties, as of December 31, 2022.

In February 2020, the Board approved a $10.0 million stock repurchase program. During the year ended December 31, 2020, the Company repurchased 88,565 shares for $4.1 million, or an average price of $46.29 per share. During the year ended December 31, 2021, the Company repurchased 40,553 shares for $2.2 million, or an average price of $54.48 per share. During the year ended December 31, 2022, the Company repurchased 145,724 shares of its common stock on the open market for a total cost of $2.8 million, or an average price per share of $19.15. The repurchase program does not have an expiration date. The shares of the Company’s common stock repurchased pursuant to the repurchase program were cancelled.

On February 16, 2023, the Company’s Board of Directors approved a common stock repurchase program, which is expected to be in effect until the approved dollar amount has been used to repurchase shares (the “Common Stock Repurchase Program”). Pursuant to the Common Stock Repurchase Program, the Company may repurchase shares of its common stock for a total purchase price of up to $5.0 million at an average per share purchase price equal to or less than $17.00. Shares may be purchased under the Common Stock Repurchase Program in open market transactions, including through block purchases, through privately negotiated transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Common Stock Repurchase Program does not obligate the Company to acquire any particular amount of shares of its common stock and may be modified or suspended.

Our Board and management consistently review the allocation of capital with the goal of providing the best long-term return for our stockholders. These reviews consider various alternatives, including increasing or decreasing regular dividends, repurchasing the Company’s securities, and retaining funds for reinvestment. Annually, the Board reviews our business plan and corporate strategies, and makes adjustments as circumstances warrant. Management’s focus is to continue our strategy to diversify our portfolio by redeploying proceeds from like-kind exchange transactions and utilizing our Credit Facility to increase our portfolio of income-producing properties, providing stabilized cash flows with strong risk-adjusted returns primarily in larger metropolitan areas and growth markets.

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CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates include those estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Our most significant estimate is as follows:

Purchase Accounting for Acquisitions of Real Estate Subject to a Lease.  As required by U.S. GAAP, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value. The assumptions underlying the allocation of relative fair values are based on market information including, but not limited to: (i) the estimate of replacement cost of improvements under the cost approach, (ii) the estimate of land values based on comparable sales under the sales comparison approach, and (iii) the estimate of future benefits determined by either a reasonable rate of return over a single year’s net cash flow, or a forecast of net cash flows projected over a reasonable investment horizon under the income capitalization approach. The underlying assumptions are subject to uncertainty and thus any changes to the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation and amortization as a result of the fair value allocation. The acquisitions of real estate subject to this estimate totaled four multi-tenant income properties and one portfolio of three single-tenant properties for a combined purchase price of $314.0 million for the year ended December 31, 2022 and eight multi-tenant income properties for a combined purchase price of $249.1 million for the year ended December 31, 2021.

See Note 2, “Summary of Significant Accounting Policies”, for further discussion of the Company’s accounting estimates and policies.