ST JOE Co (JOE) FY 2022 MD&A

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying audited consolidated financial statements and the related notes included in this Form 10-K. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties described in “Risk Factors” in this Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Form 10-K, unless required by law.

Business Overview

St. Joe is a real estate development, asset management and operating company with all of its real estate assets and operations in Northwest Florida. We intend to use existing assets for residential, hospitality and commercial ventures. We have significant residential and commercial land-use entitlements. We actively seek higher and better uses for our real estate assets through a range of development activities. As part of our core business strategy, we have created a meaningful portion of our business through joint ventures and limited partnerships over the past several years. We enter into these arrangements for the purposes of developing real estate and other business activities, which we believe allows us to complement our growth strategy, leverage industry expertise and diversify our business. We may also partner with or explore the sale of discrete assets when we and/or others can better deploy resources. We seek to enhance the value of our owned real estate assets by developing residential, commercial and hospitality projects to meet market demand. Approximately 86% of our real estate is located in Florida’s Bay, Gulf, and Walton counties. Approximately 90% of our real estate land holdings are located within fifteen miles of the Gulf of Mexico.

We believe our present capital structure, liquidity and land provide us with years of opportunities to increase recurring revenue and long-term value for our shareholders. We intend to focus on our core business activity of real estate development, asset management and operations. We continue to develop a broad range of asset types that we believe will provide acceptable rates of return, grow recurring revenues and support future business. Capital

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commitments will be funded with cash proceeds from completed projects, existing cash, owned-land, partner capital and financing arrangements. We do not anticipate immediate benefits from investments. Timing of projects may be subject to delays caused by factors beyond our control. We may also choose to operate rather than lease assets, lease rather than sell assets, or sell improved rather than unimproved land that may delay revenue and profits.

Our real estate investment strategy focuses on projects that meet long-term risk-adjusted return criteria. Our practice is to only incur such expenditures when our analysis indicates that a project will generate a return equal to or greater than the threshold return over its life.

2022 highlights include:

Market Conditions

Throughout 2022, we continued to generate positive financial results. While macroeconomic factors such as inflation, rising interest rates, supply chain disruptions, geopolitical conflicts and the continuing recovery from the COVID-19 pandemic, among other things, have created economic headwinds and impacted buyer sentiment, demand across our segments remains strong. We believe this is primarily the result of the continued growth of Northwest Florida, which we attribute to the region’s high quality of life, natural beauty and outstanding amenities, as well as the evolving flexibility in the workplace.

Despite the strong demand across our segments, we also continue to feel the impact from the aforementioned macroeconomic factors, including supply chain disruptions which have extended homesite and home deliveries in certain residential communities, and inflation and rising interests rates, which have increased operating costs and loan rates, as compared to prior periods. However, despite homesite and home delivery delays, we generally have not seen a material increase in cancellation rates, and therefore the impact relates primarily to the timing of revenue recognition. In addition, while rising interest rates have negatively impacted buyers’ ability to obtain financing and the housing market generally, homebuilders have performed on their contractual obligations with us.

Given our diverse portfolio of residential holdings, the mix of sales and pricing from different communities may also impact revenue and margins period over period, as discussed in more detail below.

Further discussion of the potential impacts on our business from the current macroeconomic environment are discussed in Part I. Item 1A. Risk Factors.

Reportable Segments

We conduct primarily all of our business in the following three reportable segments: 1) residential, 2) hospitality and 3) commercial.

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The following table sets forth the relative contribution of these reportable segments to our consolidated operating revenue:

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For more information regarding our reportable segments, see Note 19. Segment Information included in Item 15 of this Form 10-K.

Residential Segment

Our residential segment typically plans and develops residential communities of various sizes across a wide range of price points and sells homesites to homebuilders or retail consumers. Our residential segment also evaluates opportunities to enter into JV agreements for specific communities such as Latitude Margaritaville Watersound.

Our residential segment includes the Watersound Origins, Watersound Origins West, Watersound Camp Creek, Breakfast Point East, Titus Park, Ward Creek, College Station, Park Place, Salt Creek at Mexico Beach, WindMark Beach and SouthWood communities, which are large scale, multi-phase communities with current development activity, sales activity or future phases. Homesites in these communities are developed based on market demand and sold primarily to homebuilders and on a limited basis to retail customers.

The East Lake Creek, East Lake Powell, Lake Powell, Teachee, West Bay Creek and West Laird communities have phases of homesites in preliminary planning. Homesites in these communities will be developed based on market demand and sold primarily to homebuilders and on a limited basis to retail customers.

The SummerCamp Beach community has homesites available for sale and along with the RiverCamps community, both have additional lands for future development.

The Latitude Margaritaville Watersound community is a planned 55+ active adult residential community in Bay County, Florida. The community is located near the Intracoastal Waterway with convenient access to the Northwest Florida Beaches International Airport. The community is being developed through our unconsolidated Latitude Margaritaville Watersound JV with our partner Minto Communities USA, a homebuilder and community developer, and is estimated to include approximately 3,500 residential homes, which will be developed in smaller increments of discrete neighborhoods. As of December 31, 2022, the unconsolidated Latitude Margaritaville Watersound JV had 677 homes under contract, which are expected to result in a sales value of approximately $338.5 million at closing of the homes. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

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The residential homesite pipeline by community/project are as follows:

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In addition to the communities listed above, we have a number of other residential project concepts in various stages of planning and evaluation.

As of December 31, 2022, we had eighteen different homebuilders within our residential communities. As of December 31, 2022, we had 2,197 residential homesites under contract, which are expected to result in revenue of approximately $176.3 million, plus residuals, at closing of the homesites over the next several years. By comparison, as of December 31, 2021, we had 2,000 residential homesites under contract, with an expected revenue of approximately $158.9 million, plus residuals. The increase in homesites under contract is due to the development of additional homesites and increased homebuilder contracts for residential homesites. The number of homesites under contract are subject to change based on homesite closings and homebuilder interest in each community. Homesite prices vary significantly by community and sell in sporadic transactions that may impact quarterly results. As of December 31, 2022, in addition to the 2,197 homesites under contract in other residential communities, our unconsolidated Latitude Margaritaville Watersound JV had 677 homes under contract, which together with the 2,197 homesites are expected to result in a sales value of approximately $514.8 million at closing of the homesites and homes.

Hospitality Segment

Our hospitality segment features a private membership club (the “Watersound Club”), hotel operations, food and beverage operations, golf courses, beach clubs, retail outlets, gulf-front vacation rentals, management services, marinas

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and other entertainment assets. The hospitality segment generates revenue and incurs costs from membership sales, membership reservations, golf courses, lodging at our hotels, short-term vacation rentals, management of The Pearl Hotel (prior to acquisition in December 2022), food and beverage operations, merchandise sales, marina operations, charter flights, other resort and entertainment activities and beach clubs, which includes operation of the WaterColor Beach Club. Hospitality revenue is generally recognized at the point in time services are provided and represent a single performance obligation with a fixed transaction price. Hospitality revenue recognized over time includes non-refundable club membership initiation fees, club membership dues, management fees and other membership fees. From time to time, we may explore the sale of certain hospitality properties, the development of new hospitality properties, as well as new entertainment and management opportunities. Some of our JV assets and other assets incur interest and financing expenses related to the loans as described in Note 10. Debt, Net included in Item 15 of this Form 10-K.

Watersound Club provides club members and guests in some of our hotels access to our member facilities, which include Camp Creek, Shark’s Tooth golf course, WaterSound Beach Club and a Pilatus PC-12 NG aircraft (“N850J”). Watersound Club offers different types of club memberships, each with different access rights and associated fee structures. Watersound Club is focused on creating an outstanding membership experience combined with the luxurious aspects of a destination resort. Club operations include our golf courses, beach club and facilities that generate revenue from membership sales, membership reservations, daily play at the golf courses, merchandise sales, charter flights and food and beverage sales and incur expenses from the services provided, maintenance of the golf courses, aircraft, beach club and facilities and personnel costs. Watersound Origins includes an executive golf course, resort-style pool, fitness center, two tennis courts and a private dock located in the community. Access to amenities is reserved to Watersound Origins members consisting of the community residents. The golf course is available for public play.

Watersound Club has a private beach club located on Scenic Highway 30A, which includes over one mile of Gulf of Mexico frontage, two resort-style pools, two restaurants, three bars, kid’s room and a recreation area. Shark’s Tooth includes an 18-hole golf course, a full club house, a pro shop, tennis center with four har-tru courts, as well as two food and beverage outlets. Camp Creek is an 18-hole golf course and soon will feature several new amenities. These amenities include a health and wellness center, restaurants, a tennis and pickle ball center, a resort-style pool complex with separate adult pool, a golf teaching academy, pro shop and multi-sport fields.

We own and operate the award-winning WaterColor Inn, (which includes the Fish Out of Water restaurant) and The Pearl Hotel (which includes the Havana Beach Bar & Grill restaurant), as well as the Hilton Garden Inn Panama City Airport, the Homewood Suites by Hilton Panama City Beach, the WaterSound Inn and two gulf-front vacation rental houses. We also operate the WaterColor Beach Club, which includes food and beverage operations and other hospitality related activities, such as beach chair rentals. Revenue is generated from (i) lodging at our hotels, (ii) operation of the WaterColor Beach Club, (iii) management of The Pearl Hotel (prior to December 2022), (iv) short-term vacation rentals, (v) food and beverage operations and (vi) merchandise sales. Lodging at our hotels and operation of the WaterColor Beach Club generate revenue from service and/or daily rental fees and incur expenses from the cost of services and goods provided, maintenance of the facilities and personnel costs. Revenue generated from our management services include management fees and expenses consist primarily of internal administrative costs. Lodging at our hotels and short-term vacation rentals generate revenue from rental fees and incur expenses from the holding cost of assets we own and standard lodging personnel, such as front desk, reservations and marketing personnel. Our food and beverage operations generate revenue from food and beverage sales and incur expenses from the cost of services and goods provided and standard personnel costs. Our retail outlets generate revenue from merchandise sales and incur expenses from the cost of goods provided, personnel costs and facility costs.

We are in the process of constructing an Embassy Suites by Hilton hotel, with our JV partner, in the Pier Park area of Panama City Beach, Florida; the waterfront Hotel Indigo in Panama City, Florida’s downtown waterfront district; a Home2 Suites by Hilton hotel in Santa Rosa Beach, Florida; The Lodge 30A, with our JV partner, a boutique hotel on Scenic Highway 30A in Seagrove Beach, Florida; and an upscale boutique inn located adjacent to the Camp Creek golf course near the highly desirable Scenic Highway 30A corridor. Once complete, we intend to manage the day-to-day operations of these hotels. We are also in the process of constructing a Residence Inn by Marriott, with our JV partner, in Panama City Beach, Florida. Once complete, the hotel will be operated by our JV partner.

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Our hotel portfolio by property is as follows:

We own and operate two marinas, the Point South Marina Bay Point in Bay County, Florida and Point South Marina Port St. Joe in Gulf County, Florida. We are planning new marinas along the Intracoastal Waterway. Our marinas generate revenue from boat slip rentals, boat storage fees and fuel sales, and incur expenses from cost of services provided, maintenance of the marina facilities and personnel costs. The Point South Marina Bay Point fully reopened in the third quarter of 2022 and the Point South Marina Port St. Joe reopened in the fourth quarter of 2022 after completion of reconstruction due to damage from Hurricane Michael.

We also own and operate retail stores, two standalone restaurants and other entertainment assets. These assets generate revenue from merchandise sales, food and beverage sales and other service fees which are recognized at the point of sale and incur expenses from the cost of goods and services provided, personnel costs and facility costs.

In addition to the properties listed above, we have a number of hospitality projects in various stages of planning.

Commercial Segment

Our commercial segment includes leasing of commercial property, multi-family, senior living, self-storage and other assets. The commercial segment also oversees the planning, development, entitlement, management and sale of our commercial and rural land holdings for a variety of uses, including a broad range of retail, office, hotel, senior living, multi-family, self-storage and industrial properties. We provide development opportunities for national, regional and local retailers and other strategic partners in Northwest Florida. We own and manage retail shopping centers and develop

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commercial parcels. We are currently developing the Watersound Town Center in Walton County, Florida and Watersound West Bay Center in Bay County, Florida. These lifestyle centers are complementary to our Watersound Origins and Latitude Margaritaville Watersound residential communities. In conjunction with FSU and TMH, we are also in the process of developing an 87-acre medical campus in Bay County, Florida. We also have large land holdings near the Pier Park retail center, adjacent to the Northwest Florida Beaches International Airport, near or within business districts in the region and along major roadways. We also lease land for various other uses.

The commercial segment also manages our timber holdings in Northwest Florida which includes growing and selling pulpwood, sawtimber and other products. As of December 31, 2022, we had an estimated 1.9 million tons of marketable pulpwood and 3.0 million tons of marketable sawlogs on approximately 64,000 acres. Based on our annual harvest plan, we anticipate harvesting approximately 260,000 tons of pulpwood and sawlogs during 2023.

The commercial segment generates leasing revenue and incurs leasing expenses primarily from maintenance and management of our properties, personnel costs and asset holding costs. Our commercial segment also generates revenue from the sale of developed and undeveloped land, timber holdings or land with limited development and/or entitlements and the sale of commercial operating properties. Real estate sales in our commercial segment incur costs of revenue directly associated with the land, development, construction, timber and selling costs. Our commercial segment generates timber revenue primarily from open market sales of timber on site without the associated delivery costs. Some of our JV assets and other assets incur interest and financing expenses related to the loans as described in Note 10. Debt, Net included in Item 15 of this Form 10-K.

The commercial segment’s portfolio of leasable properties continues to expand and diversify. Through wholly-owned subsidiaries and consolidated and unconsolidated JVs we are in the process of constructing 371 multi-family units and 148 senior living units, in addition to the 757 multi-family units and 107 senior living units that have been completed.

Total units and percentage leased for multi-family and senior living communities by location are as follows:

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Pier Park Crossings, which was developed in two phases, includes 360 completed apartment units in Panama City Beach, Florida. Watersound Origins Crossings includes 217 completed apartment units adjacent to the Watersound Town Center. Sea Sound, our unconsolidated Sea Sound JV, included 300 completed apartment units in Panama City Beach, Florida near the Breakfast Point residential community, prior to being sold by the JV in November 2022. The WindMark Beach community includes 12 completed long-term rental units and 19 units in the process of being converted from short-term to long-term rental units in Port St. Joe, Florida. Watercrest includes 107 completed senior living units in Santa Rosa Beach, Florida. In addition, we have three multi-family communities and one senior living community under construction. North Bay Landing, planned for 240 apartment units, with 120 units completed as of December 31, 2022, is located in Panama City, Florida. Mexico Beach Crossings, planned for 216 apartment units, is located in Mexico Beach, Florida. Origins Crossings Townhomes, planned for 64 units, with 48 units completed as of December 31, 2022, is located near the Watersound Town Center. Watersound Fountains, an unconsolidated JV (WOSL, LLC, the “Watersound Fountains Independent Living JV”), planned for 148 independent living units, is located near the Watersound Origins residential community. We have additional multi-family communities in various stages of planning.

Our leasing portfolio consists of approximately 1,034,000 square feet of leasable space for mixed-use, retail, industrial, office, self-storage and medical uses. This includes our consolidated Pier Park North JV. Through separate unconsolidated JVs, other commercial properties include a 124-room TownePlace Suites by Marriott operated by our JV partner (Pier Park TPS, LLC, the “Pier Park TPS JV”), a Busy Bee branded fuel station and convenience store operated by our JV partner (SJBB, LLC, the “Busy Bee JV”) and a golf cart sales and service facility, which is under construction (SJECC, LLC, the “Electric Cart Watersound JV”), all located in Panama City Beach, Florida.

The total net rentable square feet and percentage leased of leasing properties are as follows:

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We have commercial projects under development and construction as detailed in the table below. In addition to these properties, we have other commercial buildings in various stages of planning.

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Results of Operations

Consolidated Results

The following table sets forth a comparison of the results of our operations:

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Results of operations in this Form 10-K generally discusses 2022 and 2021 items and comparisons. For a detailed discussion of results of operations and comparisons for 2021 and 2020, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10‑K for the year ended December 31, 2021 filed with the SEC on February 23, 2022.

Real Estate Revenue and Gross Profit

The following table sets forth a comparison of our total consolidated real estate revenue and gross profit:

Residential Real Estate Revenue and Gross Profit. During 2022, residential real estate revenue decreased $51.9 million, or 35.9%, to $92.8 million, as compared to $144.7 million in 2021. During 2022, residential real estate gross profit decreased $39.2 million, to $48.7 million (or gross margin of 52.5%), as compared to $87.9 million, (or gross margin of 60.7%) in 2021. During 2022, we sold 752 homesites and had unimproved residential land sales of $1.1 million, compared to 804 homesites, two homes and had unimproved residential land sales of $0.1 million during 2021. During 2022 and 2021 the average revenue, excluding homesite residuals, per homesite sold was approximately $98,000 and $157,000, respectively, due to the mix of sales from different communities. The revenue, gross profit and margin for each period was impacted by the volume of sales within each of the communities, the difference in pricing among the communities and the difference in the cost of the homesite development. The number of homesites sold varied in each period due to the timing of homebuilder contractual closing obligations in our residential communities and the extended timing of development of completed homesites.

Commercial and Rural Real Estate Revenue and Gross Profit. During 2022, we had twenty-nine commercial and rural real estate sales totaling approximately 283 acres for $12.7 million and land improvement services of $1.0 million, together resulting in a gross profit of $9.7 million (or gross margin of 70.8%). During 2021, we had twenty-two commercial and rural real estate sales totaling approximately 577 acres for $12.0 million, resulting in a gross profit of $9.5 million (or gross margin of 79.2%). Revenue from commercial and rural real estate can vary significantly from period-to-period depending on the proximity to developed areas and mix of real estate sold in each period, with varying compositions of retail, office, industrial and other commercial uses.

Our gross margin can vary significantly from period-to-period depending on the characteristics of the property sold. Sales of rural and timber land typically have a lower cost basis than residential and commercial real estate sales. In addition, our cost basis in residential and commercial real estate can vary depending on the amount of development or other costs incurred on the property.

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Other Revenue. Other revenue primarily consists of mitigation bank credit sales and title insurance business revenue.

Hospitality Revenue and Gross Profit

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Hospitality revenue increased $21.9 million, or 29.1%, to $97.2 million during 2022, as compared to $75.3 million in 2021. The increase in hospitality revenue was primarily related to the continued increase of club members, as well as an increase in lodging revenue from the Hilton Garden Inn Panama City Airport, which opened in July 2021, the Homewood Suites by Hilton Panama City Beach, which opened in March 2022 and new WaterColor Inn suites, which opened in June 2022. The increase in hospitality revenue was also due to the opening of a new retail store, standalone restaurants and marinas. As of December 31, 2022, Watersound Club had 2,604 members, compared with 2,255 members as of December 31, 2021, an increase of 349 members. Gross profit during 2021 includes $0.7 million of business interruption proceeds received for the marinas related to Hurricane Michael.

Hospitality had a gross margin of 20.3% during 2022, compared to 22.6% during 2021. The decrease in gross margin was due to increased pre-opening expenses and onboarding of staff associated with new assets that opened in 2022 and assets scheduled to open in 2023, and an increase in cost of labor and products in the current period. In 2021, gross margin was impacted by the $0.7 million of business interruption proceeds received.

Leasing Revenue and Gross Profit

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Leasing revenue increased $12.1 million, or 44.6%, to $39.2 million during 2022, as compared to $27.1 million in 2021. The increase was primarily due to new multi-family and senior living leases, as well as other new leases.

Leasing gross margin decreased to 55.1% during 2022, as compared to 57.2% during 2021, primarily due to start-up and lease-up expenses for new assets in the current period.

Timber Revenue and Gross Profit

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Timber revenue increased $0.7 million, or 11.7%, to $6.7 million during 2022, as compared to $6.0 million in 2021. The increase was primarily due to an increase in prices and the sales mix of different wood products, partially offset by a decrease in sales of fill dirt and other products in the current period. There were 275,000 tons of wood products sold during 2022, as compared to 273,000 tons of wood products sold during 2021. Timber gross margin was 88.1% during 2022, compared to 88.3% during 2021.

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Corporate and Other Operating Expenses

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Corporate and other operating expenses decreased $0.9 million to $22.1 million during 2022, as compared to $23.0 million in 2021. The decrease is primarily due to the $1.2 million of expense during 2021 to 401(k) plan participants related to the final allocation of surplus assets from the pension plan termination in 2014.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization expense increased $4.7 million during 2022, as compared to 2021, primarily due to new hospitality and commercial assets placed in service.

Investment Income, Net

Investment income, net primarily includes (i) interest and dividends earned and accretion of the net discount (ii) net unrealized gain or loss related to investments – equity securities, (iii) interest income earned on the time deposit held by a special purpose entity and (iv) interest earned on mortgage notes receivable and other receivables as detailed in the table below:

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Investment income, net increased $2.7 million to $9.9 million during 2022, as compared to $7.2 million in 2021. Investment income, net during 2022 included de minimis unrealized loss on investments, net related to preferred stock, compared to $1.9 million in 2021.

Interest Expense

Interest expense primarily includes interest incurred on the Senior Notes issued by Northwest Florida Timber Finance, LLC, project financing, Community Development District (“CDD”) debt and finance leases, as well as amortization of debt discount and premium and debt issuance costs as detailed in the table below:

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Interest expense increased $2.5 million, or 15.7%, to $18.4 million in 2022, as compared to $15.9 million in 2021, primarily related to the increase in project financing and higher interest rates. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information regarding project financing.

Gain on Contributions to Unconsolidated Joint Ventures

Gain on contributions to unconsolidated joint ventures includes gain on land, impact fees and additional infrastructure improvements contributed to our unconsolidated JVs as detailed in the table below. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Equity in Income (Loss) from Unconsolidated Joint Ventures

Equity in income (loss) from unconsolidated joint ventures includes our proportionate share of earnings or losses of unconsolidated joint ventures accounted for by the equity method. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

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Other Income, Net

Other income, net primarily includes income from our retained interest investments, gain on insurance recoveries, loss from hurricane damage and other income and expense items as detailed in the table below:

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Other income, net increased $2.8 million to $13.0 million during 2022, as compared to $10.2 million in 2021. The years ended December 31, 2022 and 2021 include a gain on insurance recovery of $9.7 million and $4.9 million, respectively, and loss from hurricane damage of less than $0.1 million during each period, related to Hurricane Michael. In November 2022, we closed out the insurance claim related to Hurricane Michael and therefore will not receive additional proceeds in future periods.

Miscellaneous income, net during 2022 includes income of $1.0 million related to gain on retained interest investment. Miscellaneous income, net during 2022 and 2021 includes $2.6 million and $0.9 million, respectively, received from the Pier Park CDD for repayment of subordinated notes, which have been fully repaid. Miscellaneous income, net during 2022 also includes expense of $1.1 million for design costs no longer pursued and $0.6 million for a homeowner’s association special assessment. Miscellaneous income, net during 2021 includes $3.6 million received from the Florida Division of Emergency Management’s Florida Timber Recovery Block Grant Program (“TRBG”) for recovery of lost income related to timber crop that was destroyed as a result of Hurricane Michael. See Note 18. Other Income, Net included in Item 15 of this Form 10-K for additional information for additional information.

Income Tax Expense

Income tax expense was $24.4 million in 2022, compared to $25.0 million in 2021. Our effective tax rate was 25.6% in 2022, as compared to 25.1% in 2021.

Our effective rate for 2022 differed from the federal statutory rate of 21.0% primarily due to state income taxes. Our effective rate for 2021 differed from the federal statutory rate of 21.0% primarily due to state income taxes, the change in valuation allowance, the changes in the 2021 Florida income tax rate from 4.5% to 3.5%, tax credits, the benefit of QOZ investment and other permanent items. See Note 13. Income Taxes included in Item 15 of this Form 10-K for additional information.

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Segment Results

Residential

The table below sets forth the consolidated results of operations of our residential segment:

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Real estate revenue includes sales of homesites, homes and other residential land and certain homesite residuals from homebuilder sales that provide us a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold. Leasing revenue includes long-term leases of residential assets. Other revenue includes tap and impact fee credits sold and marketing fees. Certain homesite residuals and other revenue related to homebuilder homesite sales are recognized in revenue at the point in time of the closing of the sale. For 2022 and 2021, real estate revenue includes estimated homesite residuals of $5.8 million and $4.8 million, respectively. For 2022 and 2021, other revenue includes estimated fees related to homebuilder homesite sales of $1.9 million and $2.4 million, respectively. Cost of real estate revenue includes direct costs (e.g., development and construction costs), selling costs and other indirect costs.

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The following tables set forth our consolidated residential real estate revenue and cost of revenue activity:

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Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

The following discussion sets forth details of the consolidated results of operations of our residential segment.

Homesites. Revenue from homesite sales decreased $52.7 million, or 38.6%, during 2022, as compared to 2021, primarily due to the mix and number of homesites sold per community, the timing of homebuilder contractual closing obligations in our residential communities and the extended timing of development of completed homesites. During 2022 and 2021, the average revenue, excluding homesite residuals, per homesite sold was approximately $98,000 and $157,000, respectively. The decrease in average revenue per homesite sold during the period was due to the mix of sales from different communities, primarily from sales in the Watersound Camp Creek and WaterColor communities, which had a higher volume during the prior period. Gross margin decreased to 51.2% during 2022, as compared to 61.4% during 2021, primarily due to the mix and number of homesites sold from different communities during each respective period. Gross margin may vary each period depending on the location of homesite sales.

Homes. During 2022, we did not have any home sales. During 2021, we sold two completed homes within our RiverCamps community for a total of $1.0 million, resulting in a gross profit margin of 10.0%.

Land sales. During 2022 we had unimproved residential land sales for $1.1 million, with de minimis cost of revenue. During 2021, we had unimproved residential land sales for $0.1 million, with de minimis cost of revenue.

Other operating expenses include salaries and benefits, property taxes, marketing, professional fees, project administration, owner association and CDD assessments and other administrative expenses.

Investment income, net primarily consists of interest earned on our notes receivable and unimproved land contribution to our unconsolidated Latitude Margaritaville Watersound JV as home sales are transacted in the community. See Note 8. Other Assets and Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information. Interest expense primarily consists of interest incurred on our portion of the total outstanding CDD debt. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

Gain on contributions to unconsolidated joint ventures for 2022 and 2021, include a gain of $0.9 million and $0.5 million, respectively, on additional infrastructure improvements contributed to our unconsolidated Latitude Margaritaville Watersound JV. Gain on contributions to unconsolidated joint ventures for 2020 includes a gain of $15.7 million on land and additional infrastructure improvements contributed to our unconsolidated Latitude Margaritaville Watersound JV. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Equity in income (loss) from unconsolidated joint ventures includes our proportionate share of earnings or losses of unconsolidated joint ventures accounted for by the equity method. Equity in income (loss) from unconsolidated joint ventures during 2022 includes $3.9 million of income, compared to $1.9 of loss during 2021, related to the Latitude Margaritaville Watersound JV. The Latitude Margaritaville Watersound JV began completing home sale transactions in the fourth quarter of 2021 and sold 316 homes in 2022, compared to 47 in 2021. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Other (expense) income, net for 2022 includes $1.0 million of design costs no longer pursued.

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Hospitality

The table below sets forth the consolidated results of operations of our hospitality segment:

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The following table sets forth details of our hospitality segment consolidated revenue and cost of revenue:

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenue from our clubs increased $8.8 million, or 27.6%, during 2022, as compared to 2021. The increase in revenue in the current period was due to increases in the number of club members and membership revenue. As of December 31, 2022, Watersound Club had 2,604 members, compared with 2,255 members as of December 31, 2021, an increase of 349 members. Our clubs gross margin increased to 30.7% during 2022, compared to 29.2% during 2021.

Revenue from our hotel operations, certain food and beverage operations, short-term vacation rentals and other management services increased $10.7 million, or 29.1%, during 2022, as compared to 2021. The increase was primarily due to an increase in lodging revenue from the Hilton Garden Inn Panama City Airport, which opened in July 2021, Homewood Suites by Hilton Panama City Beach, which opened in March 2022, new WaterColor Inn suites, which opened in June 2022 and The Pearl Hotel, which we acquired in December 2022 and managed prior to acquisition. Gross margin decreased to 15.6% during 2022, as compared to 17.7% during 2021. The decrease in gross margin was due to

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increased preopening expenses associated with assets that opened in 2022, onboarding of staff for assets scheduled to open in 2023 and an increase in cost of labor and products.

Revenue from other hospitality operations increased $2.7 million, or 46.6%, during 2022, as compared to 2021. The increase in other hospitality revenue was primarily related to revenue from two new standalone restaurants, which opened in December 2021 and August 2022, a new retail store, which opened in March 2022, Point South Marina Bay Point, which fully reopened in the third quarter of 2022 and Point South Marina Port St. Joe, which reopened in the fourth quarter of 2022. Our other hospitality operations gross margin decreased to a negative gross margin of 1.2% during 2022, compared to gross margin of 20.7% during 2021, due to opening expenses and onboarding of staff for these new assets. Gross margin during 2021 was also impacted by $0.7 million of business interruption insurance proceeds received for the marinas related to Hurricane Michael. We did not have revenue from our marinas during 2021 or 2020 due to the impact of Hurricane Michael.

Leasing revenue includes marina boat slip and dry storage rentals.

Other operating expenses include salaries and benefits, professional fees and other administrative expenses.

The increase of $2.4 million in depreciation, depletion and amortization expense during 2022, as compared to 2021, was primarily due to new properties placed in service.

Interest expense primarily includes interest incurred from our hospitality project financing. The increase of $1.2 million in interest expense during 2022, as compared to 2021, was primarily due to an increase in project financing and higher interest rates. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

Other income, net for 2022 and 2021, includes $2.6 million and $0.9 million, respectively, received from the Pier Park CDD for repayment of subordinated notes, partially offset by $0.6 million of expense for a homeowner’s association special assessment in the current period.

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Commercial

The table below sets forth the consolidated results of operations of our commercial segment:

​

The following table sets forth details of our commercial segment consolidated revenue and cost of revenue:

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following discussion sets forth details of the consolidated results of operations of our commercial segment.

Total leasing revenue increased $11.7 million, or 43.7% during 2022, as compared to 2021. The increase was primarily due to new multi-family and senior living leases as well as other new leases. Total leasing gross margin during 2022 was 57.4%, as compared to 57.5% during 2021. As of December 31, 2022, we had net rentable square feet of approximately 1,034,000, of which approximately 987,000 square feet were under lease. As of December 31, 2021, we had net rentable square feet of approximately 985,000, of which approximately 857,000 square feet were under lease. As of December 31, 2022, our consolidated entities had 864 multi-family and senior living units completed, of which 767 were leased, compared to 715 multi-family and senior living units completed, of which 632 were leased as of December 31, 2021.

Commercial and rural real estate revenue related to sales for the three years ended December 31, 2022 includes the following:

​

We believe the diversity of our commercial segment complements the growth of our residential and hospitality segments. Commercial and rural real estate revenue can vary depending on the proximity to developed areas and the mix and characteristics of commercial and rural real estate sold in each period, with varying compositions of retail, office, industrial and other commercial uses. During 2022, we had twenty-nine commercial and rural real estate sales of approximately 283 acres for $12.7 million and land improvement services of $1.0 million, together resulting in a gross margin of approximately 70.8%. During 2021, we had twenty-two commercial and rural real estate sales totaling approximately 577 acres for $12.0 million, resulting in a gross profit margin of approximately 79.2%. As our focus continues to evolve more towards recurring revenue from leasing operations, we expect to have limited commercial and rural real estate sales. Further, we may continue to transform and operate commercial properties for higher and better use. This may result in certain assets moving from the commercial segment to the hospitality segment.

Timber revenue increased by $0.7 million, or 11.7%, to $6.7 million during 2022, as compared to $6.0 million in 2021. The increase was primarily due to an increase in prices and the sales mix of different wood products, partially offset by a decrease in sales of fill dirt and other products in the current period. There were 275,000 tons of wood products sold during 2022, as compared to 273,000 tons of wood products sold during 2021. The average price of wood products sold increased to $22.71 per ton during 2022, as compared to $19.57 per ton during 2021. Timber gross margin was 88.1% during 2022, as compared to 88.3% during 2021.

The total tons sold and relative percentages of total tons sold by major type of wood product are as follows:

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Hospitality revenue includes some of our short-term vacation rentals.

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Other operating expenses include salaries and benefits, property taxes, CDD assessments, professional fees, marketing, project administration and other administrative expenses.

The increase of $2.3 million in depreciation, amortization and depletion expense during 2022, as compared to 2021, was primarily due to new properties placed in service.

Interest expense primarily includes interest incurred from our commercial project financing and CDD debt. The increase of $1.4 million in interest expense during 2022, as compared to 2021, was primarily due to an increase in project financing and higher interest rates. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

Gain on contributions to unconsolidated joint ventures for 2022, includes a gain of $1.4 million on land and impact fees contributed to our unconsolidated Pier Park RI JV and a gain of $0.4 million on land contributed to our unconsolidated Electric Cart Watersound JV. Gain on contributions to unconsolidated joint ventures for 2021, includes a gain of $3.1 million on land contributed to our unconsolidated Watersound Fountains Independent Living JV. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Equity in income (loss) from unconsolidated joint ventures includes our proportionate share of earnings or losses of unconsolidated JVs accounted for by the equity method. In November 2022, the Sea Sound JV sold its assets to an unrelated third party for $92.5 million, resulting in a total gain on sale of $36.1 million. Equity in income (loss) during 2022 included $21.7 million related to our proportionate share of the gain on sale. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Other income, net during 2021, includes $3.6 million received from the Florida Division of Emergency Management’s TRBG program for recovery of lost income related to timber crop that was destroyed as a result of Hurricane Michael. See Note 18. Other Income, Net included in Item 15 of this Form 10-K for additional information.

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Liquidity and Capital Resources

As of December 31, 2022, we had cash and cash equivalents and U.S. Treasury Bills classified as investments – debt securities of $78.3 million, compared to $159.1 million as of December 31, 2021. In addition to cash and cash equivalents, we consider our investments classified as Securities, as being generally available to meet our liquidity needs. Securities are not as liquid as cash and cash equivalents, but they are generally convertible into cash within a relatively short period of time. See Note 5. Investments included in Item 15 of this Form 10-K for additional information regarding our investments.

We believe that our current cash position, financing arrangements and cash generated from operations will provide us with sufficient liquidity to satisfy our anticipated working capital needs, expected capital expenditures, principal and interest payments on our long-term debt, capital contributions to JVs, Latitude Margaritaville Watersound JV note commitment, authorized stock repurchases and authorized dividends for the next twelve months. See Part II. Item 1A. Risk Factors.

During 2022, we invested a total of $356.7 million in capital expenditures, which includes $92.2 million for our residential segment, $93.0 million for our commercial segment, $171.1 million for our hospitality segment and $0.4 million for corporate expenditures. We anticipate that future capital commitments will be funded through cash generated from operations, new and existing financing arrangements, cash on hand and cash equivalents. As of December 31, 2022, we had a total of $118.1 million primarily in construction and development related contractual obligations, of which a portion will be funded through committed or new financing arrangements. Capital expenditures and contractual obligations exclude amounts related to unconsolidated joint ventures. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

As of December 31, 2022 and 2021, we had various loans outstanding totaling $391.4 million and $227.5 million, respectively, with maturities from May 2023 through March 2064. As of December 31, 2022, the weighted average

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effective interest rate of total outstanding debt was 5.1%, of which 60.4% of the debt outstanding includes fixed or swapped interest rates, and the average remaining life of debt outstanding was 13.8 years. As of December 31, 2022, the weighted average rate on our variable rate loans was 6.7%. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for additional information regarding London Interbank Offered Rate (“LIBOR”) related risks. Also, see Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

Our indebtedness consists of various loans on real and leasehold property. These loans are typically secured by various interests in the property such as assignment of rents, leases, deposits, permits, plans, specifications, fees, agreements, approvals, contracts, licenses, construction contracts, development contracts, service contracts, franchise agreements, the borrower’s assets, improvements, and security interests in the rents, personal property, management agreements, construction agreements, improvements, accounts, profits, leases, accounts and fixtures (collectively, “Security Interests”). The specific Security Interests vary from loan to loan.

In 2015, the Pier Park North JV entered into a $48.2 million loan (the “PPN JV Loan”). As of December 31, 2022 and 2021, $42.6 million and $43.6 million, respectively, was outstanding on the PPN JV Loan. The loan accrues interest at a rate of 4.1% per annum and matures in November 2025. In connection with the loan, we entered into a limited guarantee in favor of the lender, based on our percentage ownership of the JV. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North JV; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary bankruptcy or insolvency proceedings or upon breach of covenants in the security instrument. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In 2018, the Pier Park Crossings JV entered into a $36.6 million loan, insured by the U.S. Department of Housing and Urban Development (“HUD”) (the “PPC JV Loan”). As of December 31, 2022 and 2021, $35.2 million and $35.7 million, respectively, was outstanding on the PPC JV Loan. The loan bears interest at a rate of 3.1% and matures in June 2060. The loan includes a prepayment premium due to the lender of 2% - 10% for any additional principal that is prepaid through August 31, 2031. The loan is secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In 2019, the Watersound Origins Crossings JV entered into a $37.9 million loan (the “Watersound Origins Crossings JV Loan”). In January 2022, the Watersound Origins Crossings JV entered into a modification that increased the principal amount of the loan to $44.0 million, modified the interest rate from 5.0% to the Secured Overnight Financing Rate (“SOFR”) plus 2.8%, with a floor of 3.3%, and provides for payments of interest only with a final balloon payment at maturity in May 2024. As of December 31, 2022 and 2021, $44.0 million and $37.9 million, respectively, was outstanding on the Watersound Origins Crossings JV Loan. The loan is secured by the real property and certain other Security Interests. In connection with the loan, we executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Watersound Origins Crossings JV Loan. As guarantor, our liability has been reduced to 25% of the outstanding principal amount, based on meeting certain debt service coverage and loan to value requirements. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation or failure to abide by other certain obligations on the part of such guarantor. We are the sole guarantor and receive a monthly fee related to the guarantee from our JV partner based on the JV partner’s ownership percentage. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information. In January 2023, we began the process to refinance the Watersound Origins Crossings JV Loan with a loan commitment to be insured by HUD.

In 2019, the Watercrest JV entered into a $22.5 million loan (the “Watercrest JV Loan”). As of December 31, 2022 and 2021, $21.0 million and $20.1 million, respectively, was outstanding on the Watercrest JV Loan. The loan bears interest at a rate of LIBOR plus 2.2% and matures in June 2047. The loan is secured by the real property and certain other Security Interests. In connection with the loan, we executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Watercrest JV Loan. We are the sole guarantor and receive a quarterly fee related to the guarantee from our JV partner based on the JV partner’s ownership percentage. The Watercrest JV entered into an interest rate swap to hedge cash flows tied to changes in the underlying floating interest rate tied to LIBOR. The interest rate swap was effective June 1, 2021 and matures on June 1, 2024 and fixed the variable

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rate on the notional amount of related debt of $20.0 million to a rate of 4.4%. In April 2022, the swap was terminated resulting in a gain of $0.1 million, included in interest expense on the consolidated statements of income for the year ended December 31, 2022. See Note 6. Financial Instruments and Fair Value Measurements and Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In 2019, a wholly-owned subsidiary of ours entered into a $5.5 million loan, which is guaranteed by us (the “Beckrich Building III Loan”). As of December 31, 2022 and 2021, $5.0 million and $5.2 million, respectively, was outstanding on the Beckrich Building III Loan. The loan bears interest at a rate of LIBOR plus 1.7% and matures in August 2029. The loan is secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In 2019, the Pier Park Crossings Phase II JV entered into a $17.5 million loan (the “PPC II JV Loan”). As of December 31, 2022 and 2021, $22.6 million and $17.4 million, respectively, was outstanding on the PPC II JV Loan. In April 2022, the Pier Park Crossings Phase II JV refinanced the PPC II JV Loan that increased the principal amount of the loan, which had a balance of $17.3 million at the time of the refinance, to $22.9 million, fixed the interest rate to 2.7% and provides for monthly payments of principal and interest through maturity in May 2057. The refinanced loan terms include a prepayment premium due to the lender of 1% - 10% for any principal that is prepaid through May 31, 2032. The refinanced loan is insured by HUD and is secured by the real property and certain other Security Interests. During 2022, we incurred $0.2 million of additional loan cost, related to the refinance. As a result of the refinance, the year ended December 31, 2022 includes a $0.1 million loss on early extinguishment of debt related to unamortized debt issuance costs, included within other income, net on the consolidated statements of income. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In March 2020, a wholly-owned subsidiary of ours entered into a $15.3 million loan, which is guaranteed by us (the “Airport Hotel Loan”). As of both December 31, 2022 and 2021, $14.6 million was outstanding on the Airport Hotel Loan. The loan bears interest at LIBOR plus 2.0%, with a floor of 3.0%, and matures in March 2025. The loan is secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In April 2020, the Pier Park Resort Hotel JV entered into a loan with an initial amount of $52.5 million up to a maximum of $60.0 million through additional earn-out requests (the “Pier Park Resort Hotel JV Loan”). As of December 31, 2022 and 2021, $45.2 million and $14.7 million, respectively, was outstanding on the Pier Park Resort Hotel JV Loan. The loan matures in April 2027 and bears interest at a rate of LIBOR plus 2.2% during construction and LIBOR plus 2.0% upon hotel opening. In December 2022, the Pier Park Resort Hotel Loan was amended, effective February 10, 2023, to bear interest at a rate of SOFR plus 2.1%. The loan is secured by the real property and certain other Security Interests. In connection with the loan, as guarantors, we and our JV partner entered into a guarantee based on each partner’s ownership interest in favor of the lender, to guarantee the payment and performance of the borrower. As guarantor, our liability under the loan will be released upon reaching and maintaining certain debt service coverage for twelve months. In addition, the guarantee can become full recourse in the case of the failure of the guarantor to abide by or perform any of the covenants or warranties to be performed on the part of such guarantor. The Pier Park Resort Hotel JV entered into an interest rate swap to hedge cash flows tied to changes in the underlying floating interest rate tied to LIBOR. The interest rate swap was effective December 10, 2022 and matures on April 12, 2027 and fixed the variable rate on the notional amount of related debt of $42.0 million to a rate of 3.2%. See Note 6. Financial Instruments and Fair Value Measurements and Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In November 2020, a wholly-owned subsidiary of ours entered into a $16.8 million loan, which is guaranteed by us (the “Breakfast Point Hotel Loan”). As of December 31, 2022 and 2021, $16.4 million and $11.8 million, respectively, was outstanding on the Breakfast Point Hotel Loan. The loan matures in November 2042. In November 2022, the Breakfast Point Hotel loan was amended to fix the interest rate to 6.0% through November 2027 and the 1-year constant maturity Treasury rate plus 3.3% from December 2027 through November 2042, with a minimum rate of 6.0% throughout the term of the loan. The amendment also includes a prepayment premium due to the lender of 1% - 3% of the outstanding principal balance for any additional principal that is prepaid through November 2027. The loan is

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secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In November 2020, a wholly-owned subsidiary of ours entered into a $5.8 million loan, which is guaranteed by us (the “Self-Storage Facility Loan”). As of both December 31, 2022 and 2021, $4.7 million was outstanding on the Self-Storage Facility Loan. The loan matures in November 2025 and bears interest at a rate of LIBOR plus 2.4%, with a floor of 2.9%. The loan is secured by the real property and certain other Security Interests. Our liability as guarantor under the loan shall not exceed $2.9 million, plus any additional fees, upon reaching and maintaining certain debt service coverage. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In January 2021, The Lodge 30A JV entered into a $15.0 million loan (the “Lodge 30A JV Loan”). As of December 31, 2022 and 2021, $13.3 million and $7.5 million, respectively, was outstanding on the Lodge 30A JV Loan. The loan bears interest at a rate of 3.8% and matures in January 2028. The loan is secured by the real property and certain other Security Interests. In connection with the loan, we, wholly-owned subsidiaries of ours and our JV partner entered into a joint and several payment and performance guarantee in favor of the lender. Upon reaching a certain debt service coverage ratio for a minimum of twenty-four months, our liability as guarantor will be reduced to 75% of the outstanding principal amount for a twelve-month period. The debt service coverage ratio will be tested annually thereafter and will be reduced to 50% in year four and 25% in year five. We receive a monthly fee related to the guarantee from our JV partner based on the JV partner’s ownership percentage. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In March 2021, a wholly-owned subsidiary of ours entered into a $26.8 million loan, which is guaranteed by us (the “North Bay Landing Loan”). As of December 31, 2022 and 2021, $18.2 million and $1.3 million, respectively, was outstanding on the North Bay Landing Loan. The loan bears interest at a rate of LIBOR plus 2.5%, with a floor of 3.2%. Upon reaching a certain debt service coverage ratio, the loan will bear interest at a rate of LIBOR plus 2.3%, with a floor of 3.0%. The loan matures in September 2024 and includes an option for an extension of the maturity date by eighteen months, subject to certain conditions. The loan is secured by the real property and certain other Security Interests. As guarantor, our liability under the loan will be reduced to 50% of the outstanding principal amount upon satisfaction of final advance conditions and reduced to 25% of the outstanding principal amount upon reaching and maintaining a certain debt service coverage ratio. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation or failure to abide by other certain obligations on the part of such guarantor. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In June 2021, a wholly-owned subsidiary of ours entered into a $28.0 million loan, which is guaranteed by us (the “Watersound Camp Creek Loan”). As of December 31, 2022 and 2021, $13.1 million and $3.4 million, respectively, was outstanding on the Watersound Camp Creek Loan. The loan bears interest at a rate of LIBOR plus 2.1%, with a floor of 2.6%, and matures in December 2047. The loan is secured by the real property and certain other Security Interests. As guarantor, our liability under the loan will be reduced to 50% of the outstanding principal amount upon the project reaching and maintaining a trailing six months of operations with a certain debt service coverage ratio and reduced to 25% of the outstanding principal amount upon reaching and maintaining a trailing twelve months of operations with a certain debt service coverage ratio. In addition, the guarantee can become full recourse in the case of the failure of the guarantor to abide by or perform any of the covenants, warranties or other certain obligations to be performed on the part of such guarantor. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In August 2021, a wholly-owned subsidiary of ours entered into a $12.0 million loan, which is guaranteed by us (the “Watersound Town Center Grocery Loan”). As of December 31, 2022 and 2021, $11.4 million and $0.6 million, respectively, was outstanding on the Watersound Town Center Grocery Loan. The loan bears interest at LIBOR plus 2.0%, with a floor of 2.2%, and matures in August 2031. The loan is secured by the real property and certain other Security Interests. As guarantor, our liability under the loan will be reduced to 50% of the outstanding principal amount upon satisfaction of final advance conditions, issuance of the certificate of occupancy for the project and receipt of the initial base rent payment and reduced to 25% of the outstanding principal amount upon reaching a certain debt service coverage ratio and the project maintaining 93% occupancy for ninety consecutive days. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

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In October 2021, a wholly-owned subsidiary of ours entered into a $21.2 million loan, which is guaranteed by us (the “Hotel Indigo Loan”). As of December 31, 2022, $10.4 million was outstanding on the Hotel Indigo Loan. As of December 31, 2021, there was no principal balance outstanding on the Hotel Indigo Loan. In June 2022, the Hotel Indigo Loan was amended to revise the interest rate to SOFR plus 2.7%, with a floor of 2.7%, through October 2023 and SOFR plus 2.5%, with a floor of 2.5%, from November 2023 through maturity. The loan matures in October 2028 and includes an option for an extension of the maturity date by sixty months, subject to certain conditions. The loan is secured by the leasehold property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In January 2022, the Mexico Beach Crossings JV entered into a $43.5 million loan, insured by HUD (the “Mexico Beach Crossings JV Loan”). As of December 31, 2022, $23.4 million was outstanding on the Mexico Beach Crossings JV Loan. The loan bears interest at a rate of 3.0% and matures in March 2064. The loan may not be prepaid prior to April 1, 2024 and if any additional principal is prepaid from April 1, 2024 through March 31, 2034 a premium is due to the lender of 1% - 10%. The loan is secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In July 2022, a wholly-owned subsidiary of ours entered into a $13.7 million loan, which is guaranteed by us (the “Topsail Hotel Loan”). As of December 31, 2022, $5.2 million was outstanding on the Topsail Hotel Loan. The loan bears interest at a rate of SOFR plus 2.1%, with a floor of 3.0% and matures in July 2027. The loan is secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In December 2022, a wholly-owned subsidiary of ours entered into a $37.0 million loan, which is guaranteed by us (“The Pearl Hotel Loan”). As of December 31, 2022, $37.0 million was outstanding on The Pearl Hotel Loan. The loan bears interest at a rate of 6.3% and matures in December 2032. The loan includes a prepayment fee due to the lender of 1% - 5% of the outstanding principal balance if the loan is refinanced with another financial institution through December 2027. The loan is secured by the real property and certain other Security Interests. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

CDD bonds financed the construction of infrastructure improvements in some of our communities. The principal and interest payments on the bonds are paid by assessments on the properties benefited by the improvements financed by the bonds. We have recorded a liability for CDD debt that is associated with platted property, which is the point at which it becomes fixed and determinable. Additionally, we have recorded a liability for the balance of the CDD debt that is associated with unplatted property if it is probable and reasonably estimable that we will ultimately be responsible for repayment. We have recorded CDD related debt of $4.1 million as of December 31, 2022. Total outstanding CDD debt related to our land holdings was $12.8 million as of December 31, 2022, which is comprised of $10.7 million at the SouthWood community, $2.0 million at the existing Pier Park retail center and $0.1 million at the Wild Heron residential community. We pay interest on this total outstanding CDD debt.

As of December 31, 2022, our unconsolidated Watersound Fountains Independent Living JV, Latitude Margaritaville Watersound JV, Pier Park TPS JV, Pier Park RI JV, Busy Bee JV and Electric Cart Watersound JV had various loans outstanding, some of which we have entered into guarantees. See Note 4. Joint Ventures and Note 20. Commitments and Contingencies included in Item 15 of this Form 10-K for additional information.

In June 2020, we, as lender, entered into a $10.0 million secured revolving promissory note with the unconsolidated Latitude Margaritaville Watersound JV, as borrower (the “Latitude JV Note”). As of December 31, 2022, there was no principal balance outstanding on the Latitude JV Note. As of December 31, 2021, $7.1 million was outstanding on the Latitude JV Note. The Latitude JV Note was provided by us to finance the development of the pod-level, non-spine infrastructure. Future advances, if any, will be repaid by the JV as each home is sold by the JV, with the aggregate unpaid principal and all accrued and unpaid interest due at maturity in June 2025. The note is secured by a mortgage and security interest in and on the real property and improvements located on the real property of the JV. See Note 4. Joint Ventures and Note 8. Other Assets included in Item 15 of this Form 10-K for additional information.

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During the year ended December 31, 2022, we repurchased 576,963 shares of our common stock outstanding at an average purchase price of $34.81, per share, for an aggregate purchase price of $20.0 million. During the year ended December 31, 2021, we did not repurchase shares of our common stock outstanding. See Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Note 15. Stockholders’ Equity included in Item 15 of this Form 10-K for additional information regarding the Stock Repurchase Program and treasury stock retirement during 2022.

As part of timberland sales in 2008, we have recorded a retained interest with respect to notes contributed to bankruptcy-remote qualified special purpose entities of $8.2 million for the installment notes monetized through December 31, 2022. This balance represents the present value of future cash flows to be received over the life of the installment notes, using management’s best estimates of underlying assumptions, including credit risk and interest rates as of the date of the monetization, plus the accretion of investment income based on an effective yield, which is recognized over the term of the notes, less actual cash receipts. See Note 8. Other Assets included in Item 15 of this Form 10-K for additional information.

As part of certain sales of timberlands in 2008 and 2014, we generated significant tax gains. The installment note’s structure allowed us to defer the resulting federal tax liability of $20.4 million until 2023 - 2024 and $37.8 million until 2029, respectively, the maturity dates for the installment notes. We have a deferred tax liability related to the gains in connection with these sales.

As of December 31, 2022 and 2021, we were required to provide surety bonds that guarantee completion and maintenance of certain infrastructure in certain development projects and mitigation banks, as well as other financial guarantees of $38.1 million and $36.9 million, respectively, as well as standby letters of credit in the amount of $17.3 million and $12.9 million, respectively, which may potentially result in a liability to us if certain obligations are not met.

In conducting our operations, we routinely hold customers’ assets in escrow pending completion of real estate transactions, and are responsible for the proper disposition of these balances for our customers. These amounts are maintained in segregated bank accounts and have not been included in the accompanying consolidated balance sheets, consistent with U.S. generally accepted accounting principles (“GAAP”) and industry practice. The cash deposit accounts and offsetting liability balances for escrow deposits in connection with our title insurance agencies for real estate transactions were $8.0 million and $9.3 million as of December 31, 2022 and 2021, respectively, these escrow funds are not available for regular operations.

Summary of Cash Flows

A summary of our cash flows from operating, investing and financing activities are as follows:

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Cash Flows from Operating Activities

Cash flows provided by operating activities includes net income, adjustments for non-cash items, changes in operating assets and liabilities and expenditures related to assets ultimately planned to be sold, including residential real estate development and related amenities, sales of timberlands or undeveloped and developed land and land developed by the commercial segment. Adjustments for non-cash items primarily include depreciation, depletion and amortization,

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unrealized loss on investments, net, equity in (income) loss from unconsolidated joint ventures, net of distributions, deferred income tax expense, cost of real estate sold and gain on contributions to unconsolidated joint ventures. Net cash provided by operations was $48.2 million in 2022, as compared to $111.8 million in 2021. During 2022 net income was $70.2 million, compared to $73.7 million in 2021. The decrease in net cash provided by operating activities was primarily due to expenditures for and acquisition of real estate to be sold, cost of real estate sold, equity in (income) loss from unconsolidated joint ventures, net of distributions, gain on insurance for damage to property and equipment, net and the changes in deferred income tax expense and deferred revenue, partially offset by the changes in other assets during the year.

Cash Flows from Investing Activities

Cash flows used in investing activities primarily includes capital expenditures for operating property and property and equipment used in our operations, purchases of investments, capital contributions to unconsolidated joint ventures and payments for interest in unconsolidated joint venture, partially offset by proceeds from insurance claims, sales and maturities of investments, capital distributions from unconsolidated joint ventures and maturities of assets held by special purpose entities. During 2022, net cash used in investing activities was $189.8 million, which included capital expenditures for operating property and equipment, purchases of investments of U.S. Treasury Bills of $97.1 million and capital contributions to unconsolidated joint ventures of $2.5 million, partially offset by proceeds from insurance claims of $9.8 million, maturities of investments of $92.0 million, sales of investments of $54.3 million, capital distributions from unconsolidated joint ventures of $12.0 million and maturities of assets held by special purpose entities of $0.8 million. During 2021, net cash used in investing activities was $196.1 million, which included capital expenditures for operating property and equipment, purchases of investments of U.S. Treasury Bills of $157.9 million, capital contributions to unconsolidated joint ventures of $9.4 million and payments for interest in unconsolidated joint venture of $0.5 million, partially offset by proceeds from insurance claims of $4.9 million, maturities of investments of $117.0 million, sales of investments of $1.5 million, capital distributions from unconsolidated joint ventures of $1.0 million and maturities of assets held by special purpose entities of $0.8 million.

Capital expenditures for operating property and property and equipment were $259.1 million and $153.5 million during 2022 and 2021, respectively, which were primarily for our commercial and hospitality segments, including the acquisition of The Pearl Hotel in 2022. See Note 3. Investment in Real Estate, Net included in Item 15 of this Form 10-K for additional information regarding the acquisition.

Cash Flows from Financing Activities

Net cash provided by financing activities was $112.5 million for 2022, compared to $48.6 million in 2021. Net cash provided by financing activities during 2022 included capital contributions from non-controlling interest of $3.8 million and borrowings on debt of $184.5 million, partially offset by capital distributions to non-controlling interest of $2.4 million, additional ownership interest acquired in Pier Park North JV of $7.7 million, repurchase of common shares of $20.0 million, dividends paid of $23.5 million, principal payments for debt of $20.2 million, principal payments for finance leases of $0.1 million and debt issuance costs of $1.9 million. Net cash provided by financing activities during 2021 included capital contribution from non-controlling interest of $3.2 million and borrowings on debt of $69.3 million, partially offset by capital distribution to non-controlling interest of $1.3 million, dividends paid of $18.8 million, principal payments on debt of $2.3 million, principal payments for finance leases of $0.1 million and debt issuance costs of $1.4 million.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base these estimates on historical experience, available current market information and on various other assumptions that management believes are reasonable under the circumstances. Additionally, we evaluate the results of these estimates on an on-going basis. Management’s estimates

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form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and our accounting estimates are subject to change.

Investment in Real Estate, Net and Cost of Real Estate Revenue. Costs associated with a specific real estate project are capitalized during the development period. These development costs include land and common development costs (such as roads, structures, utilities and amenities). We capitalize costs directly associated with development and construction of identified real estate projects. Indirect costs that clearly relate to a specific project under development, such as project administration, interest (up to total interest expense) and real estate taxes, may also be capitalized.

A portion of real estate development costs and estimates for costs to complete are allocated to each unit based on the relative sales value of each unit as compared to the estimated sales value of the total project. These estimates are reevaluated at least annually, and more frequently if warranted by market conditions, changes in the project’s scope or other factors, with any adjustments being allocated prospectively to the remaining property or units.

The capitalization period relating to direct and indirect project costs is the period in which activities necessary to ready a property for its intended use are in progress. The period begins when such activities commence, typically when we begin the site work or construction on land already owned, and ends when the asset is substantially complete and ready for its intended use. In the event that the activities to ready the asset for its intended use are suspended, the capitalization period will cease until such activities are resumed. If we determine not to complete a project, any previously capitalized costs that are not recoverable are expensed in the period in which the determination is made and recovery is not deemed probable.

Our investments in real estate are carried at cost, net of depreciation and timber depletion, unless circumstances indicate that the carrying value of the assets may not be recoverable. If we determine that an impairment exists due to the inability to recover an asset’s carrying value, an impairment charge is recorded to the extent that the carrying value exceeds estimated fair value. If such assets were held for sale, the provision for loss would be recorded to the extent that the carrying value exceeds estimated fair value less costs to sell.

Long-Lived Assets. Long-lived assets include our investments in land holdings, operating and development properties, investment in unconsolidated JV’s and property and equipment. Our investments in land holdings, operating and development properties and property and equipment are carried at cost, net of depreciation and timber depletion. We review our long-lived assets for impairment quarterly to determine whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As part of our review for impairment of long-lived assets, we review the long-lived asset’s carrying value, current period actual financial results as compared to prior period and forecasted results contained in our business plan and any other events or changes in circumstances to identify whether an indicator of potential impairment may exist. Some of the events or changes in circumstances that are considered as indicators of potential impairment include:

We use varying methods to determine if an impairment exists, such as (i) considering indicators of potential impairment, (ii) analyzing expected future cash flows and comparing the expected future undiscounted cash flows of the property to its carrying value or (iii) determining market resale values.

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The accounting estimate related to real estate impairment evaluation is susceptible to change due to the use of assumptions about future sales proceeds and future expenditures. For projects under development or construction, an estimate of future cash flows on an undiscounted basis is performed using estimated future expenditures necessary to maintain the existing project and using management’s best estimates about future sales prices and planned holding periods. Based on our investment return criteria for evaluating our projects under development or undeveloped land, management’s assumptions used in the projection of undiscounted cash flows include:

For operating properties, an estimate of undiscounted cash flows requires management to make similar assumptions about the use and eventual disposition of such properties. Some of the significant assumptions that are used to develop the undiscounted cash flows include:

Homesites substantially completed and ready for sale are measured at the lower of carrying value or fair value less costs to sell. Management identifies homesites as being substantially completed and ready for sale when the properties are being actively marketed with intent to sell such properties in the near term and under current market conditions. Other homesites, which management does not intend to sell in the near term under current market conditions, are evaluated for impairment based on management’s best estimate of the long-term use and eventual disposition of such property.

Other properties that management does not intend to sell in the near term under current market conditions and has the ability to hold are evaluated for impairment based on management’s best estimate of the long-term use and eventual disposition of the property. Typically, assets are carried based on historical cost basis, which in some cases may exceed fair value if sold in the near term. The results of impairment analysis for development and operating properties are particularly dependent on the estimated holding and selling period for each asset group.

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If a property is considered impaired, the impairment charge is determined by the amount the property’s carrying value exceeds its fair value. We use varying methods to determine fair value, such as (i) analyzing expected future cash flows, (ii) determining resale values in a given market, (iii) applying a capitalization rate to net operating income using prevailing rates in a given market or (iv) applying a multiplier to revenue using prevailing rates in a given market. The fair value of a property may be derived either from discounting projected cash flows at an appropriate discount rate, through appraisals of the underlying property, or a combination thereof.

We classify the assets and liabilities of a long-lived asset as held-for-sale when management approves and commits to a formal plan of sale and it is probable that a sale will be completed. The carrying value of the assets held-for-sale is then recorded at the lower of their carrying value or fair value less costs to sell.

Income Taxes. In preparing our consolidated financial statements, significant management judgment is required to estimate our income taxes. Our estimates are based on our interpretation of federal and state tax laws. We estimate our actual current tax due and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Adjustments may be required by a change in assessment of our deferred tax assets and liabilities, changes due to audit adjustments by federal and state tax authorities and changes in tax laws. To the extent adjustments are required in any given period, we will include the adjustments in the deferred tax assets and liabilities in our consolidated financial statements. We record a valuation allowance against our deferred tax assets as needed based upon our analysis of the timing and reversal of future taxable amounts and our historical and future expectations of taxable income.

In general, a valuation allowance is recorded, if based on all the available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of our deferred tax assets is dependent upon us generating sufficient taxable income in future years in the appropriate tax jurisdictions to obtain a benefit from the reversal of deductible temporary differences and from net loss carryforwards.

As of December 31, 2022 and 2021, we had a state NOL of $121.1 million and $229.3 million, respectively. As of December 31, 2022 and 2021, we had $3.4 million and $3.1 million of federal NOLs. The federal NOLs are applicable to a specific QOF entity and do not expire. The majority of state net operating losses are available to offset future taxable income through 2036 and will begin expiring in 2031. As of both December 31, 2022 and 2021, we had a valuation allowance of $0.3 million against certain state NOLs. As of December 31, 2022 and 2021, we had income tax payable of $3.5 million and $0.7 million, respectively, included within other liabilities on the consolidated balance sheets.

Recently Adopted Accounting Pronouncements

There are no recently adopted accounting pronouncements which would have a material effect on our financial condition, results of operations and cash flows.

Recently Issued Accounting Pronouncements

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) that provides temporary optional guidance to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. This guidance provides expedients and exceptions for applying GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate that is expected to be discontinued due to reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”) which clarifies the original guidance that certain optional expedients and exceptions in contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”) that extends the temporary reference rate reform guidance under Topic 848 from December 31, 2022 to December 31, 2024. This new guidance was effective upon issuance and may be applied prospectively through December 31, 2024, as reference

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rate activities occur. In 2022, some of our debt agreements that referenced LIBOR were amended to an alternative rate, ASU 2020-04 was applied at the time of these modifications and there was no impact on our financial condition, results of operations and cash flows. There is no current additional impact to us from this guidance and we will consider the impact on our financial condition, results of operations and cash flows if there are additional modifications to existing agreements.