ST JOE Co (JOE) FY 2023 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

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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 JVs 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 87% 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 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.

Highlights for the year ended December 31, 2023 compared to the year ended December 31, 2022 include:

Market Conditions

Throughout 2023, we continued to generate positive financial results. While macroeconomic factors such as inflation, elevated interest rates, higher insurance costs, supply chain disruptions, labor shortages, financial institution disruptions and geopolitical conflicts, among other things, continued to produce 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 the time to complete residential, hospitality and commercial projects. In addition, inflation, higher insurance costs and elevated interest rates, have

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increased operating costs and loan rates, as compared to prior periods. While elevated interest rates have negatively impacted buyers’ ability to obtain financing and the housing market generally, the impact has been offset by the net migration into our markets, limited housing supply relative to demand and the number of cash buyers. Market conditions have not caused an increase in cancellation rates as homebuilders have continued to perform on their contractual obligations with us.

Given our diverse portfolio of residential holdings, the mix of sales and pricing from different communities may 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.

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.

The residential segment generates revenue from sales of developed 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. Revenue is recognized at the point in time when a sale is closed and title and control has been transferred to the buyer. The residential segment also generates revenue from the sale of tap and impact fee credits, marketing fees and other fees on certain transactions. 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. The residential segment incurs cost from direct costs (e.g., development and construction costs), selling costs and other indirect costs.

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.

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The East Lake Creek, East Lake Powell, Lake Powell, Teachee, West Bay Creek and West Laird communities have phases of homesites in preliminary planning or permitting. 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, 2023, the unconsolidated Latitude Margaritaville Watersound JV had 609 homes under contract, which are expected to result in a sales value of approximately $318.5 million at closing of the homes. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

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.

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As of December 31, 2023, we had nineteen different homebuilders within our residential communities. As of December 31, 2023, we had 1,486 residential homesites under contract, which are expected to result in revenue of approximately $132.5 million, plus residuals, at closing of the homesites over the next several years. By comparison, as of December 31, 2022, we had 2,197 residential homesites under contract, with an expected revenue of approximately $176.3 million, plus residuals. The change in homesites under contract is due to increased homesite transactions during 2023 and the amount of remaining homesites in current phases of residential communities. The number of homesites under contract is subject to change based on homesite closings and new sales activity. Homesite prices vary significantly by community and often sell in concentrated transactions that may impact quarterly results. As of December 31, 2023, in addition to the 1,486 homesites under contract in other residential communities, our unconsolidated Latitude Margaritaville Watersound JV had 609 homes under contract, which together with the 1,486 homesites are expected to result in a sales value of approximately $451.0 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 and other entertainment assets. The hospitality segment generates revenue from membership sales, 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 (including boat slip rentals, boat storage fees and fuel sales), 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. The hospitality segment incurs costs from the services and goods provided, personnel costs, maintenance of the facilities and holding costs of the assets. 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 of some of our hotels access to our member facilities, which include Camp Creek golf course and amenities, Shark’s Tooth golf course and tennis center, 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 a private beach club located on Scenic Highway 30A, with 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, tennis center, a full club house, a pro shop, as well as two food and beverage outlets. Camp Creek includes an 18-hole golf course, a full club house, health and wellness center, three 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 are in the process of constructing The Third, an 18-hole golf course, planned to be added to our Watersound Club operations.

Watersound Origins amenities include an executive golf course, resort-style pool, fitness center and two tennis courts located in the community. Access to these amenities is reserved to Watersound Origins and Watersound Origins West members consisting of the communities’ residents. The golf course is available for public play.

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); the Camp Creek Inn, the Hilton Garden Inn Panama City Airport, the Homewood Suites by Hilton Panama City Beach, the Hotel Indigo Panama City Marina, the Home2 Suites by Hilton Santa Rosa Beach, the WaterSound Inn and two gulf-front vacation rental houses. With our JV partners, we own and operate The Lodge 30A and the Embassy Suites by Hilton Panama City Beach Resort. We also operate the WaterColor Beach Club, which includes food and beverage operations and other hospitality related activities, such as beach chair rentals.

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We are 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 and will be included within our commercial segment.

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. The Point South Marina Bay Point 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.

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

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Commercial Segment

Our commercial segment includes leasing of commercial property, multi-family, senior living, self-storage and other assets. The commercial segment 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 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 in the process of developing an 87-acre medical campus in Panama City Beach, Florida. We 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 lease land for various other uses. The commercial segment manages our timber holdings in Northwest Florida which includes growing and selling pulpwood, sawtimber and other products.

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 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 loans as described in Note 10. Debt, Net included in Item 15 of this Form 10-K.

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 and Origins Crossings Townhomes includes 64 completed units near the Watersound Town Center. North Bay Landing includes 240 completed apartment units in Panama City, Florida. Mexico Beach Crossings includes 216 completed apartment units in Mexico Beach, Florida. The WindMark Beach community includes 31 completed 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 a senior living community under construction, through our unconsolidated Watersound Fountains Independent Living JV. Watersound Fountains, planned for 148 independent living units, is located near the Watersound Town Center and the Watersound Origins residential community. We have additional multi-family communities in various stages of planning.

Our leasing portfolio consists of approximately 1,082,000 square feet of leasable space for mixed-use, retail, industrial, office, self-storage and medical uses. Through separate unconsolidated JVs, other commercial properties that are operated by our JV partners include a 124-room TownePlace Suites by Marriott (Pier Park TPS JV), a Busy Bee branded fuel station and convenience store, which includes a Starbucks, (SJBB, LLC, the “Busy Bee JV”) and a golf cart sales and service facility (SJECC, LLC, the “Electric Cart Watersound JV”), all located in Bay County, 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 and sites in various stages of planning and development.

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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 2023 and 2022 items and comparisons. For a detailed discussion of results of operations and comparisons for 2022 and 2021, 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, 2022 filed with the SEC on February 22, 2023.

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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 2023, residential real estate revenue increased $62.9 million, or 67.8%, to $155.7 million, as compared to $92.8 million in 2022. During 2023, residential real estate gross profit increased $29.1 million, to $77.8 million (or gross margin of 50.0%), as compared to $48.7 million, (or gross margin of 52.5%) in 2022. During 2023, we sold 1,063 homesites and had unimproved residential land sales of $0.6 million, compared to 752 homesites and unimproved residential land sales of $1.1 million during 2022. During 2023 and 2022 the average base revenue, excluding homesite residuals, per homesite sold was approximately $107,000 and $98,000, respectively, due to the mix of sales from different communities. The current period homesite sales also include the sale of 100 entitled but undeveloped homesites sold within the SouthWood community, compared to 42 in the prior period, which reduced the average price per homesite. The revenue, gross profit and margin for each period was impacted by the difference in pricing among the communities, the difference in the cost of the homesite development and the volume of sales within each of the communities. The number of homesites sold varied in each period due to the timing of homebuilder contractual closing obligations in our residential communities.

Commercial and Rural Real Estate Revenue and Gross Profit. During 2023, we had twenty-eight commercial and rural real estate sales totaling approximately 474 acres for $21.0 million and land improvement services of $0.3 million, together resulting in a gross profit of $14.7 million (or gross margin of 69.0%). 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%). 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.

Timber Revenue and Gross Profit. Timber revenue decreased $1.8 million, or 26.9%, to $4.9 million during 2023, as compared to $6.7 million in 2022. The decrease was primarily due to a decrease in prices and tons of wood products sold in the current period. There were 259,000 tons of wood products sold at an average price per ton of $16.56 during 2023,

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as compared to 275,000 tons of wood products sold at an average price per ton of $22.71, during 2022. Timber gross margin was 83.7% during 2023, compared to 88.1% during 2022. The decrease was primarily due to lower prices and less tons sold in the current period.

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 $55.2 million, or 56.8% to $152.4 million during 2023, as compared to $97.2 million in 2022. The increase in hospitality revenue was primarily related to the continued increase of club members and opening of new Camp Creek amenities in April 2023, as well as an increase in lodging revenue. The increase in lodging revenue was related to The Pearl Hotel, which we acquired in December 2022; Embassy Suites by Hilton Panama City Beach Resort, which opened in April 2023; The Lodge 30A, which opened in February 2023; Home2 Suites by Hilton Santa Rosa Beach, Hotel Indigo Panama City Marina and Camp Creek Inn, which opened in June 2023; 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 standalone restaurant and marinas in 2022. As of December 31, 2023, Watersound Club had 3,317 members, compared with 2,604 members as of December 31, 2022, an increase of 713 members. As of December 31, 2023, we had 1,053 operational hotel rooms, compared with 407 operational hotel rooms as of December 31, 2022, an increase of 646 rooms (both periods exclude 124 rooms related to an unconsolidated JV). Hospitality had a gross margin of 19.8% during 2023, compared to 20.3% during 2022. The decrease in gross margin was primarily due to the opening costs associated with opening five new hotels in 2023.

Leasing Revenue and Gross Profit

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Leasing revenue increased $11.6 million, or 29.6%, to $50.8 million during 2023, as compared to $39.2 million in 2022. The increase was primarily due to new multi-family, senior living and marina leases, as well as other new leases. Leasing gross margin decreased to 49.2% during 2023, as compared to 55.1% during 2022, primarily due to increased operating costs, as well as start-up and lease-up expenses in the current period.

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Corporate and Other Operating Expenses

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Corporate and other operating expenses increased $1.7 million to $23.8 million during 2023, as compared to $22.1 million in 2022. The increase was primarily due to employee costs related to restricted stock awards, property taxes and professional fees. See Note 15. Stockholders’ Equity included in Item 15 of this Form 10-K for additional information related to the issuance of common stock for employee compensation.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization expense increased $15.8 million during 2023, as compared to 2022, primarily due to new hospitality and commercial assets placed in service. Depreciation is a non-cash, generally accepted accounting principles (“GAAP”) expense which is amortized over an asset’s useful life, while maintenance and repair expenses are period costs and expensed as incurred. See Note 2. Significant Account Policies included in Item 15 of this Form 10-K for additional information.

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 notes receivable and other receivables as detailed in the table below:

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Investment income, net increased $3.4 million to $13.3 million during 2023, as compared to $9.9 million in 2022. The increase was primarily due to higher interest rates earned on our investments and cash equivalents in the current period. The increase was also due to interest earned on the unimproved land contribution to our unconsolidated Latitude Margaritaville Watersound JV related to increased home sale transactions in the community in the current period. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Interest Expense

Interest expense primarily includes interest incurred on project financing, the Senior Notes issued by Northwest Florida Timber Finance, LLC, 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 $12.2 million, or 66.3%, to $30.6 million in 2023, as compared to $18.4 million in 2022, 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 JVs accounted for by the equity method as detailed in the table below. 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 (expense), 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 decreased $9.8 million to $3.2 million during 2023, as compared to $13.0 million in 2022. Accretion income from retained interest investments increased $0.9 million during 2023 due to an agreement by all parties for an optional prepayment of the related bonds, in full, in August 2023, prior to the installment notes’ scheduled maturity in 2024. See Note 8. Other Assets included in Item 15 of this Form 10-K for additional information. The year ended December 31, 2022 includes a gain on insurance recovery of $9.7 million 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 2023, includes $1.1 million of income 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. Miscellaneous income, net during 2023 also includes $0.6 million of expense for cleanup of damaged timber as a result of Hurricane Michael. Miscellaneous income, net during 2023 and 2022 includes income of $0.4 million and $1.0 million, respectively, related to gain on retained interest investment. Miscellaneous income, net during 2022 includes $2.6 million received from the Pier Park CDD for repayment of subordinated notes. 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. See Note 18. Other Income, Net included in Item 15 of this Form 10-K for additional information.

Income Tax Expense

Income tax expense was $26.0 million in 2023, compared to $24.4 million in 2022. Our effective tax rate was 25.1% in 2023, as compared to 25.6% in 2022.

Our effective rate for 2023 and 2022, differed from the federal statutory rate of 21.0% primarily due to state income taxes, tax credits 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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The following tables set forth our consolidated residential real estate revenue and cost of revenue activity:

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Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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

Homesites. Revenue from homesite sales increased $61.0 million, or 72.6%, during 2023, as compared to 2022, primarily due to the mix and number of homesites sold per community and the timing of homebuilder contractual closing obligations in our residential communities. During 2023 and 2022, the average base revenue, excluding homesite residuals, per homesite sold was approximately $107,000 and $98,000, respectively, due to the mix of sales from different communities. The current period homesite sales also include the sale of 100 entitled but undeveloped homesites sold within the SouthWood community, compared to 42 in the prior period, which reduced the average price per homesite. Revenue includes estimated homesite residuals of $24.0 million and $5.8 million, during 2023 and 2022, respectively. Gross margin decreased to 49.3% during 2023, as compared to 51.2% during 2022, primarily due to the cost, mix and number of homesites sold from different communities during each period. Gross margin may vary each period depending on the location of homesite sales.

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Land sales. During 2023, we had unimproved residential land sales for $0.6 million, resulting in a gross margin of approximately 83.3%. During 2022, we had unimproved residential land sales for $1.1 million, with de minimis cost of revenue.

Other revenue includes tap and impact fee credits sold and marketing fees. Other revenue includes estimated fees related to homebuilder homesite sales of $5.0 million and $1.9 million during 2023 and 2022, respectively. The increase in estimated homesite residuals and fees related to homebuilder homesite sales was due to the mix and number of homesites sold per community in the current period.

Leasing revenue includes long-term leases of residential assets.

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 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 during 2023 and 2022, includes a gain of $0.7 million and $0.9 million, respectively, on 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 an unconsolidated JV accounted for by the equity method. Equity in income (loss) from unconsolidated joint ventures increased $19.7 million during 2023, compared to 2022. The increase was due to the completion of 641 home sale transactions by the Latitude Margaritaville Watersound JV during 2023, compared to 316 home sale transactions during 2022. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Other income (expense), 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 gross profit:

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenue from our clubs increased $13.3 million, or 32.7%, during 2023, as compared to 2022. The increase in revenue in the current period was due to increases in the number of club members and membership revenue, as well as the opening of new Camp Creek amenities in April 2023 and Camp Creek Inn in June 2023. As of December 31, 2023, Watersound Club had 3,317 members, compared with 2,604 members as of December 31, 2022, an increase of 713 members. Our clubs gross margin was 28.7% during 2023, compared to 30.5% during 2022. The decrease in gross margin was primarily due to the opening costs associated with the opening of new assets in the current period.

Revenue from our hotel operations increased $40.4 million, or 87.8%, during 2023, as compared to 2022. The increase was primarily due to an increase in lodging revenue from The Pearl Hotel, which we acquired in December 2022; Embassy Suites by Hilton Panama City Beach Resort, which opened in April 2023; The Lodge 30A, which opened in February 2023; Home2 Suites by Hilton Santa Rosa Beach and Hotel Indigo Panama City Marina, which both opened in June 2023; Homewood Suites by Hilton Panama City Beach, which opened in March 2022; and new WaterColor Inn suites, which opened in June 2022. Our hotels had a gross margin of 14.4% during 2023, as compared to

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15.9% during 2022. The decrease in gross margin was due to the opening costs associated with the opening of new hotels in the current period.

As of December 31, 2023, we had 1,053 operational hotel rooms, compared with 407 operational hotel rooms as of December 31, 2022, an increase of 646 rooms (both periods exclude 124 rooms related to an unconsolidated JV).

Revenue from other hospitality operations increased $2.0 million, or 20.0%, during 2023, as compared to 2022. The increase in other hospitality revenue was primarily related to revenue from a new standalone restaurant, which opened in August 2022, Point South Marina Bay Point, which 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 had a gross margin of 19.2% during 2023, compared to 1.0% during 2022. The increase in gross margin was due to new assets being operational in the current period.

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 $12.7 million in depreciation, depletion and amortization expense during 2023, as compared to 2022, was primarily due to new properties placed in service.

Interest expense primarily includes interest incurred from our hospitality project financing. The increase of $7.9 million in interest expense during 2023, as compared to 2022, 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 (expense) income, net for 2022, includes $2.6 million 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.

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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 gross profit (deficit):

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​

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

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

Total leasing revenue increased $9.7 million, or 25.2% during 2023, as compared to 2022. The increase was primarily due to new multi-family and senior living leases as well as other new leases. Total leasing gross margin during 2023 was 52.5%, as compared to 57.4% during 2022. The decrease in leasing gross margin was primarily due to increased operating costs, as well as start-up and lease-up expenses in the current period. As of December 31, 2023, we had net rentable square feet of approximately 1,082,000, of which approximately 1,029,000 square feet were under lease. 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, 2023, our consolidated entities had 1,235 multi-family and senior living units completed, of which 999 were leased, compared to 864 multi-family and senior living units completed, of which 767 were leased as of December 31, 2022.

Commercial and rural real estate revenue related to sales for the three years ended December 31, 2023 includes the following:

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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 2023, we had twenty-eight commercial and rural real estate sales of approximately 474 acres for $21.0 million and land improvement services of $0.3 million, together resulting in a gross margin of approximately 69.0%. 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%.

Timber revenue decreased by $1.8 million, or 26.9%, to $4.9 million during 2023, as compared to $6.7 million in 2022. The decrease was primarily due to a decrease in prices and tons of wood products sold in the current period. There were 259,000 tons of wood products sold during 2023, as compared to 275,000 tons of wood products sold during 2022. The average price of wood product sold decreased to $16.56 per ton during 2023, as compared to $22.71 per ton during 2022. Timber gross margin was 83.7% during 2023, as compared to 88.1% during 2022. The decrease was primarily due to the lower prices and less tons sold in the current period.

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

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

The increase of $3.1 million in depreciation, depletion and amortization expense during 2023, as compared to 2022, 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 $4.4 million in interest expense during 2023, as compared to 2022, 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.

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Gain on contributions to unconsolidated joint ventures for 2022, includes a gain of $1.4 million on land 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. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

Equity in (loss) income from unconsolidated joint ventures includes our proportionate share of earnings or losses of unconsolidated JVs accounted for by the equity method. Equity in (loss) income from unconsolidated joint ventures during 2023 had a loss of $0.9 million, primarily related to start-up expenses for the Watersound Fountains Independent Living JV. 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 (loss) income 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.

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Liquidity and Capital Resources

As of December 31, 2023, we had cash and cash equivalents of $86.1 million, compared to cash and cash equivalents and U.S. Treasury Bills classified as investments – debt securities of $78.3 million as of December 31, 2022. Although we do not currently hold any Securities, we did hold Securities as of December 31, 2022. See Note 5. Investments included in Item 15 of this Form 10-K for additional information regarding our previous 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 I. Item 1A. Risk Factors.

During 2023, we invested a total of $217.8 million in capital expenditures, which includes $74.4 million for our residential segment, $70.1 million for our commercial segment, $72.3 million for our hospitality segment and $1.0 million for corporate expenditures. The $217.8 million in capital expenditures included $209.8 million for new operating assets or for residential development and $8.0 million for sustaining capital on existing operating properties. We anticipate that future capital commitments will be funded through cash generated from operations, new financing arrangements, cash on hand and cash equivalents. As of December 31, 2023, we had a total of $48.6 million primarily in construction and development related contractual obligations. Capital expenditures and contractual obligations exclude amounts related to unconsolidated JVs. See Note 4. Joint Ventures included in Item 15 of this Form 10-K for additional information.

As of December 31, 2023 and 2022, we had various loans outstanding totaling $459.2 million and $391.4 million, respectively, with maturities from May 2024 through March 2064. As of December 31, 2023, the weighted average effective interest rate of total outstanding debt was 5.3%, of which 66.2% of the debt outstanding includes fixed or swapped interest rates, and the average remaining life of debt outstanding was 17.2 years. As of December 31, 2023, the weighted average rate on our variable rate loans, excluding the swapped portion, was 7.6%. 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 and fixtures (collectively, “Security Interests”). The specific Security Interests vary from loan to loan.

In 2015, the Pier Park North JV (the “Pier Park North JV”) entered into a $48.2 million loan (the “PPN JV Loan”). As of December 31, 2023 and 2022, $41.5 million and $42.6 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

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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, Pier Park Crossings LLC (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, 2023 and 2022, $34.7 million and $35.2 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% - 9% 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, Origins Crossings, LLC (the “Watersound Origins Crossings JV”) entered into a $44.0 million loan, as amended (the “Watersound Origins Crossings JV Loan”). In March 2023, the Watersound Origins Crossings JV refinanced the Watersound Origins Crossings JV Loan that increased the principal amount of the loan, which had a balance of $44.0 million at the time of the refinance, to $52.9 million, fixed the interest rate to 5.0% and provides for monthly payments of principal and interest through maturity in April 2058. The refinanced loan terms include a prepayment premium due to the lender of 1% - 10% for any principal that is prepaid through April 2033. As of December 31, 2023 and 2022, $52.5 million and $44.0 million, respectively, was outstanding on the Watersound Origins Crossings JV Loan. The refinanced loan is insured by HUD and secured by the real property and certain other Security Interests. We incurred $0.9 million of additional loan cost due to the refinance. As a result of the refinance, 2023 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 2019, SJWCSL, LLC (the “Watercrest JV”) entered into a $22.5 million loan (the “Watercrest JV Loan”). As of December 31, 2023 and 2022, $20.1 million and $21.0 million, respectively, was outstanding on the Watercrest JV Loan. The loan bears interest at a rate of the Secured Overnight Financing Rate (“SOFR”) plus 2.2% and matures in June 2047. Effective July 1, 2023, the benchmark interest rate index based on the London Interbank Offered Rate (“LIBOR”) transitioned to SOFR. 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. See 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 both December 31, 2023 and 2022, $5.0 million was outstanding on the Beckrich Building III Loan. The loan bears interest at a rate of SOFR plus 1.8% and matures in August 2029. Effective July 1, 2023, the benchmark interest rate index based on LIBOR transitioned to SOFR. 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, Pier Park Crossings Phase II LLC (the “Pier Park Crossings Phase II JV”) entered into a $22.9 million loan, insured by HUD, as amended (the “PPC II JV Loan”). As of December 31, 2023 and 2022, $22.2 million and $22.6 million, respectively, was outstanding on the PPC II JV Loan. The loan bears interest at a rate of 2.7% and matures in May 2057. The loan includes a prepayment premium due to the lender of 1% - 9% for any principal that is prepaid through May 2032. 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 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 December 31, 2023 and 2022, $13.0 million and $14.6 million, respectively, was outstanding on the Airport Hotel Loan. The loan bears interest at SOFR plus 2.1%, with a floor of 3.0%, and matures in March 2025. Effective July 1, 2023, the benchmark interest rate index based on LIBOR transitioned to SOFR. The loan

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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 2020, Pier Park Resort Hotel, LLC (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, 2023 and 2022, $51.9 million and $45.2 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 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 SOFR. The interest rate swap matures in April 2027 and fixed the variable rate on the notional amount of related debt, initially at $42.0 million, amortizing to $38.7 million at swap maturity, 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 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, 2023 and 2022, $15.9 million and $16.4 million, respectively, was outstanding on the Breakfast Point Hotel Loan. The loan matures in November 2042 and bears interest at a rate of 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 loan includes a prepayment premium due to the lender of 1% - 2% of the outstanding principal balance for any additional principal that is prepaid through November 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 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, 2023 and 2022, $4.7 million was outstanding on the Self-Storage Facility Loan. The loan matures in November 2025 and bears interest at a rate of SOFR plus 2.5%, with a floor of 2.9%. Effective July 1, 2023, the benchmark interest rate index based on LIBOR transitioned to SOFR. 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, with the project maintaining a certain debt service coverage. See Note 10. Debt, Net included in Item 15 of this Form 10-K for additional information.

In January 2021, 30A Greenway Hotel, LLC (“The Lodge 30A JV”) entered into a $15.0 million loan (the “Lodge 30A JV Loan”). As of December 31, 2023 and 2022, $14.7 million and $13.3 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, 2023 and 2022, $26.8 million and $18.2 million, respectively, was outstanding on the North Bay Landing Loan. The loan bears interest at a rate of SOFR plus 2.6%, with a floor of 3.3%. Upon reaching a certain debt service coverage ratio, the loan will bear interest at a rate of SOFR plus 2.4%, with a floor of 3.1%. Effective July 1, 2023, the benchmark interest rate index based on LIBOR transitioned to SOFR. 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

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liability under the loan has been reduced to 50% of the outstanding principal amount upon satisfaction of final advance conditions and will be further 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 May 2023, we began the process to make available the option to refinance the North Bay Landing Loan by seeking a loan commitment to be insured by HUD.

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, 2023 and 2022, $28.0 million and $13.1 million, respectively, was outstanding on the Watersound Camp Creek Loan. The loan matures in December 2047. In February 2023, the loan was amended, which modified the interest rate from LIBOR plus 2.1%, with a floor of 2.6%, to SOFR plus 2.1%, with a floor of 2.6%. 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, 2023 and 2022, $10.5 million and $11.4 million, respectively, was outstanding on the Watersound Town Center Grocery Loan. The loan bears interest at SOFR plus 2.1%, with a floor of 2.3%, and matures in August 2031. Effective July 1, 2023, the benchmark interest rate index based on LIBOR transitioned to SOFR. The loan is secured by the real property and certain other Security Interests. As guarantor, our liability under the loan has been reduced to 50% of the outstanding principal amount and will be further 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.

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, 2023 and 2022, $20.7 million and $10.4 million, respectively, was outstanding on the Hotel Indigo Loan. The loan bears interest a rate of SOFR plus 2.5%, with a floor of 2.5%. 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, Mexico Beach Crossings, LLC (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, 2023 and 2022, $42.4 million and $23.4 million, respectively, 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 2024 and if any additional principal is prepaid from April 2024 through March 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, 2023 and 2022, $12.3 million and $5.2 million, respectively, 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, 2023 and 2022, $35.5 million and $37.0 million, respectively, was outstanding on The Pearl Hotel Loan. The loan bears interest at a rate of 6.3% and matures in December 2032. The loan

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includes a prepayment fee due to the lender of 1% - 4% 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 $3.0 million as of December 31, 2023. Total outstanding CDD debt related to our land holdings was $10.7 million as of December 31, 2023, which is comprised of $8.7 million at the SouthWood community, $1.9 million at the existing Pier Park retail center and less than $0.1 million at the Wild Heron residential community. We pay interest on this total outstanding CDD debt.

As of December 31, 2023, our unconsolidated Latitude Margaritaville Watersound JV, Watersound Fountains Independent Living 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 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 both December 31, 2023 and 2022, there was no principal balance outstanding on the Latitude JV Note. The 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 20. Commitments and Contingencies included in Item 15 of this Form 10-K for additional information.

During the year ended December 31, 2023, we did not repurchase shares of our common stock outstanding. 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. 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 a certain sale of timberlands in 2014, we generated significant tax gains. The installment note’s structure allowed us to defer the resulting federal and state tax liability of $45.6 million until 2029, the maturity date for the installment note. We have a deferred tax liability related to the gain in connection with the sale.

As of December 31, 2023 and 2022, 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 $40.0 million and $38.1 million, respectively, as well as standby letters of credit in the amount of $0.2 million and $17.3 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. 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 $10.0 million and $8.0 million as of December 31, 2023 and 2022, respectively. These escrow funds are not available for regular operations.

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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

Net 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 developed and undeveloped land. Adjustments for non-cash items primarily include depreciation, depletion and amortization, unrealized loss on investments, net, equity in (income) loss from unconsolidated joint ventures, net of distributions, deferred income tax, cost of real estate sold and gain on contributions to unconsolidated joint ventures. Net cash provided by operations was $103.8 million in 2023, as compared to $48.2 million in 2022. During 2023 net income was $74.1 million, compared to $70.2 million in 2022. The increase in net cash provided by operating activities was primarily due to the changes in net income, expenditures for and acquisition of real estate to be sold, depreciation, depletion and amortization, and gain on insurance for damage to property and equipment, net, partially offset by the changes in cost of real estate sold and other assets during the year.

Cash Flows from Investing Activities

Net cash flows used in investing activities primarily includes capital expenditures for operating property and property and equipment used in our operations, purchases of investments and capital contributions to unconsolidated joint ventures, 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 2023, net cash used in investing activities was $99.1 million, which included capital expenditures for operating property and equipment, purchases of investments of U.S. Treasury Bills of $37.4 million and capital contributions to unconsolidated joint ventures of $2.3 million, partially offset by maturities of investments of $79.0 million, capital distributions from unconsolidated joint ventures of $0.7 million and maturities of assets held by special purpose entities of $0.8 million. 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.

Capital expenditures for operating property and property and equipment were $139.9 million and $259.1 million during 2023 and 2022, 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 $40.8 million for 2023, compared to $112.5 million in 2022. Net cash provided by financing activities during 2023 included capital contributions from non-controlling interest of $1.4 million and borrowings on debt of $121.8 million, partially offset by capital distributions to non-controlling interest of $2.2

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million, dividends paid of $25.7 million, principal payments for debt of $53.5 million, principal payments for finance leases of $0.1 million and debt issuance costs of $0.9 million. 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.

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 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

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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.

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:

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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.

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, 2023 and 2022, we had $11.0 million and $3.4 million, respectively, of federal net operating loss carryforwards (“NOLs”). The federal NOLs are specific to our QOF entity and do not expire. As of December 31, 2023 and 2022, we had state net NOLs of $12.9 million and $121.1 million, respectively. The majority of these state NOLs are available to offset future taxable income through 2042 and will begin expiring in 2025. As of both December 31, 2023 and 2022, we had a valuation allowance of $0.3 million against approximately $7.2 million of certain state NOLs. As of December 31, 2023 and 2022, we had income tax payable of $9.2 million and $3.5 million, respectively, included within accounts payable and other liabilities on the consolidated balance sheets. See Note 13. Income Taxes included in Item 15 of this Form 10-K for additional information.

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Recently Adopted 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 provided temporary optional guidance to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. This guidance provided expedients and exceptions for applying GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria were met. The amendments applied only to contracts and hedging relationships that referenced LIBOR or another reference rate that was 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 clarified 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 extended 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 could be applied prospectively through December 31, 2024, as reference rate activities occurred. In 2022 and the first half of 2023, some of our debt agreements that referenced LIBOR were amended to an alternative rate and on July 1, 2023, the remainder of our debt agreements that referenced a benchmark interest rate index based on LIBOR automatically transitioned to SOFR. Topic 848 was applied at the time of these modifications and there was no impact on our financial condition, results of operations and cash flows.

Leases Common Control Arrangements

In March 2023, the FASB issued ASU 2023-01, Leases (“Topic 842”): Common Control Arrangements (“ASU 2023-01”) that improved accounting guidance for arrangements between entities under common control. The new guidance required that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group, as long as the lessee controls the use of the underlying asset through a lease. When the lessee no longer controls the use of the underlying asset, the leasehold improvements are accounted for as a transfer between entities under common control through an adjustment to equity. We adopted this guidance as of December 31, 2023 and will apply the guidance prospectively to all new leasehold improvements recognized on or after adoption. As of December 31, 2023, there were no leasehold improvements associated with common control leases. The adoption of this guidance had no impact on our financial condition, results of operations and cash flows.

Recently Issued Accounting Pronouncements

Business Combinations – Joint Venture Formations

In August 2023, the FASB issued ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”) that requires a JV to apply a new basis of accounting upon formation by recognizing and initially measuring its assets and liabilities at fair value. This guidance will be effective prospectively for all JVs with a formation date on or after January 1, 2025, with early adoption permitted. A JV formed before January 1, 2025 may elect to apply the guidance retrospectively if sufficient information is available. We are currently evaluating the impact that the adoption of this guidance will have on our financial condition, results of operations, cash flows and related disclosures.

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Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (“Topic 280”) – Improvements to Reportable Segment Disclosures (“ASU 2023-07”) that requires an entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. This guidance also requires that an entity disclose an amount and description of other segment items, provide all annual disclosures currently required by Topic 280 in interim periods and

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disclose the title and position of the CODM and how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources. This guidance will be effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance should be applied retrospectively to all prior periods presented. We are currently evaluating the impact that the adoption of this guidance will have on our financial condition, results of operations, cash flows and related disclosures.

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Income Taxes

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In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (“ASU 2023-09”) that increases transparency about income tax information by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid, disaggregated by jurisdiction. This guidance will be effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact that the adoption of this guidance will have on our financial condition, results of operations, cash flows and related disclosures.

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