EX-99.2 5 tm2421006d1_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

CTO REALTY GROWTH, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

On March 20, 2024, CTO Realty Growth, Inc. (the “Company”) completed the acquisition of a lifestyle, mixed-use property in the Sanford submarket of Orlando, Florida (“Marketplace at Seminole Towne Center”) from a certain institutional owner for a purchase price of $68.7 million. The acquisition was funded using (a) available cash, (b) 1031 like-kind exchange proceeds generated from certain of the Company’s previously completed property dispositions, and (c) proceeds from the Company’s revolving credit facility, and was structured as a reverse like-kind exchange in order to account for possible future dispositions of income properties by the Company.

 

On August 2, 2024, the Company entered into a Purchase and Sale Agreement (the “PSA”) with a certain institutional owner for the purchase of a three-property portfolio with properties located in Charlotte, North Carolina, Orlando, Florida, and Tampa, Florida (the “Three Property Portfolio”) for a purchase price of $137.5 million. The Company expects to close the purchase of the Three Property Portfolio in the third quarter of 2024. However, certain closing conditions must be met before or at the closing and are not currently satisfied. Accordingly, there can be no assurance that the Company will acquire the Three Property Portfolio. The Company may fund the acquisition of the Three Property Portfolio using (a) available cash, (b) proceeds from the Company’s revolving credit facility and/or other borrowings, (c) proceeds from offerings of the Company’s securities, and/or (d) proceeds from future dispositions of income properties by the Company through structuring the acquisition as a reverse like-kind exchange. For purposes of these unaudited pro forma consolidated financial statements, the Company has assumed funding the acquisition of the Three Property Portfolio entirely with proceeds from the Company’s revolving credit facility.

 

The following unaudited pro forma consolidated balance sheet as of June 30, 2024, unaudited pro forma consolidated statement of operations for the six months ended June 30, 2024, and unaudited pro forma consolidated statement of operations for the year ended December 31, 2023 (collectively, the “Unaudited Pro Forma Financials”) give effect to the acquisitions of Marketplace at Seminole Towne Center and the Three Property Portfolio. The adjustments in the Unaudited Pro Forma Financials are referred to herein as the “Property Acquisition Transaction Accounting Adjustments.”

 

Transaction Accounting Adjustments

 

The Unaudited Pro Forma Financials present the effects of the acquisitions of Marketplace at Seminole Towne Center and the Three Property Portfolio (together, the “Properties”) as though such acquisitions had occurred on January 1, 2023, the beginning of the earliest applicable reporting period.

 

Unaudited Pro Forma Financials

 

The Unaudited Pro Forma Financials are based on the estimates and assumptions as of the date of this Current Report on Form 8-K set forth in the notes to the Unaudited Pro Forma Financials, which are preliminary and have been made solely for the purpose of developing such pro forma information. The Unaudited Pro Forma Financials are not necessarily indicative of the financial position or operating results that would have been achieved had the acquisitions of the Properties occurred on the date indicated, nor are they necessarily indicative of the Company’s future financial position or operating results. Assumptions underlying the adjustments to the Unaudited Pro Forma Financials are described in the accompanying notes, which should be read in conjunction with the Unaudited Pro Forma Financials.

 

 

 

 

CTO REALTY GROWTH, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2024

(In thousands, except share and per share data)

 

          Property Acquisition     Property Acquisition              
          Transaction     Transaction              
          Accounting
 Adjustments – 		     Accounting              
          Marketplace at
 Seminole		     Adjustments – 
Three Property  		              
    Historical     Towne Center     Portfolio     Notes     Pro Forma  
ASSETS                                      
Real Estate:                                      
Land, at Cost   $ 236,207     $ —     $ 27,959     [A]     $ 264,166  
Building and Improvements, at Cost     601,584       —       92,128     [A]       693,712  
Other Furnishings and Equipment, at Cost     872       —       —             872  
Construction in Process, at Cost     4,824       —       —             4,824  
Total Real Estate, at Cost     843,487       —       120,087             963,574  
Less, Accumulated Depreciation     (63,547 )     —       —             (63,547 )
Real Estate—Net     779,940       —       120,087             900,027  
Land and Development Costs     300       —       —             300  
Intangible Lease Assets—Net     95,054       —       21,065     [A]       116,119  
Investment in Alpine Income Property Trust, Inc.     36,561       —       —             36,561  
Mitigation Credits     355       —       —             355  
Commercial Loans and Investments     50,323       —       —             50,323  
Cash and Cash Equivalents     4,794       —       —             4,794  
Restricted Cash     1,363       —       —             1,363  
Refundable Income Taxes     85       —       —             85  
Deferred Income Taxes—Net     2,147       —       —             2,147  
Other Assets     38,846       —       —             38,846  
Total Assets   $ 1,009,768     $ —     $ 141,152           $ 1,150,920  

 

See accompanying notes to unaudited pro forma consolidated financial statements.

 

 

 

 

CTO REALTY GROWTH, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (Continued)

AS OF JUNE 30, 2024

(In thousands, except share and per share data)

 

          Property Acquisition     Property Acquisition              
          Transaction     Transaction              
          Accounting Adjustments –      Accounting              
          Marketplace at
Seminole		     Adjustments – 
Three Property  		              
    Historical     Towne Center     Portfolio     Notes     Pro Forma  
LIABILITIES AND STOCKHOLDERS’ EQUITY                                      
Liabilities:                                      
Accounts Payable   $ 1,787     $ —     $ —           $ 1,787  
Accrued and Other Liabilities     14,713       —       —             14,713  
Deferred Revenue     5,371       —       —             5,371  
Intangible Lease Liabilities—Net     13,421       —       6,502     [A]       19,923  
Long-Term Debt     482,661       —       134,650     [B]       617,311  
Total Liabilities     517,953       —       141,152             659,105  
Commitments and Contingencies                                      
Stockholders’ Equity:                                      
Preferred Stock – 100,000,000 shares authorized; $0.01 par value, 6.375% Series A Cumulative Redeemable Preferred Stock, $25.00 Per Share Liquidation Preference, 4,697,225 shares issued and outstanding at June 30, 2024     47       —       —             47  
Common Stock –  500,000,000 shares authorized; $0.01 par value, 23,115,110 shares issued and outstanding at June 30, 2024     231       —       —             231  
Additional Paid-In Capital     207,882       —       —             207,882  
Retained Earnings     268,269       —       —             268,269  
Accumulated Other Comprehensive Income     15,386       —       —             15,386  
Total Stockholders’ Equity     491,815       —       —             491,815  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 1,009,768     $ —     $ 141,152           $ 1,150,920  

 

See accompanying notes to unaudited pro forma consolidated financial statements.

 

 

 

 

CTO REALTY GROWTH, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2024

(In thousands, except share and per share data)

 

          Property Acquisition           Property Acquisition              
          Transaction           Transaction              
          Accounting
 Adjustments – 		           Accounting              
          Marketplace at
 Seminole		           Adjustments – 
Three Property  		              
    Historical     Towne Center     Notes     Portfolio     Notes     Pro Forma  
Revenues                                            
Income Properties   $ 50,501     $ 1,968     [A][B]     $ 8,194     [A][B]     $ 60,663  
Management Fee Income     2,236       —             —             2,236  
Interest Income From Commercial Loans and Investments     2,792       —             —             2,792  
Real Estate Operations     1,443       —             —             1,443  
Total Revenues     56,972       1,968             8,194             67,134  
Direct Cost of Revenues                                            
Income Properties     (14,833 )     (533 )   [A]       (2,264 )   [A]       (17,630 )
Real Estate Operations     (1,078 )     —             —             (1,078 )
Total Direct Cost of Revenues     (15,911 )     (533 )           (2,264 )           (18,708 )
General and Administrative Expenses     (7,675 )     —             —             (7,675 )
Provision for Impairment     (115 )     —             —             (115 )
Depreciation and Amortization     (22,480 )     (834 )   [B]       (4,587 )   [B]       (27,901 )
Total Operating Expenses     (46,181 )     (1,367 )           (6,851 )           (54,399 )
Gain on Disposition of Assets     9,163       —             —             9,163  
Other Gain     9,163       —             —             9,163  
Total Operating Income     19,954       601             1,343             21,898  
Investment and Other Income (Loss)     (1,830 )     —             —             (1,830 )
Interest Expense     (11,133 )     (347 )   [C]       (4,672 )   [C]       (16,152 )
Income (Loss) Before Income Tax Benefit     6,991       254             (3,329 )           3,916  
Income Tax Benefit     34       —             —             34  
Net Income (Loss) Attributable to the Company     7,025       254             (3,329 )           3,950  
Distributions to Preferred Stockholders     (3,058 )     —             —             (3,058 )
Net Income (Loss) Attributable to Common Stockholders   $ 3,967     $ 254           $ (3,329 )         $ 892  
                                             
Per Share Information:                                            
Basic and Diluted Net Income (Loss) Attributable to Common Stockholders   $ 0.17     $ 0.01           $ (0.15 )         $ 0.04  
                                             
Weighted Average Number of Common Shares                                            
Basic     22,669,246       22,669,246             22,669,246             22,669,246  
Diluted     22,674,796       22,674,796             22,674,796             22,674,796  

 

See accompanying notes to unaudited pro forma consolidated financial statements.

 

 

 

 

CTO REALTY GROWTH, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2023

(In thousands, except share and per share data)

 

          Property Acquisition           Property Acquisition              
          Transaction           Transaction              
          Accounting
 Adjustments – 		           Accounting              
          Marketplace at
 Seminole		           Adjustments –  Three Property                
    Historical     Towne Center     Notes     Portfolio     Notes     Pro Forma  
Revenues                                            
Income Properties   $ 96,663     $ 9,090     [A][B]     $ 16,996     [A][B]     $ 122,749  
Management Fee Income     4,388       —             —             4,388  
Interest Income From Commercial Loans and Investments     4,084       —             —             4,084  
Real Estate Operations     3,984       —             —             3,984  
Total Revenues     109,119       9,090             16,996             135,205  
Direct Cost of Revenues                                            
Income Properties     (28,455 )     (2,462 )   [A]       (4,475 )   [A]       (35,392 )
Real Estate Operations     (1,723 )     —             —             (1,723 )
Total Direct Cost of Revenues     (30,178 )     (2,462 )           (4,475 )           (37,115 )
General and Administrative Expenses     (14,249 )     —             —             (14,249 )
Provision for Impairment     (1,556 )     —             —             (1,556 )
Depreciation and Amortization     (44,173 )     (3,855 )   [B]       (9,174 )   [B]       (57,202 )
Total Operating Expenses     (90,156 )     (6,317 )           (13,649 )           (110,122 )
Gain on Disposition of Assets     7,543       —             —             7,543  
Other Gain     7,543       —             —             7,543  
Total Operating Income     26,506       2,773             3,347             32,626  
Investment and Other Income     1,987       —             —             1,987  
Interest Expense     (22,359 )     (1,600 )   [C]       (9,345 )   [C]       (33,304 )
Income (Loss) Before Income Tax Benefit     6,134       1,173             (5,998 )           1,309  
Income Tax Expense     (604 )     —             —             (604 )
Net Income (Loss) Attributable to the Company     5,530       1,173             (5,998 )           177  
Distributions to Preferred Stockholders     (4,772 )     —             —             (4,772 )
Net Income (Loss) Attributable to Common Stockholders   $ 758     $ 1,173           $ (5,998 )         $ (4,067 )
                                             
Per Share Information:                                            
Basic and Diluted Net Income (Loss) Attributable to Common Stockholders   $ 0.03     $ 0.05           $ (0.27 )         $ (0.18 )
                                             
Weighted Average Number of Common Shares                                            
Basic and Diluted     22,529,703       22,529,703             22,529,703             22,529,703  

 

See accompanying notes to unaudited pro forma consolidated financial statements.

 

 

 

 

CTO REALTY GROWTH, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. BASIS OF PRESENTATION

 

The unaudited pro forma consolidated balance sheet as of June 30, 2024, unaudited pro forma consolidated statement of operations for the six months ended June 30, 2024, and unaudited pro forma consolidated statement of operations for the year ended December 31, 2023 present the effects of the acquisitions of Marketplace at Seminole Towne Center and the Three Property Portfolio (each as defined below) as though they had occurred on January 1, 2023, the beginning of the earliest applicable reporting period.

 

On March 20, 2024, CTO Realty Growth, Inc. (the “Company”) completed the acquisition of a lifestyle, mixed-use property in the Sanford submarket of Orlando, Florida (“Marketplace at Seminole Towne Center”) from a certain institutional owner for a purchase price of $68.7 million. The acquisition was funded using (a) available cash, (b) 1031 like-kind exchange proceeds generated from certain of the Company’s previously completed property dispositions, and (c) proceeds from the Company’s revolving credit facility, and was structured as a reverse like-kind exchange in order to account for possible future dispositions of income properties by the Company.

 

On August 2, 2024, the Company entered into a Purchase and Sale Agreement (the “PSA”) with a certain institutional owner for the purchase of a three-property portfolio with properties located in Charlotte, North Carolina, Orlando, Florida, and Tampa, Florida (the “Three Property Portfolio” and, together with the Marketplace at Seminole Towne Center, the “Properties”) for a purchase price of $137.5 million. The Company expects to close the purchase of the Three Property Portfolio in the third quarter of 2024. However, certain closing conditions must be met before or at the closing and are not currently satisfied. Accordingly, there can be no assurance that the Company will acquire the Three Property Portfolio. The Company may fund the acquisition of the Three Property Portfolio using (a) available cash, (b) proceeds from the Company’s revolving credit facility and/or other borrowings, (c) proceeds from offerings of the Company’s securities, and/or (d) proceeds from future dispositions of income properties by the Company through structuring the acquisition as a reverse like-kind exchange. For purposes of these Unaudited Pro Forma Financials, the Company has assumed funding the acquisition of the Three Property Portfolio entirely with proceeds from the Company’s revolving credit facility.

 

Unaudited Pro Forma Financials. The Unaudited Pro Forma Financials are based on the estimates and assumptions as of the date of this Current Report on Form 8-K set forth in the notes to the Unaudited Pro Forma Financials, which are preliminary and have been made solely for the purpose of developing such pro forma information. The Unaudited Pro Forma Financials are not necessarily indicative of the financial position or operating results that would have been achieved had the acquisitions of the Properties occurred on the date indicated, nor are they necessarily indicative of the Company’s future financial position or operating results. Assumptions underlying the adjustments to the Unaudited Pro Forma Financials are described in the accompanying notes, which should be read in conjunction with the Unaudited Pro Forma Financials.

 

NOTE 2. PRO FORMA ADJUSTMENTS

 

Pro Forma Consolidated Balance Sheet as of June 30, 2024

 

As the Marketplace at Seminole Towne Center was acquired on March 20, 2024, this asset is already reflected in the Company’s historical balance sheet as of June 30, 2024. Accordingly, no property acquisition transaction adjustments are required with respect to the Marketplace at Seminole Towne Center.

 

[A] Represents the fair value of the real estate expected to be acquired subsequent to June 30, 2024 which are allocated to the to-be acquired tangible assets, consisting of land and building and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs. The fair value allocation was provided by a third-party valuation company.

 

The following represents the allocation of the estimated purchase price for the Three Property Portfolio for GAAP purposes (in thousands):

 

Allocation of Purchase Price:  Three Property
Portfolio		 
Land, at Cost  $27,959 
Building and Improvements, at Cost   92,128 
Intangible Lease Assets   21,065 
Intangible Lease Liabilities   (6,502)
Total Acquisition Cost - Purchase Price Plus Acquisition Costs  $134,650 

 

 

 

 

[B] Represents the sources of funds related to the Three Property Portfolio acquisition, which is expected to close in the third quarter of 2024. For purposes of these Unaudited Pro Forma Financials, the Company has assumed funding the acquisition of the Three Property Portfolio entirely with proceeds from the Company’s revolving credit facility; however, the Company may fund the acquisition of the Three Property Portfolio using (a) available cash, (b) proceeds from the Company’s revolving credit facility and/or other borrowings, (c) proceeds from offerings of the Company’s securities, and/or (d) proceeds from future dispositions of income properties by the Company through structuring the acquisition as a reverse like-kind exchange.

 

Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2024

 

As the Marketplace at Seminole Towne Center property was acquired on March 20, 2024, the historical statement of operations for the six months ended June 30, 2024 already included certain revenues, direct costs of revenues, depreciation and amortization, and interest expense related to this property. Accordingly, the acquisition transaction adjustments in Items [A], [B], and [C] below only adjusted for the period from January 1, 2024 to March 19, 2024.

 

[A] Represents adjustments to income property revenues totaling $10.2 million in the aggregate, based on the calculation of rent on a straight-line basis utilizing the existing lease terms, and related direct costs of income property revenues totaling $2.8 million in the aggregate for the six months ended June 30, 2024. The Company recognizes rental revenue from operating leases on a straight-line basis over the life of the related leases. The pro forma adjustments reflect the estimated incremental straight-line rental income to be recognized over the remaining life of the leases at Marketplace at Seminole Towne Center and the Three Property Portfolio as of the acquisition dates as though they had occurred on January 1, 2023, as compared to the straight-line rental income that had been recorded in the Historical Summary of Revenues and Direct Costs of Revenues of the Three Property Portfolio filed herewith on August 8, 2024 as Exhibit 99.1 to the Company’s Current Report on Form 8-K pursuant to the requirements under Item 9.01(a) of Form 8-K.

 

[B] Represents depreciation and amortization of real estate acquired related to Marketplace at Seminole Towne Center and the Three Property Portfolio which totaled $0.8 million and $4.6 million, respectively, for the six months ended June 30, 2024 based on the estimated remaining economic useful life for tangible assets and the weighted average remaining lease term for the related intangible assets and intangible liabilities. Capitalized above-and below-market lease values are amortized as a decrease or increase, respectively, to income property revenues which totaled $0.7 million, in the aggregate, for the six months ended June 30, 2024 and is included in the $10.2 million increase to income property revenues referred to in Note [A] above.

 

[C] Represents additional interest expense of $5.0 million related to the draws on the Company’s revolving credit facility totaling $157.8 million in the aggregate, including (i) $23.1 million in connection with the acquisition of Marketplace at Seminole Towne Center, which adjustment was already reflected in the Company’s historical balance sheet as of June 30, 2024, and (ii) an anticipated draw of $134.7 million in connection with the expected acquisition of the Three Property Portfolio. For purposes of these Unaudited Pro Forma Financials, the Company has assumed funding the acquisition of the Three Property Portfolio entirely with proceeds from the Company’s revolving credit facility; however, the Company may fund the acquisition of the Three Property Portfolio using (a) available cash, (b) proceeds from the Company’s revolving credit facility and/or other borrowings, (c) proceeds from offerings of the Company’s securities, and/or (d) proceeds from future dispositions of income properties by the Company through structuring the acquisition as a reverse like-kind exchange.

 

Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2023

 

[A] Represents adjustments to income property revenues totaling $26.1 million in the aggregate, based on the calculation of rent on a straight-line basis utilizing the existing lease terms, and related direct costs of income property revenues totaling $6.9 million in the aggregate for the year ended December 31, 2023. The Company recognizes rental revenue from operating leases on a straight-line basis over the life of the related leases. The pro forma adjustments reflect the estimated incremental straight-line rental income to be recognized over the remaining life of the leases at Marketplace at Seminole Towne Center and the Three Property Portfolio as of the acquisition dates as though they had occurred on January 1, 2023, as compared to the straight-line rental income that had been recorded in the Historical Summary of Revenues and Direct Costs of Revenues of the Three Property Portfolio filed herewith on August 8, 2024 as Exhibit 99.1 to the Company’s Current Report on Form 8-K pursuant to the requirements under Item 9.01(a) of Form 8-K.

 

[B] Represents depreciation and amortization of real estate acquired related to Marketplace at Seminole Towne Center and the Three Property Portfolio which totaled $3.8 million and $9.2 million, respectively, for the year ended December 31, 2023, based on the estimated remaining economic useful life for tangible assets and the weighted average remaining lease term for the related intangible assets and intangible liabilities. Capitalized above-and below-market lease values are amortized as a decrease or increase, respectively, to income property revenues which totaled $1.9 million, in the aggregate, for the year ended December 31, 2023 and is included in the $26.1 million increase to income property revenues referred to in Note [A] above.

 

 

 

 

[C] Represents additional interest expense of $10.9 million related to the draws on the Company’s revolving credit facility totaling $157.8 million in the aggregate, including (i) $23.1 million in connection with the acquisition of Marketplace at Seminole Towne Center, which adjustment was already reflected in the Company’s historical balance sheet as of June 30, 2024, and (ii) an anticipated draw of $134.7 million in connection with the expected acquisition of the Three Property Portfolio. For purposes of these Unaudited Pro Forma Financials, the Company has assumed funding the acquisition of the Three Property Portfolio entirely with proceeds from the Company’s revolving credit facility; however, the Company may fund the acquisition of the Three Property Portfolio using (a) available cash, (b) proceeds from the Company’s revolving credit facility and/or other borrowings, (c) proceeds from offerings of the Company’s securities, and/or (d) proceeds from future dispositions of income properties by the Company through structuring the acquisition as a reverse like-kind exchange.