CTO Realty Growth, Inc. (CTO) FY 2021 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
When the Company uses any words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, the Company is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon current expectations and reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements. Certain factors or risks that could cause actual results or events to differ materially from those the Company anticipates or projects are described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Given these uncertainties, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Annual Report on Form 10-K or any document incorporated herein by reference. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this Annual Report on Form 10-K.
Our Business
We are a publicly traded, primarily retail-oriented, REIT that was founded in 1910. We own and manage, sometimes utilizing third-party property management companies, 22 commercial real estate properties in 10 states in the United States. As of December 31, 2021, we owned 9 single-tenant and 13 multi-tenant income-producing properties comprising 2.7 million square feet of gross leasable space.
In addition to our income property portfolio, as of December 31, 2021, our business included the following:
Management Services:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | A fee-based management business that is engaged in managing PINE, see Note 6, “Related Party Management Services Business” in the notes to the consolidated financial statements in Item 8. |
Commercial Loan and Master Lease Investments:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | A portfolio of two commercial loan investments and two commercial properties, which are included in the 22 commercial real estate properties above, whose leases are classified as commercial loan and master lease investments. |
Real Estate Operations:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | A portfolio of subsurface mineral interests associated with approximately 370,000 surface acres in 19 counties in the State of Florida (“Subsurface Interests”); and |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | An inventory of historically owned mitigation credits as well as mitigation credits produced by the Company’s mitigation bank. The mitigation bank owns a 2,500 acre parcel of land in the western part of Daytona Beach, Florida and, pursuant to a mitigation plan approved by the applicable state and federal authorities, produces mitigation credits that are sold to developers of land in the Daytona Beach area for the purpose of enabling the developers to obtain certain regulatory permits for property development (the “Mitigation Bank”). Prior to the Interest Purchase (hereinafter defined in Note 8, “Investments in Joint Ventures”) completed on September 30, 2021, the Company held a 30% retained interest in the entity that owns the Mitigation Bank. |
On December 10, 2021, the Land JV, of which the Company previously held a 33.5% retained interest, completed the Land JV Sale. Proceeds to the Company after distributions to the other member of the Land JV, and before taxes, were $24.5 million. Prior to the completion of the Land JV Sale, the Company was engaged in managing the Land JV, as further described in Note 6, “Related Party Management Services Business” in the notes to the consolidated financial statements in Item 8. As a result of the Land JV Sale and corresponding dissolution of the Land JV, the Company no longer holds a retained interest in the Land JV as of December 31, 2021.
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Our business also includes our investment in PINE. As of December 31, 2021, the fair value of our investment totaled $41.0 million, or 15.6% of PINE’s outstanding equity, including the OP Units we hold in the PINE Operating Partnership, which are redeemable for cash, based upon the value of an equivalent number of shares of PINE common stock at the time of the redemption, or shares of PINE common stock on a one-for-one basis, at PINE’s election. Our investment in PINE generates investment income through the dividends distributed by PINE. In addition to the dividends we receive from PINE, our investment in PINE may benefit from any appreciation in PINE’s stock price, although no assurances can be provided that such appreciation will occur, the amount by which our investment will increase in value, or the timing thereof. Any dividends received from PINE are included in investment and other income (loss) on the accompanying consolidated statements of operations.
Discontinued Operations. The Company reports the historical financial position and results of operations of disposed businesses as discontinued operations when it has no continuing interest in the business. On October 16, 2019, the Company sold a controlling interest in its wholly owned subsidiary that held 5,300 acres of undeveloped land in Daytona Beach, Florida. On October 17, 2019, the Company sold its interest in the golf operations. For the year ended December 31, 2019, the Company has reported the historical financial position and the results of operations related to the Land JV and the golf operations as discontinued operations (see Note 25, “Assets and Liabilities Held for Sale and Discontinued Operations” in the notes to the consolidated financial statements in Item 8). The cash flows related to discontinued operations have been disclosed. There were no discontinued operations during the years ended December 31, 2021 or 2020.
REIT Conversion
As of December 31, 2020, the Company had completed certain internal reorganization transactions necessary to begin operating in compliance with the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes under the Code, commencing with the taxable year ended December 31, 2020. See Item 1, “Business” for information related to the Company’s REIT conversion and related transactions. On January 29, 2021, in connection with the REIT conversion, the Company completed the Merger in order to reincorporate in Maryland and facilitate its ongoing compliance with the REIT requirements.
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Selected Historical Financial Information
The following table summarizes our selected historical financial information for each of the last five fiscal years (in thousands except per share amounts). The selected financial information has been derived from our audited consolidated financial statements. Additional data for fiscal years 2021, 2020, and 2019 is included elsewhere in this report.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Fiscal Years Ended | ||||||||||||
| | 2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||
| Total Revenues | | $ | 70,272 | | $ | 56,381 | | $ | 44,941 | | $ | 43,658 | | $ | 38,651 |
| | | | | | | | | | | | | | | | |
| Operating Income | | $ | 23,345 | | $ | 12,280 | | $ | 34,199 | | $ | 31,385 | | $ | 7,745 |
| | | | | | | | | | | | | | | | |
| Net Income Attributable to the Company | | $ | 29,940 | | $ | 78,509 | | $ | 114,973 | | $ | 37,168 | | $ | 41,719 |
| Distributions to Preferred Stockholders | | | (2,325) | | | — | | | — | | | — | | | — |
| Net Income Attributable to Common Stockholders | | $ | 27,615 | | $ | 78,509 | | $ | 114,973 | | $ | 37,168 | | $ | 41,719 |
| | | | | | | | | | | | | | | | |
| Per Share Information: | | | | | | | | | | | | | | | |
| Basic: | | | | | | | | | | | | | | | |
| Income From Continuing Operations Attributable to Common Stockholders | | $ | 4.69 | | $ | 16.69 | | $ | 3.32 | | $ | 2.72 | | $ | 3.92 |
| Income From Discontinued Operations (Net of Income Tax) Attributable to Common Stockholders | | | — | | | — | | | 19.71 | | | 4.04 | | | 3.61 |
| Basic Net Income per Share Attributable to Common Stockholders | | $ | 4.69 | | $ | 16.69 | | $ | 23.03 | | $ | 6.76 | | $ | 7.53 |
| | | | | | | | | | | | | | | | |
| Diluted: | | | | | | | | | | | | | | | |
| Income From Continuing Operations Attributable to Common Stockholders | | $ | 4.69 | | $ | 16.69 | | $ | 3.32 | | $ | 2.71 | | $ | 3.90 |
| Income From Discontinued Operations (Net of Income Tax) Attributable to Common Stockholders | | | — | | | — | | | 19.68 | | | 4.01 | | | 3.58 |
| Diluted Net Income per Share Attributable to Common Stockholders | | $ | 4.69 | | $ | 16.69 | | $ | 23.00 | | $ | 6.72 | | $ | 7.48 |
| | | | | | | | | | | | | | | | |
| Dividends Declared and Paid - Preferred Stock | | $ | 0.77 | | $ | — | | $ | — | | $ | — | | $ | — |
| Dividends Declared and Paid - Common Stock | | $ | 4.00 | | $ | 13.88 | | $ | 0.44 | | $ | 0.27 | | $ | 0.18 |
| | | | | | | | | | | | | | | | |
| Summary of Financial Position: | | | | | | | | | | | | | | | |
| Real Estate—Net | | $ | 494,695 | | $ | 442,384 | | $ | 370,591 | | $ | 368,751 | | $ | 342,628 |
| Total Assets | | $ | 733,139 | | $ | 666,700 | | $ | 704,194 | | $ | 556,841 | | $ | 466,667 |
| Stockholders’ Equity | | $ | 430,480 | | $ | 350,899 | | $ | 285,413 | | $ | 211,761 | | $ | 184,178 |
| Long-Term Debt | | $ | 278,273 | | $ | 273,830 | | $ | 286,310 | | $ | 247,114 | | $ | 195,279 |
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Non-U.S. GAAP Financial Measures
Our reported results are presented in accordance with U.S. GAAP. We also disclose Funds From Operations (“FFO”), Core Funds From Operations (“Core FFO”), and Adjusted Funds From Operations (“AFFO”), each of which are non-U.S. GAAP financial measures. We believe these non-U.S. GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.
FFO, Core FFO, and AFFO do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operating activities as reported on our statement of cash flows as a liquidity measure and should be considered in addition to, and not in lieu of, U.S. GAAP financial measures.
We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as U.S. GAAP net income or loss adjusted to exclude extraordinary items (as defined by U.S. GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate related depreciation and amortization, including the pro rata share of such adjustments of unconsolidated subsidiaries. The Company also excludes the gains or losses from sales of assets incidental to the primary business of the REIT which specifically include the sales of mitigation credits, impact fee credits, subsurface sales, and land sales. To derive Core FFO, we modify the NAREIT computation of FFO to include other adjustments to U.S. GAAP net income related to gains and losses recognized on the extinguishment of debt. To derive AFFO, we further modify the NAREIT computation of FFO and Core FFO to include other adjustments to U.S. GAAP net income related to non-cash revenues and expenses such as straight-line rental revenue, amortization of above- and below-market lease related intangibles, non-cash compensation, and other non-cash amortization. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We use AFFO as one measure of our performance when we formulate corporate goals.
FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains or losses on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that Core FFO and AFFO are additional useful supplemental measures for investors to consider because they will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO, Core FFO, and AFFO may not be comparable to similarly titled measures employed by other companies.
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Reconciliation of Non-U.S. GAAP Measures (in thousands):
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | |||||||
| | | December 31, 2021 | | December 31, 2020 | | December 31, 2019 | |||
| Net Income Attributable to the Company | | $ | 29,940 | | $ | 78,509 | | $ | 114,973 |
| Depreciation and Amortization | | | 20,581 | | | 19,063 | | | 15,797 |
| Gains on Disposition of Assets | | | (28,316) | | | (9,746) | | | (16,507) |
| Losses (Gains) on the Disposition of Other Assets (Including Discontinued Operations) | | | (4,924) | | | 2,480 | | | (99,978) |
| Impairment Charges, Net | | | 13,283 | | | 9,147 | | | — |
| Unrealized (Gain) Loss on Investment Securities | | | (10,340) | | | 8,240 | | | (61) |
| Income Tax Expense (Benefit) from Non-FFO Items and De-Recognition of REIT Deferred Tax Assets and Liabilities | | | 1,840 | | | (80,225) | | | — |
| Funds from Operations | | | 22,064 | | | 27,468 | | | 14,224 |
| Distributions to Preferred Stockholders | | | (2,325) | | | — | | | — |
| Funds From Operations Attributable to Common Stockholders | | | 19,739 | | | 27,468 | | | 14,224 |
| Loss (Gain) on Extinguishment of Debt | | | 3,431 | | | (1,141) | | | — |
| Core Funds From Operations Attributable to Common Stockholders | | | 23,170 | | | 26,327 | | | 14,224 |
| Adjustments: | | | | | | | | | |
| Straight-Line Rent Adjustment | | | (2,443) | | | (2,564) | | | (1,680) |
| COVID-19 Rent Repayments (Deferrals), Net | | | 842 | | | (1,005) | | | — |
| Amortization of Intangibles to Lease Income | | | (404) | | | (1,754) | | | (2,383) |
| Other Non-Cash Amortization | | | (676) | | | (834) | | | (293) |
| Amortization of Loan Costs and Discount on Convertible Debt | | | 1,864 | | | 1,833 | | | 1,801 |
| Non-Cash Compensation | | | 3,168 | | | 2,786 | | | 2,688 |
| Non-Recurring G&A | | | 155 | | | 1,426 | | | 462 |
| Adjusted Funds From Operations Attributable to Common Stockholders | | $ | 25,676 | | $ | 26,215 | | $ | 14,819 |
| | | | | | | | | | |
| Weighted Average Number of Common Shares: | | | | | | | | | |
| Basic | | | 5,892,270 | | | 4,704,877 | | | 4,991,656 |
| Diluted | | | 5,892,270 | | | 4,704,877 | | | 4,998,043 |
| | | | | | | | | | |
| Dividends Declared and Paid - Preferred Stock | | $ | 0.77 | | $ | — | | $ | — |
| Dividends Declared and Paid - Common Stock | | $ | 4.00 | | $ | 13.88 | | $ | 0.44 |
Other Data (in thousands except per share data):
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | |||||||
| | | December 31, 2021 | | December 31, 2020 | | December 31, 2019 | |||
| FFO Attributable to Common Stockholders | | $ | 19,739 | | $ | 27,468 | | $ | 14,224 |
| FFO per Common Share - Diluted | | $ | 3.35 | | $ | 5.84 | | $ | 2.85 |
| | | | | | | | | | |
| Core FFO Attributable to Common Stockholders | | $ | 23,170 | | $ | 26,327 | | $ | 14,224 |
| Core FFO per Common Share - Diluted | | $ | 3.93 | | $ | 5.60 | | $ | 2.85 |
| | | | | | | | | | |
| AFFO Attributable to Common Stockholders | | $ | 25,676 | | $ | 26,215 | | $ | 14,819 |
| AFFO per Common Share - Diluted | | $ | 4.36 | | $ | 5.57 | | $ | 2.97 |
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COMPARISON OF THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Revenue
Total revenue for the year ended December 31, 2021 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2020 (in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| Operating Segment | | December 31, 2021 | | December 31, 2020 | | $ Variance | | % Variance | |||
| Income Properties | | $ | 50,679 | | $ | 49,953 | | $ | 726 | | 1.5% |
| Management Services | | | 3,305 | | | 2,744 | | | 561 | | 20.4% |
| Commercial Loan and Master Lease Investments | | | 2,861 | | | 3,034 | | | (173) | | (5.7)% |
| Real Estate Operations | | | 13,427 | | | 650 | | | 12,777 | | 1965.7% |
| Total Revenue | | $ | 70,272 | | $ | 56,381 | | $ | 13,891 | | 24.6% |
Total revenue for the year ended December 31, 2021 increased to $70.3 million, compared to $56.4 million during the year ended December 31, 2020. The increase in total revenue is primarily attributable to increased revenue from real estate operations related to the sale of the Daytona Beach Development, Subsurface Interests and mitigation credits, as further described below, in addition to increased income produced by the Company’s recent income property acquisitions versus that of properties disposed of by the Company during the comparative period. Revenues further benefited from increased management fee income from PINE. These increases were offset by a decrease in revenue generated from the Company’s portfolio of commercial loan and master lease investments.
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| Income Property Operations Revenue(in thousands) | | December 31, 2021 | | December 31, 2020 | | $ Variance | | % Variance | |||
| Revenue From Recent Acquisitions | | $ | 8,846 | | $ | — | | $ | 8,846 | | 100.0% |
| Revenue From Recent Dispositions | | | — | | | 7,986 | | | (7,986) | | (100.0)% |
| Revenue From Remaining Portfolio | | | 41,429 | | | 40,213 | | | 1,216 | | 3.0% |
| Accretion of Above Market/Below Market Intangibles | | | 404 | | | 1,754 | | | (1,350) | | (77.0)% |
| Total Income Property Operations Revenue | | $ | 50,679 | | $ | 49,953 | | $ | 726 | | 1.5% |
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| Real Estate Operations Revenue (in thousands) | | December 31, 2021 | | December 31, 2020 | | $ Variance | | % Variance | |||
| Mitigation Credit Sales | | $ | 708 | | $ | 6 | | $ | 702 | | 11700.0% |
| Subsurface Revenue | | | 4,724 | | | 638 | | | 4,086 | | 640.4% |
| Fill Dirt and Other Revenue | | | — | | | 6 | | | (6) | | (100.0)% |
| Land Sales Revenue | | | 7,995 | | | — | | | 7,995 | | 100.0% |
| Total Real Estate Operations Revenue | | $ | 13,427 | | $ | 650 | | $ | 12,777 | | 1965.7% |
Income Properties
Revenue and operating income from our income property operations totaled $50.7 million and $36.9 million, respectively, during the year ended December 31, 2021, compared to total revenue and operating income of $50.0 million and $38.0 million, respectively, for the year ended December 31, 2020. The direct costs of revenues for our income property operations totaled $13.8 million and $12.0 million for the years ended December 31, 2021 and 2020, respectively. The increase in revenues of $0.7 million, or 1.5%, during the year ended December 31, 2021 is primarily related to the timing of acquisitions versus dispositions. The slight decrease in operating income from our income property operations reflects increased rent revenues, offset by an increase of $1.8 million in our direct costs of revenues which is also related to the timing of acquisitions versus dispositions.
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Management Services
Revenue from our management services totaled $3.3 million during the year ended December 31, 2021, including $3.2 million and $0.1 million earned from PINE and the Land JV, respectively. Revenue from our management services totaled $2.7 million during the year ended December 31, 2020, including $2.5 million and $0.2 million earned from PINE and the Land JV, respectively
Commercial Loan and Master Lease Investments
Interest income from our commercial loan and master lease investments totaled $2.9 million and $3.0 million during the years ended December 31, 2021 and 2020, respectively. The decrease is due to the timing of investments and sales within the Company’s commercial loan and master lease investment portfolio, as further described below.
2021 Portfolio. As of December 31, 2021, the Company’s commercial loan and master lease investments portfolio included two commercial loan investments and two commercial properties. The timing of the investments includes (i) the origination of one commercial loan investment during the fourth quarter of 2020, (ii) the origination of one commercial loan investment during the second quarter of 2021, and (iii) the acquisition of two commercial properties during the third quarter of 2020 and 2019, individually, which are accounted for as commercial loan investments due to future repurchase rights.
2020 Portfolio. As of December 31, 2020, the Company’s commercial loan and master lease investments portfolio included one commercial loan investment and two commercial properties, of which one was originated during the third quarter of 2019, and two were originated during the third and fourth quarter of 2020. Additionally, during the three months ended June 30, 2020, the Company sold four of its commercial loan and master lease investments in an effort to strengthen the Company’s liquidity in light of the COVID-19 Pandemic.
Real Estate Operations
During the year ended December 31, 2021, operating income from real estate operations was $4.8 million on revenues totaling $13.4 million. During the year ended December 31, 2020, operating loss from real estate operations was $2.6 million on revenues totaling $0.7 million. The operating income during the year ended December 31, 2021 was primarily due to the sale of the Daytona Beach Development for $6.25 million, in addition to the sale of approximately 84,900 acres of Subsurface Interests totaling $4.6 million and six mitigation credits totaling $0.7 million, which revenues were offset by $8.5 million aggregate cost of sales, as compared to the year ended December 31, 2020 which includes an aggregate charge to cost of sales totaling $3.1 million, primarily comprised of $2.9 million attributable to 42 mitigation credits provided at no cost to buyers in addition to the Company’s purchase of two mitigation credits for $0.2 million.
General and Administrative Expenses
Total general and administrative expenses for the year ended December 31, 2021 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2020 (in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| General and Administrative Expenses | | December 31, 2021 | | December 31, 2020 | | $ Variance | | % Variance | |||
| Recurring General and Administrative Expenses | | $ | 7,879 | | $ | 7,355 | | $ | 524 | | 7.1% |
| Non-Cash Stock Compensation | | | 3,168 | | | 2,786 | | | 382 | | 13.7% |
| REIT Conversion and Other Non-Recurring Items | | | 155 | | | 1,426 | | | (1,271) | | (89.1)% |
| Total General and Administrative Expenses | | $ | 11,202 | | $ | 11,567 | | $ | (365) | | (3.2)% |
Gains (Losses) and Impairment Charges
2021 Dispositions. During the year ended December 31, 2021, the Company sold one multi-tenant income property and 14 single-tenant income properties for a total disposition volume of $162.3 million. The sale of the properties generated aggregate gains of $28.2 million.
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The income properties disposed of during the year ended December 31, 2021 are described below (in thousands):
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| Tenant Description | Tenant Type | | Date of Disposition | | Sales Price | | Gain on Sale | |||
| World of Beer/Fuzzy's Taco Shop, Brandon, FL | | Multi-Tenant | | 01/20/21 | | $ | 2,310 | | $ | 599 |
| Moe's Southwest Grill, Jacksonville, FL (4) | | Single-Tenant | | 02/23/21 | | | 2,541 | | | 109 |
| Burlington, N. Richland Hills, TX | | Single-Tenant | | 04/23/21 | | | 11,528 | | | 62 |
| Staples, Sarasota, FL | | Single-Tenant | | 05/07/21 | | | 4,650 | | | 662 |
| CMBS Portfolio (1) | | Single-Tenant | | 06/30/21 | | | 44,500 | | | 3,899 |
| Chick-fil-A, Chandler, AZ (4) | | Single-Tenant (2) | | 07/14/21 | | | 2,884 | | | 1,582 |
| JPMorgan Chase Bank, Chandler, AZ (4) | | Single-Tenant (2) | | 07/27/21 | | | 4,710 | | | 2,738 |
| Fogo De Chao, Jacksonville, FL (4) | | Single-Tenant (3) | | 09/02/21 | | | 4,717 | | | 866 |
| Wells Fargo, Raleigh, NC | | Single-Tenant | | 09/16/21 | | | 63,000 | | | 17,480 |
| 24 Hour Fitness, Falls Church, VA | | Single-Tenant | | 12/16/21 | | | 21,500 | | | 212 |
| Total | | $ | 162,340 | | $ | 28,209 |
| Column 1 | Column 2 |
|---|---|
| (1) | On June 30, 2021, the Company sold the CMBS Portfolio to PINE for an aggregate purchase price of $44.5 million. |
| Column 1 | Column 2 |
|---|---|
| (2) | Represents a single-tenant outparcel to Crossroads Towne Center, the Company’s multi-tenant income property located in Chandler, Arizona. |
| Column 1 | Column 2 |
|---|---|
| (3) | Represents a single-tenant property at The Strand at St. Johns Town Center, the Company’s multi-tenant income property located in Jacksonville, Florida. |
| Column 1 | Column 2 |
|---|---|
| (4) | Property or outparcel represents a ground lease. |
2020 Dispositions. During the year ended December 31, 2020, the Company sold 11 income properties and one vacant land parcel for a total disposition volume of $86.5 million. The sale of the properties generated aggregate gains of $8.6 million. In addition to the income property and vacant land parcel dispositions, the Company sold eight of its remaining nine billboard sites for a sales price of $1.5 million, resulting in a gain equal to the sales price.
The income properties disposed of during the year ended December 31, 2020 are described below (in thousands):
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| Tenant Description | Tenant Type | | Date of Disposition | | Sales Price | | Gain (Loss) on Sale | |||
| CVS, Dallas, TX (1) | | Single-Tenant | | 04/24/20 | | $ | 15,222 | | $ | 854 |
| Wawa, Daytona Beach, FL (1) | | Single-Tenant | | 04/29/20 | | | 6,002 | | | 1,769 |
| JPMorgan Chase Bank, Jacksonville, FL (1) | | Single-Tenant | | 06/18/20 | | | 6,715 | | | 959 |
| 7-Eleven, Dallas, TX | | Multi-Tenant | | 06/26/20 | | | 2,400 | | | (46) |
| Bank of America, Monterey, CA (1) | | Single-Tenant | | 06/29/20 | | | 9,000 | | | 3,892 |
| Wawa, Jacksonville, FL (1) | | Single-Tenant | | 07/23/20 | | | 7,143 | | | 246 |
| Carrabbas, Austin, TX | | Single-Tenant | | 08/05/20 | | | 2,555 | | | (84) |
| PDQ, Jacksonville, FL (1) | | Single-Tenant | | 09/08/20 | | | 2,540 | | | 128 |
| Macaroni Grill, Arlington, TX | | Single-Tenant | | 10/13/20 | | | 2,500 | | | 68 |
| Aspen Development, Aspen, CO | | Single-Tenant | | 12/21/20 | | | 28,500 | | | 501 |
| Outback, Austin, TX | | Single-Tenant | | 12/23/20 | | | 3,402 | | | 222 |
| Total | | $ | 85,979 | | $ | 8,509 |
| Column 1 | Column 2 |
|---|---|
| (1) | Property represents a ground lease. |
Commercial Loan and Master Lease Investments. In light of the COVID-19 Pandemic, during the three months ended March 31, 2020, the Company began marketing its commercial loan portfolio in advance of their upcoming maturities to further strengthen the Company’s liquidity. The Company received multiple bids for the portfolio including a bid offering a value that was at a discount to par. Additionally, the Company implemented the guidance regarding current expected credit losses (“CECL”) effective January 1, 2020, which resulted in an allowance reserve of $0.3 million. The CECL reserve combined with the impairment related to marketing the loan portfolio resulted in an aggregate impairment charge on the loan portfolio of $1.9 million.
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Additionally, during the year ended December 31, 2020, the Company sold four of its commercial loan and master lease investments in two separate transactions generating aggregate proceeds of $20.0 million, resulting in a loss of $0.4 million during the three months ended June 30, 2020. The total loss on the loan portfolio disposition, including the impairment and CECL reserve charges in the three months ended March 31, 2020, was $2.1 million.
There were no losses on the Company’s commercial loan and master lease investments portfolio during the year ended December 31, 2021.
2025 Note Repurchases. During the year ended December 31, 2021, the Company repurchased $11.4 million aggregate principal amount of 2025 Notes at a $1.6 million premium, resulting in a loss on extinguishment of debt of $2.9 million. During the year ended December 31, 2020, the Company repurchased $12.5 million aggregate principal amount of 2025 Notes at a $2.6 million discount, resulting in a gain on extinguishment of debt of $1.1 million.
Mortgage Note Payable. In connection with the disposition of the CMBS Portfolio during the second quarter of 2021 and related assumption by the buyer of the Company’s $30.0 million fixed-rate mortgage note payable, the Company recognized a $0.5 million loss on extinguishment of debt related to the write-off of unamortized financing costs.
Impairment Charges. There were no impairment charges on the Company’s undeveloped land holdings, or its income property portfolio, during the years ended December 31, 2021 or 2020. The $17.6 million impairment charge recognized during the year ended December 31, 2021, which is comprised of a $16.5 million charge during the three months ended June 30, 2021 and a $1.1 million charge during the three months ended December 31, 2021, is related to the Company’s previously held retained interest in the Land JV. The aggregate impairment charge of $17.6 million is a result of eliminating the investment in joint ventures based on the final proceeds received through distributions of the Land JV in connection with closing the sale of substantially all of the Land JV’s remaining land with Timberline, for a final sales price of $66.3 million.
Additionally, during the year ended December 31, 2020, the Company recognized an aggregate $7.2 million impairment charge comprised of a $0.1 million impairment charge on one of the land parcels included in the Daytona Beach Development and a $ 7.1 million impairment charge on the Company’s previously held retained interest in the Land LV. The $7.1 million impairment on the Company’s previously held retained interest in the Land JV was the result of a re-forecast of the anticipated undiscounted future cash flows to be received by the Company based on the estimated timing of future land sales from the Land JV.
Depreciation and Amortization
Depreciation and amortization totaled $20.6 million and $19.1 million during the years ended December 31, 2021 and 2020, respectively. The increase of $1.5 million is primarily due to the increase in the Company’s income property portfolio.
Investment and Other Income (Loss)
During the year ended December 31, 2021, the closing stock price of PINE increased by $5.05 per share, with a closing price of $20.04 on December 31, 2021. During the year ended December 31, 2020, the closing stock price of PINE decreased by $4.04 per share, with a closing price of $14.99 on December 31, 2020. The increase (decrease) resulted in an unrealized, non-cash gain (loss) on the Company’s investment in PINE of $10.3 million and ($8.2) million which is included in investment and other income (loss) in the consolidated statements of operations for the years ended December 31, 2021 and 2020, respectively.
The Company earned dividend income from the investment in PINE of $2.1 million and $1.7 million during the years ended December 31, 2021 and 2020, respectively.
Interest Expense
Interest expense totaled $8.9 million and $10.8 million for the years ended December 31, 2021 and 2020, respectively. The decrease of $1.9 million resulted primarily from (i) the repurchase of $11.4 million aggregate principal amount of 2025 Notes and (ii) the disposition of the CMBS Portfolio under which the buyer assumed a $30.0 million fixed-rate mortgage note. The assumed $30.0 million mortgage note and the 2025 Notes both had higher interest rates than the Credit Facility and term loans.
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Net Income
Net income attributable to the Company totaled $29.9 million and $78.5 million during the years ended December 31, 2021 and 2020, respectively. The decrease in net income is attributable to the factors described above in addition to the $83.5 million income tax benefit recorded during the year ended December 31, 2020, primarily related to the de-recognition of the deferred tax assets and liabilities associated with the entities included in the REIT totaling $82.5 million, as a result of the Company’s REIT election.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 2020 AND 2019
Revenue
Total revenue for the year ended December 31, 2020 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2019 (in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| Operating Segment | | December 31, 2020 | | December 31, 2019 | | $ Variance | | % Variance | |||
| Income Properties | | $ | 49,953 | | $ | 41,956 | | $ | 7,997 | | 19.1% |
| Management Services | | | 2,744 | | | 304 | | | 2,440 | | 802.6% |
| Commercial Loan and Master Lease Investments | | | 3,034 | | | 1,829 | | | 1,205 | | 65.9% |
| Real Estate Operations | | | 650 | | | 852 | | | (202) | | (23.7)% |
| Total Revenue | | $ | 56,381 | | $ | 44,941 | | $ | 11,440 | | 25.5% |
Total revenue for the year ended December 31, 2020 increased to $56.4 million, compared to $44.9 million during the year ended December 31, 2019. The increase in total revenue reflects the net impact of an increase in revenue from our income property operations of $8.0 million, which is the result of an increase in revenue of $23.8 million from recent acquisitions partially offset by a decrease relating to our recent dispositions of income properties, which totaled $15.4 million. Revenues further benefited from the increase of $2.4 million in connection with the management fees we earned from PINE and the Land JV in addition to $1.2 million in increased revenues generated from the commercial loan and master lease investments portfolio due to the timing of investments.
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| Income Property Operations Revenue (in thousands) | | December 31, 2020 | | December 31, 2019 | | $ Variance | | % Variance | |||
| Revenue From Recent Acquisitions | | $ | 23,816 | | $ | — | | $ | 23,816 | | 100.0% |
| Revenue From Recent Dispositions | | | — | | | 15,373 | | | (15,373) | | (100.0)% |
| Revenue From Remaining Portfolio | | | 24,383 | | | 24,200 | | | 183 | | 0.8% |
| Accretion of Above Market/Below Market Intangibles | | | 1,754 | | | 2,383 | | | (629) | | (26.4)% |
| Total Income Property Operations Revenue | | $ | 49,953 | | $ | 41,956 | | $ | 7,997 | | 19.1% |
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| Real Estate Operations Revenue(in thousands) | | December 31, 2020 | | December 31, 2019 | | $ Variance | | % Variance | |||
| Mitigation Credit Sales | | $ | 6 | | $ | — | | $ | 6 | | 100.0% |
| Subsurface Revenue | | | 638 | | | 748 | | | (110) | | (14.8)% |
| Fill Dirt and Other Revenue | | | 6 | | | 104 | | | (98) | | (94.0)% |
| Total Real Estate Operations Revenue | | $ | 650 | | $ | 852 | | $ | (202) | | (23.7)% |
Income Properties
Revenue and operating income from our income property operations totaled $50.0 million and $38.0 million, respectively, during the year ended December 31, 2020, compared to total revenue and operating income of $42.0 million and $35.0 million, respectively, for the year ended December 31, 2019. The direct costs of revenues for our income
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property operations totaled $12.0 million and $7.0 million for the year ended December 31, 2020 and 2019, respectively. The increase in revenues of $8.0 million, or 19.1%, during the year ended December 31, 2020 reflects our expanded portfolio of income properties including increases of $23.8 million due to recent acquisitions, offset by the decrease of $15.4 million related to our recent disposition of income properties. Revenue from our income properties during the years ended December 31, 2020 and 2019 also includes $1.8 million and $2.4 million, respectively, in revenue from the net accretion of the above-market and below-market lease intangibles, of which a significant portion is attributable to the property located in Raleigh, North Carolina, leased to Wells Fargo. Our increased operating income from our income property operations reflects increased rent revenues, offset by an increase of $5.0 in our direct costs of revenues which was primarily comprised of $7.5 million in increased operating expenses related to the timing of acquisitions, offset by the reduction in operating expenses related to our recent disposition of income properties.
Management Services
Revenue from our management services totaled $2.7 million during the year ended December 31, 2020, including $2.5 million and $0.2 million earned from PINE and the Land JV, respectively. During the year ended December 31, 2019, the Company earned management services revenue from PINE of $0.2 million which represents the initial stub period of PINE’s operations from November 26, 2019 to December 31, 2019 and $0.1 million from the Land JV which represents the initial stub period of the Land JV’s operations from October 16, 2019 to December 31, 2019.
Commercial Loan and Master Lease Investments
Interest income from our commercial loan and master lease investments totaled $3.0 million $1.8 million during the years ended December 31, 2020 and 2019, respectively. The increase is due to the timing of investing in the Company’s commercial loan and master lease investment portfolio, as the Company held no commercial loan and master lease investments until the second quarter 2019. The loans originated during, and subsequent to, the second quarter of 2019 through the remainder of 2019, were inclusive of four loans, two of which were sold during the second quarter of 2020 and one which was repaid in full by the buyer of the Company’s former golf operations during the fourth quarter of 2020. These decreased revenues were partially offset by the Company’s origination of two loans during the first quarter of 2020, which were sold during the second quarter of 2020, in addition to the origination of one loan during both the third and fourth quarter of 2020.
Real Estate Operations
During the year ended December 31, 2020, operating loss from real estate operations was $2.6 million on revenues totaling $0.6 million. During the year ended December 31, 2019, operating income from real estate operations was $0.7 million on revenues totaling $0.9 million. The operating loss during the year ended December 31, 2020, was due to the decrease in revenue of $0.2 million, in addition to the 42 mitigation credits with a cost basis of $2.9 million that were provided at no cost to buyers during 2020.
General and Administrative Expenses
Total general and administrative expenses for the year ended December 31, 2020 is presented in the following summary and indicates the changes as compared to the year ended December 31, 2019 (in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | | | | ||||
| General and Administrative Expenses | | December 31, 2020 | | December 31, 2019 | | $ Variance | | % Variance | |||
| Recurring General and Administrative Expenses | | $ | 7,355 | | $ | 6,668 | | $ | 687 | | 10.3% |
| Non-Cash Stock Compensation | | | 2,786 | | | 2,688 | | | 98 | | 3.6% |
| REIT Conversion and Other Non-Recurring Items | | | 1,426 | | | 462 | | | 964 | | 208.7% |
| Total General and Administrative Expenses | | $ | 11,567 | | $ | 9,818 | | $ | 1,749 | | 17.8% |
General and administrative expenses totaled $11.6 million and $9.8 million for the years ended December 31, 2020 and 2019, respectively, of which increase is primarily related to legal, audit, and other professional fees incurred in connection with the Company’s REIT conversion totaling $1.4 million.
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Gains (Losses) and Impairment Charges
2020 Dispositions. During the year ended December 31, 2020, the Company sold 11 income properties and one vacant land parcel for a total disposition volume of $86.5 million. The sale of the properties generated aggregate gains of $8.6 million. In addition to the income property and vacant land parcel dispositions, the Company sold eight of its remaining nine billboard sites for a sales price of $1.5 million, resulting in a gain equal to the sales price.
The income properties disposed of during the year ended December 31, 2020 are described below (in thousands):
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| Tenant Description | Tenant Type | | Date of Disposition | | Sales Price | | Gain (Loss) on Sale | |||
| CVS, Dallas, TX (1) | | Single-Tenant | | 04/24/20 | | $ | 15,222 | | $ | 854 |
| Wawa, Daytona Beach, FL (1) | | Single-Tenant | | 04/29/20 | | | 6,002 | | | 1,769 |
| JPMorgan Chase Bank, Jacksonville, FL (1) | | Single-Tenant | | 06/18/20 | | | 6,715 | | | 959 |
| 7-Eleven, Dallas, TX | | Multi-Tenant | | 06/26/20 | | | 2,400 | | | (46) |
| Bank of America, Monterey, CA (1) | | Single-Tenant | | 06/29/20 | | | 9,000 | | | 3,892 |
| Wawa, Jacksonville, FL (1) | | Single-Tenant | | 07/23/20 | | | 7,143 | | | 246 |
| Carrabbas, Austin, TX | | Single-Tenant | | 08/05/20 | | | 2,555 | | | (84) |
| PDQ, Jacksonville, FL (1) | | Single-Tenant | | 09/08/20 | | | 2,540 | | | 128 |
| Macaroni Grill, Arlington, TX | | Single-Tenant | | 10/13/20 | | | 2,500 | | | 68 |
| Aspen Development, Aspen, CO | | Single-Tenant | | 12/21/20 | | | 28,500 | | | 501 |
| Outback, Austin, TX | | Single-Tenant | | 12/23/20 | | | 3,402 | | | 222 |
| Total | | $ | 85,979 | | $ | 8,509 |
| Column 1 | Column 2 |
|---|---|
| (1) | Property represents a ground lease. |
2019 Dispositions. Twenty-one single-tenant income properties were disposed of during the year ended December 31, 2019, resulting in gains totaling $22.0 million, which properties are described below:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On November 26, 2019, as part of PINE’s initial public offering (the “IPO”), the Company sold or contributed 20 single-tenant net-leased income properties to PINE and the PINE Operating Partnership for aggregate cash consideration of $125.9 million for 15 of the properties and an aggregate of 1,223,854 OP Units for five of the properties, with the OP Units having an initial value of $23.3 million, based on Alpine’s IPO price, resulting in a gain of $1.0 million, or $0.16 per share, after tax. |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On August 7, 2019, the Company sold its 1.56-acre outparcel subject to a ground lease with Wawa located in Winter Park, Florida for $2.8 million (the “Wawa Sale”). The property is an outparcel to the Grove at Winter Park which the Company sold in May 2019. The gain on the Wawa Sale totaled $2.1 million, or $0.33 per share, after tax. |
Additionally, three multi-tenant income properties, which were classified in assets held for sale as of December 31, 2018, were disposed of during the year ended December 31, 2019 as described below.
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On June 24, 2019, the Company sold its 76,000 square foot multi-tenant retail property located in Santa Clara, California for $37.0 million (the “Peterson Sale”). The gain on the Peterson Sale totaled $9.0 million, or $1.36 per share, after tax. |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On May 23, 2019, the Company sold its 112,000 square foot multi-tenant retail property, anchored by a 24 Hour Fitness, located in Winter Park, Florida for $18.3 million (the “Grove Sale”). The gain on the Grove Sale totaled $2.8 million, or $0.42 per share, after tax. |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On February 21, 2019, the Company sold its 59,000 square foot multi-tenant retail property, anchored by a Whole Foods Market retail store, located in Sarasota, Florida for $24.6 million (the “Whole Foods Sale”). The gain on the Whole Foods Sale totaled $6.9 million, or $0.96 per share, after tax. |
Commercial Loan and Master Lease Investments. During the year ended December 31, 2020, the Company recognized aggregate impairment charges totaling $1.9 million, comprised of (i) the Company’s implementation of CECL resulting in an allowance reserve of $0.3 million, and (ii) the impairment totaling $1.6 million recognized during the first quarter of 2020 related to marketing the Company’s loan portfolio in advance of their upcoming maturities prior to the
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disposition of four commercial loan and master lease investments during the second quarter of 2020, which sale resulted in loss of $0.4 million, or $0.06 per share, after tax.
2025 Note Repurchases. During the year ended December 31, 2020, the Company repurchased of $12.5 million aggregate principal amount of 2025 Notes at a discount totaling $2.6 million, resulting in a gain on extinguishment of debt of $1.1 million, or $0.18 per share, after tax.
Impairment Charges. There were no impairment charges on the Company’s undeveloped land holdings, or its income property portfolio, during the years ended December 31, 2020 or 2019. During the year ended December 31, 2020, the Company recognized an aggregate $7.2 million impairment charge comprised of a $0.1 million impairment charge on one of the land parcels included in the Daytona Beach Development and a $ 7.1 million impairment charge on the Company’s previously held retained interest in the Land LV. The $7.1 million impairment on the Company’s previously held retained interest in the Land JV was the result of a re-forecast of the anticipated undiscounted future cash flows to be received by the Company based on the estimated timing of future land sales from the Land JV.
Depreciation and Amortization
Depreciation and amortization totaled $19.1 million and $15.8 million during the years ended December 31, 2020 and 2019, respectively. The increase of $3.3 million is primarily due to the increase in the Company’s income property portfolio.
Investment and Other Income (Loss)
During the year ended December 31, 2020, the closing stock price of PINE decreased by $4.04 per share, with a closing price of $14.99 on December 31, 2020 versus $19.03 on December 31, 2019. As a result, the Company recognized an unrealized, non-cash loss on its 2,039,644 shares (including OP Units) of $8.2 million, or $1.75 per share, after tax, which is included in investment and other income (loss) in the consolidated statements of operations.
Interest Expense
Interest expense totaled $10.8 million and $12.5 million for the years ended December 31, 2020 and 2019, respectively. The decrease of $1.6 million is primarily attributable to the lower rate on the outstanding balance of the 2025 Notes, compared to the 2020 Notes (hereinafter defined).
Discontinued Operations
During the year ended December 31, 2020, there was no activity related to discontinued operations. During the year ended December 31, 2019, discontinued operations activity consisted of land operations and golf operations, which were sold during the fourth quarter of 2019, of which activity is further described below. For the years ended December 31, 2019 and 2018, the Company has reported the historical financial position and the results of operations related to the Land JV and the golf operations as discontinued operations.
Land Operations. On October 16, 2019, the Company sold a controlling interest in its wholly owned subsidiary that held 5,300 acres of undeveloped land in Daytona Beach, Florida (the “Magnetar Land Sale”) for $97.0 million. The Magnetar Land Sale resulted in a gain of $127.5 million, which was comprised of a gain of $78.6 million, or $12.21 per share, after tax, on the land sale and a non-cash gain of $48.9 million on the Company’s previously held retained interest in the Land JV, or $7.59 per share, after tax. Excluding the Magnetar Land Sale, the Company closed on five land sale transactions, generating proceeds of $11.0 million and the recognition of the cost basis in the land plus closing costs of $5.3 million.
Golf Operations. Revenues and direct cost of revenues from golf operations totaled $4.1 million and $5.3 million, respectively, for the year ended December 31, 2019. The Company did not recognize any deprecation or amortization expense for the year ended December 31, 2019 as the golf operations were treated as discontinued operations as of December 31, 2018. The Company’s golf operations had a net operating loss of $1.2 million during the year ended December 31, 2019.
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Net Income
Net income (loss) attributable to the Company totaled $78.5 million and $115.0 million during the years ended December 31, 2020 and 2019, respectively. The decrease in net income is attributable to the factors described above, which decrease was partially offset by the $83.5 million income tax benefit recorded during the year ended December 31, 2020, primarily related to the de-recognition of the deferred tax assets and liabilities associated with the entities included in the REIT totaling $82.5 million, as a result of the Company’s REIT election, versus income tax expense of $5.5 million during the comparable period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash totaled $31.3 million at December 31, 2021, including restricted cash of $22.7 million, see Note 2 “Summary of Significant Accounting Policies” under the heading Restricted Cash in the notes to the consolidated financial statements in Item 8 for the Company’s disclosure related to its restricted cash balance at December 31, 2021.
Our total cash balance at December 31, 2021, reflected cash flows provided by our operating activities totaling $27.6 million during the year ended December 31, 2021, compared to the prior year’s cash flows provided by operating activities totaling $16.9 million for the year ended December 31, 2020, an increase of $10.7 million. The increase of $10.7 million is primarily related to the increase in the cash flows provided by real estate operations of $7.4 million which was driven by the sale of the Daytona Beach Development for $6.25 million and the sale of $4.6 million of Subsurface Interests. The Company also received cash credits at closing for upcoming tenant improvements, leasing commissions, and prepaid rents related to the fourth quarter 2021 income property acquisitions as well as the release of escrowed funds related to the Buc-ee’s matter. These increases in cash are partially offset by the cash outlay during the third quarter of 2021 to purchase the remaining interest in the Mitigation Bank for $16.1 million. The change in operating cash is further impacted by various other timing differences within other assets and accounts payable.
Our cash flows used in investing activities totaled $103.0 million for the year ended December 31, 2021, compared to cash flows used in investing activities of $91.1 million for the year ended December 31, 2020, an increase of $11.9 million. The increase in cash used in investing activities of $11.9 million is primarily related to a net increase in cash outflows of $44.7 million during the year ended December 31, 2021 related to the timing of income property acquisitions versus dispositions, which increase in cash outflows was partially offset by $23.9 million proceeds received from the Land Venture Sale and a net increase in cash inflows of $4.9 million related to timing of investing in the Company’s commercial loan and master lease investment portfolio, in addition to decreased cash outflows of $3.6 million as a result of 48 mitigation credits put to the Company by the Mitigation Bank JV during the year ended December 31, 2020.
Our cash flows provided by financing activities totaled $72.9 million for the year ended December 31, 2021, compared to cash flows used in financing activities of $26.9 million for the year ended December 31, 2020, an increase in cash of $99.8 million. The increase of $99.8 million is primarily related to $72.4 million net proceeds received from the Company’s issuance of 3,000,000 shares of its Series A Preferred Stock during the year ended December 31, 2021, in addition to the net impact of $36.6 million increased cash inflow related to the Company’s debt borrowings, primarily comprised of (i) origination of the $50.0 million 2026 Term Loan and subsequent exercise of the accordion option for $15.0 million, (ii) origination of the $100.0 million 2027 Term Loan (ii) net repayments on the Company’s Credit Facility of $97.9 million, (iii) payoff of the $23.2 million variable-rate mortgage note, and (iv) convertible note repurchases of $11.4 million. The aggregate increase in cash inflows was partially offset by increased cash outflows of $11.4 million related to dividends paid during the year ended December 31, 2021.
See Note 17, “Long-Term Debt” in the notes to the consolidated financial statements in Item 8 for the Company’s disclosure related to its long-term debt balance at December 31, 2021.
Acquisitions and Investments. As noted previously, the Company acquired eight multi-tenant income properties during the year ended December 31, 2021 for an aggregate purchase price of $249.1 million, as further described in Note 4, “Income Properties” in the notes to the consolidated financial statements in Item 8.
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The acquisitions completed during the year ended December 31, 2021 totaled $249.1 million, nearing the top end of the Company’s guidance released in October 2021. We expect to fund future acquisitions utilizing cash on hand, cash from operations, proceeds from the dispositions of income properties through 1031 like-kind exchanges, and potentially the sale of all or a portion of our Subsurface Interests, and borrowings on our Credit Facility, if available. We expect dispositions of income properties and subsurface interests will qualify under the like-kind exchange deferred-tax structure, and additional financing sources.
Dispositions. During the year ended December 31, 2021, the Company sold one multi-tenant income property and 14 single-tenant income properties for a total disposition volume of $162.3 million. The sale of the properties generated aggregate gains of $28.2 million.
Contractual Obligations. The Company has committed to fund the following capital improvements. The improvements, which are related to several properties, are estimated to be generally completed within twelve months. These commitments, as of December 31, 2021, are as follows (in thousands):
| | | | |
|---|---|---|---|
| | | As of December 31, 2021 | |
| Total Commitment (1) | | $ | 19,737 |
| Less Amount Funded | | | (5,041) |
| Remaining Commitment | | $ | 14,696 |
(1) Commitment includes tenant improvements, leasing commissions, rebranding, facility expansion and other capital improvements.
The Company is also contractually obligated under its various long-term debt and operating lease agreements. In the aggregate, the Company is obligated under such agreements to repay $0.1 million within one year, with $283.1 million being long-term to be repaid in excess of one year.
As of December 31, 2021, we have no other contractual requirements to make capital expenditures.
Other Matters. None.
We believe we will have sufficient liquidity to fund our operations, capital requirements, maintenance, and debt service requirements over the next twelve months and into the foreseeable future, with cash on hand, cash flow from our operations and $143.0 million available capacity on the existing $210.0 million Credit Facility, based on our current borrowing base of income properties, as of December 31, 2021.
In January 2019, the Board approved an increase of $10.0 million to the existing stock repurchase program, refreshing the total program to an aggregate of $10.0 million. As of the quarter ended September 30, 2019 the Company had repurchased 211,736 shares for $12.7 million. In April 2019 the Board approved the repurchase of a block of shares from the Company’s largest stockholder whereby the Company repurchased 320,741 shares for $18.4 million, or $57.50 per share. In November 2019 the Board approved a $10.0 million buyback program. During the fourth quarter of 2019 the Company repurchased 158,625 shares for $10.0 million, or $63.04 per share. In February 2020, the Board approved a new $10.0 million stock repurchase program, under which 88,565 shares of the Company’s stock totaling $4.1 million, or an average price of $46.29 per share, had been repurchased as of June 30, 2020. During the year ended December 31, 2021, the Company repurchased 40,553 shares for $2.2 million, or an average price of $54.48 per share. The repurchase program does not have an expiration date. The shares of the Company’s common stock repurchased during each of the aforementioned years through the year ended December 31, 2021 were cancelled.
Our Board and management consistently review the allocation of capital with the goal of providing the best long-term return for our stockholders. These reviews consider various alternatives, including increasing or decreasing regular dividends, repurchasing the Company’s securities, and retaining funds for reinvestment. Annually, the Board reviews our business plan and corporate strategies, and makes adjustments as circumstances warrant. Management’s focus is to continue our strategy to diversify our portfolio by redeploying proceeds from like-kind exchange transactions and utilizing our Credit Facility to increase our portfolio of income-producing properties, providing stabilized cash flows with strong risk-adjusted returns primarily in larger metropolitan areas and growth markets.
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CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates include those estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Our most significant estimate is as follows:
Purchase Accounting for Acquisitions of Real Estate Subject to a Lease. As required by U.S. GAAP, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value. The assumptions underlying the allocation of relative fair values are based on market information including, but not limited to: (i) the estimate of replacement cost of improvements under the cost approach, (ii) the estimate of land values based on comparable sales under the sales comparison approach, and (iii) the estimate of future benefits determined by either a reasonable rate of return over a single year’s net cash flow, or a forecast of net cash flows projected over a reasonable investment horizon under the income capitalization approach. The underlying assumptions are subject to uncertainty and thus any changes to the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation and amortization as a result of the fair value allocation. The acquisitions of real estate subject to this estimate totaled eight multi-tenant income properties for a combined purchase price of $249.1 million for the year ended December 31, 2021 and two multi-tenant income properties and two single-tenant income properties for a combined purchase price of $185.1 million for the year ended December 31, 2020.
See Note 2, “Summary of Significant Accounting Policies”, for further discussion of the Company’s accounting estimates and policies.