CTO Realty Growth (CTO) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We are subject to risks related to the ownership of commercial real estate that could affect the performance and value of our properties
2. 02Adverse changes in U.S., global and local regions or markets that impact our tenants’ businesses may materially and adversely affect us generally and the ability of our tenants to make rental payments to us pursuant to our leases
3. 03Our business is dependent upon our tenants successfully operating their businesses, and their failure to do so could materially and adversely affect us
4. 04Competition that traditional retail tenants face from e-commerce retail sales, or the integration of brick and mortar stores with e-commerce retail operators, could adversely affect our business
5. 05A key element of our future success will depend upon, among other things, our ability to successfully execute our strategy to invest in income-producing assets which if unsuccessful could adversely impact our financial condition, results of operations and cash flows
6. 06We operate in a highly competitive market for the acquisition of income properties and more established entities or other investors may be able to compete more effectively for acquisition opportunities than we can
7. 07The loss of revenues from our income property portfolio or certain tenants would adversely impact our results of operations and cash flows
8. 08A significant portion of the revenue we generate from our income property portfolio is concentrated in specific industry classifications and/or geographic locations and any prolonged dislocation in those industries or downturn in those geographic areas would adversely impact our results of operations and cash flows
9. 09Certain provisions of the Company’s leases may be unenforceable
10. 10We may not be able to dispose of properties we target for sale to recycle our capital
11. 11Our revenues include receipt of management fees and potentially incentive fees derived from our provision of management services to PINE and the loss or failure, or decline in the business or assets, of PINE could substantially reduce our revenues
12. 12Our management agreement with PINE is subject to termination for events of default or non-performance, and any such termination could have a material adverse effect on our business, results of operations and financial condition
13. 13An internalization of PINE’s management functions could have a material adverse effect on our business, results of operations and financial condition
14. 14We may be unable to successfully operate PINE’s business
15. 15Declines in the market values of our investment in PINE may adversely affect periodic reported results
16. 16There are various potential conflicts of interest in our relationship with PINE, including our executive officers and/or directors who are also officers and/or directors of PINE, which could result in decisions that are not in the best interest of our stockholders
17. 17A part of our investment strategy is focused on investing in commercial loans and investments which may involve credit risk or the risk that our borrowers will fail to pay scheduled contractual payments to us when due
18. 18Our commercial loans and investments segment is also exposed to risks associated with real estate investments generally
19. 19Our origination or acquisition of construction loans exposes us to an increased risk of loss
20. 20Our investments in construction loans require us to make estimates about the fair value of land improvements that may be challenged by the Internal Revenue Service (“IRS”)
21. 21Because of competition, we may not be able to originate or acquire commercial loans or similar financings at all or at favorable yields
22. 22Debt and preferred equity investments could cause us to incur expenses, which could adversely affect our results of operations
23. 23The mezzanine loan assets that we may acquire will involve greater risks of loss than senior loans secured by income-producing properties
24. 24We may invest in fixed-rate loan investments, and an increase in interest rates may adversely affect the value of these investments, which could adversely impact our financial condition, results of operations and cash flows
25. 25The commercial loans or similar financings we have acquired and may acquire in the future that are secured by commercial real estate typically depend on the ability of the property owner to generate income from operating the property. Failure to do so may result in delinquency and/or foreclosure
26. 26The activities or actions of a third-party servicer engaged to service our investment in a commercial loan or similar debt financing could adversely impact the value of our investment or our results of operations and cash flows
27. 27We may suffer losses when a borrower defaults on a loan and the value of the underlying collateral is less than the amount due
28. 28We could fail to continue to qualify as a REIT if the IRS successfully challenges our treatment of any mezzanine loans in which we invest
29. 29We are subject to a number of risks inherent with the real estate industry and in the ownership of real estate assets or investment in financings secured by real estate, which may adversely affect our returns from our investments, our financial condition, results of operations and cash flows
30. 30The Company’s real estate investments are generally illiquid
31. 31We may experience a decline in the fair value of our real estate assets or investments which could result in impairments and would impact our financial condition and results of operations
32. 32From time to time we make investments in companies over which we do not have control. Some of these companies may operate in industries that differ from our current operations, with different risks than investing in real estate
33. 33Quarterly results may fluctuate and may not be indicative of future quarterly performance

Risks related to Our Financing

1. 34The Company may be unable to obtain debt or equity capital on favorable terms, if at all, or additional borrowings may impact our liquidity or ability to monetize any assets securing such borrowings
2. 35An increase in our borrowing costs would adversely affect our financial condition and results of operations
3. 36Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to service or pay our debt
4. 37Our level of indebtedness could have significant adverse consequences and our cash flow may be insufficient to meet our debt service obligations
5. 38We continue to have the ability to incur debt; if we incur substantial additional debt, the higher levels of debt may affect our ability to pay the interest and principal of our debt
6. 39Declines in the value of the assets in which we invest will adversely affect our financial condition and results of operations and make it costlier to finance these assets
7. 40We have in the past and expect to continue to utilize derivative instruments to hedge risk, which may adversely affect our borrowing cost and expose us to other risks
8. 41Increases in interest rates could have an adverse effect on our operating results
9. 42The Company’s Credit Facility and secured financings include certain financial and/or other covenants that could restrict our operating activities, and the failure to comply with such covenants could result in a default that accelerates the required payment of such debt
10. 43Certain investors in the 2025 Notes may also invest in our common stock utilizing trading strategies which may increase the volatility in or adversely affect the trading price and liquidity of our common stock
11. 44To the extent we issue shares of our common stock to satisfy all or a portion of the settlement of our 2025 Notes, settlement of some or all of the 2025 Notes will dilute the ownership interest of our existing stockholders
12. 45The fundamental change purchase feature of our 2025 Notes may delay or prevent an otherwise beneficial attempt to take over our company
13. 46The accounting method for our 2025 Notes, which may be settled in cash, may have a material effect on our reported financial results
14. 47Our operations and properties could be adversely affected in the event of natural disasters, pandemics, or other significant disruptions
15. 48Acts of violence, terrorist attacks or war may affect the markets in which the Company operates and adversely affect the Company’s results of operations and cash flows
16. 49We may encounter environmental problems which require remediation or the incurrence of significant costs to resolve, which could adversely impact our financial condition, results of operations, and cash flows
17. 50We are subject to certain risks associated with investing in real estate, including potential liabilities under environmental laws and risks of loss from weather conditions, man-made or natural disasters, climate change and terrorism
18. 51The Company’s operations and financial condition may be adversely affected by climate change, including possible changes in weather patterns, weather-related events, government policy, laws, regulations, and economic conditions

Risks Related to Our Organization and Structure

1. 52Certain provisions of Maryland law could inhibit changes in control of our company
2. 53Our charter contains stock ownership limits, which may delay, defer or prevent a change of control
3. 54which could limit your recourse in the event of actions not in your best interest

Risks Related to Our Qualification and Operation as a REIT

1. 55Failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders
2. 56Even if we remain qualified as a REIT, we may face other tax liabilities that could reduce our cash flows and negatively impact our results of operations and financial condition
3. 57If we failed to distribute our Pre-REIT Conversion Earnings and Profits, we could fail to qualify as a REIT
4. 58Failure to make required distributions would subject us to U.S. federal corporate income tax
5. 59Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
6. 60Our relative lack of experience in operating under the constraints imposed on us as a REIT may hinder the achievement of our investment objectives
7. 61Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities
8. 62Our ability to provide certain services to our tenants may be limited by the REIT rules or may have to be provided through a TRS
9. 63The prohibited transactions tax may limit our ability to dispose of our properties
10. 64We may pay taxable dividends in our stock and cash, in which case stockholders may sell shares of our stock to pay tax on such dividends, placing downward pressure on the market price of our stock
11. 65The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
12. 66There are limits on our ownership of TRSs and our transactions with a TRS may cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
13. 67If the provisions of Section 1031 were altered substantially or eliminated, our financial position, results of operations and cash flows could be adversely impacted
14. 68The stock ownership restrictions for REITs in the Code and the 9.8% share ownership limit in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities
15. 69Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
16. 70We may be subject to adverse legislative or regulatory tax changes, in each instance with potentially retroactive effect, that could reduce the market price of our common stock
17. 71The Company may from time to time have stockholders that beneficially own more than 5% of the Company’s outstanding common stock and exercise the related voting rights of those shares. Actions by these stockholders, including trading activity, could have a material adverse impact on the trading price of our stock

Other Operational Risks

1. 72Our operations could be negatively impacted by the loss of key management personnel
2. 73Uninsured losses may adversely affect the Company’s financial condition and results of operations
3. 74Property insurance costs may continue to increase, and in some cases insurance may not be available
4. 75We are required to make a number of judgments in applying accounting policies, and different estimates and assumptions could result in changes to our financial condition and results of operations
5. 76The FASB has issued new accounting standards that will affect our financial reporting
6. 77Changes in accounting standards could affect the comparability of our reported results with prior periods and our ability to comply with financial covenants under our debt instruments. We may also need to change our accounting systems and processes to enable us to comply with the new standards, which may be costly
7. 78Global trade disruption, significant introductions of trade barriers and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect our performance
8. 79Under the Americans with Disabilities Act of 1990, all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons, compliance with which may be costly
9. 80We cannot predict the unintended consequences and market distortions that may stem from far-ranging governmental intervention in the economic and financial system or from financial reform legislation
10. 81The Company’s failure to maintain effective internal control over financial reporting could have a material adverse effect on its business, operating results, and price of our common stock and preferred stock
11. 82If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned, and the market price of our common stock and preferred stock may suffer
12. 83We are subject to substantial regulation and numerous contractual obligations and internal policies, and failure to comply with these provisions could have a material adverse effect on our business, financial condition and results of operations
13. 84Employee misconduct could harm us by subjecting us to significant legal liability, reputational harm and loss of business
14. 85The Company’s ability to pay dividends in the future is subject to many factors
15. 86Cybersecurity risks and cyber incidents could adversely affect the Company’s business and disrupt operations
16. 87Artificial intelligence and other machine learning techniques could increase competitive, operational, legal and regulatory risks to our business in ways that we cannot predict
17. 88The market value of the Company’s common stock and preferred stock is subject to various factors that may cause significant fluctuations or volatility
18. 89Future sales of our common stock or other securities convertible into our common stock could cause the market value of our common stock to decline and could result in dilution of your shares
19. 90Significant legal proceedings may adversely affect our results of operations or financial condition
20. 91We are subject to risks related to corporate social responsibility