{ "docId": "019dd923-622c-750b-8b9a-a34e1e87d1d8", "docSlug": "ebebcd140b34", "documentTitle": "CTO Realty Growth, Inc. (CTO)", "authorId": "60_Wolfpack_Research", "authorName": "Wolfpack Research", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2025-06-25 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 26, "pageCount": 30, "prevPage": 25, "nextPage": 27, "slideType": "appendix_disclosure", "function": "expose_contradiction", "density": "dense", "nDataPoints": 0, "notes": "This page serves as a collection of endnotes/footnotes for a research report, specifically highlighting discrepancies in capex reporting and management's communication regarding cash flow metrics.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b9a-a34e1e87d1d8/26", "deckHref": "/decks/019dd923-622c-750b-8b9a-a34e1e87d1d8", "deckJsonHref": "/decks/019dd923-622c-750b-8b9a-a34e1e87d1d8.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b9a-a34e1e87d1d8#slide-26", "components": [ { "bbox": null, "kind": "callout", "text": "The SEC seemed particularly confused as to how CTO could report increasing “cash flow”, while also having their GAAP metric for cash flow going in the wrong direction.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-78b5-7512-b5aa-3e9c0a19440e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.7, "x": 0.15, "y": 0.39 }, "kind": "paragraph", "text": "Despite strong rental growth, two factors are keeping bottom line AFFO (adjusted funds from operations, or cash flow minus maintenance capex) per share growth elusive. As with the broader industry, interest expense increased dramatically in 2023 and will increase again in 2024. More importantly, “recurring” capex (driven by leasing commissions paid to brokers and tenant allowances provided at the start of a lease) remains elevated. When we factor these costs into gross rents, the true “economic” gains from recent leasing activity are not as strong.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b1679f7a-d696-4828-b6d5-fe064b99607b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.7, "x": 0.15, "y": 0.81 }, "kind": "paragraph", "text": "In the company's response, it stated it would be more careful in its communications and use the terms Core FFO and AFFO as the drivers of higher dividends: “The Company acknowledges the Staff's comment and to be more consistent with its use of non-GAAP financial measures, the Company will update this information in future filings to reference Core FFO and AFFO as opposed to “cash flow”, “earnings”, “free cash flow” and “taxable income,” as Core AFFO and AFFO are clearly defined and reconciled to net income in the Company's filings.”", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e7366d35-b3ca-489f-beab-23b3854359ac", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.7, "x": 0.15, "y": 0.54 }, "kind": "paragraph", "text": "We have seen too often that Retail REITs are quick to point out how leasing has generated impressive “signed not open” gross rent levels without mentioning the costs associated with adding the tenants to the portfolio. In our view, the key to reducing recurring capital expenditures is to increase the retention of existing tenants (a trend already underway). Even if the rental increase from a renewal isn’t as high as a new lease, controlling downtime and minimizing capital outlays drive stronger AFFO growth over the long term. Going forward, we believe well positioned retail landlords can push tenant retention to new record levels.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f01f4c92-e916-4157-adb7-be7284cd0eb0", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "“You cite increasing cash flow, earnings, taxable income and free cash flow as drivers of your dividend increases. ... We note that operating cash flow decreased in 2023 and income before income tax benefit (expense) decreased in 2022 and 2023 compared to 2021.” — SEC comment letter to CTO Realty. “The Company acknowledges the Staff’s comment and to be more consistent with its use of non-GAAP financial measures, the Company will update this information in future filings to reference Core FFO and AFFO as opposed to “cash flow”, “earnings”, “free cash flow” and “taxable income,” as Core AFFO and AFFO are clearly defined and reconciled to net income in the Company’s filings.” — CTO Realty response to SEC.", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-78b5-7512-b5aa-43342a725dca", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.8, "w": 0.7, "x": 0.15, "y": 0.1 }, "kind": "source-note", "text": "Footnotes 42-54", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "37cb5f7c-a6c8-498f-8081-8bfc5421c23e", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Audience Definition", "slug": "audience-definition", "agent": "Storyteller", "layer": "slide", "matchId": "6a08a6dc-09ea-427b-bf56-ab3a3b6c2521", "evidence": "The SEC seemed particularly confused as to how CTO could report increasing “cash flow”, while also having their GAAP metric for cash flow going in the wrong direction.", "confidence": 0.7 }, { "name": "Credibility Transfer", "slug": "credibility-transfer", "agent": "Storyteller", "layer": "slide", "matchId": "f8aac41e-915e-42f0-aaa5-c53028c5a6eb", "evidence": "quote: “You cite increasing cash flow, earnings, taxable income and free cash flow as drivers of your dividend increases. ... We note that operating cash flow decreased in 2023 and income before income tax benefit (expen", "confidence": 0.6 } ], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "57a239ba-4998-40e8-8b09-7bd21e8347fb", "evidence": "The slide explicitly calls out misleading financial reporting and management's inconsistent use of non-GAAP metrics.", "confidence": 0.85 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }