UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10‑Q10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20182019
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number: 1‑10466
The St. Joe Company
(Exact name of registrant as specified in its charter)
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Florida | 59‑0432511 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
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133 South Watersound Parkway |
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Watersound, Florida | 32461 |
(Address of principal executive offices) | (Zip Code) |
(850) 231‑6400
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Exchange on Which Registered | ||
Common Stock, no par value | JOE | New York Stock Exchange | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☑ NO ◻☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☑ NO ◻☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
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Large accelerated filer |
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☐ | Accelerated filer | ☑ | |
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Non-accelerated filer |
| Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). YES ◻☐ NO ☑
As of OctoberJuly 29, 2018,2019, there were 60,672,03460,206,242 shares of common stock, no par value, outstanding.
THE ST. JOE COMPANY
2
PART I - FINANCIAL INFORMATION
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
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| September 30, |
| December 31, |
| June 30, |
| December 31, | ||||
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| 2018 |
| 2017 |
| 2019 |
| 2018 | ||||
ASSETS |
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Investment in real estate, net |
| $ | 348,896 |
| $ | 332,624 |
| $ | 384,056 |
| $ | 350,994 |
Cash and cash equivalents |
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| 200,884 |
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| 192,083 |
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| 195,587 |
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| 195,155 |
Investments - debt securities |
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| 13,177 |
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| 76,245 |
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| 2,832 |
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| 8,958 |
Investments - equity securities |
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| 35,144 |
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| 35,023 |
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| 36,270 |
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| 36,132 |
Restricted investments |
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| 3,429 |
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| 4,469 | ||||||
Income tax receivable |
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| 3,395 |
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| 8,371 | ||||||
Claim settlement receivable |
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| 5,400 |
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| 5,280 | ||||||
Other assets |
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| 40,602 |
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| 47,133 |
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| 61,497 |
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| 60,308 |
Property and equipment, net of accumulated depreciation of $60,397 and $60,697 at September 30, 2018 and December 31, 2017, respectively |
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| 12,335 |
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| 11,776 | ||||||
Property and equipment, net of accumulated depreciation of $61,692 and $60,271 at June 30, 2019 and December 31, 2018, respectively |
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| 18,950 |
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| 12,031 | ||||||
Investments held by special purpose entities |
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| 207,338 |
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| 207,989 |
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| 207,055 |
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| 207,384 |
Total assets |
| $ | 870,600 |
| $ | 920,993 |
| $ | 906,247 |
| $ | 870,962 |
LIABILITIES AND EQUITY |
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Liabilities: |
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Debt, net |
| $ | 62,326 |
| $ | 55,630 |
| $ | 80,244 |
| $ | 69,374 |
Other liabilities |
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| 50,006 |
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| 47,259 |
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| 58,758 |
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| 47,387 |
Deferred tax liabilities, net |
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| 47,451 |
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| 48,983 |
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| 48,206 |
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| 44,315 |
Senior Notes held by special purpose entity |
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| 176,715 |
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| 176,537 |
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| 176,899 |
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| 176,775 |
Total liabilities |
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| 336,498 |
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| 328,409 |
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| 364,107 |
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| 337,851 |
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Commitments and contingencies (Note 18) |
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Equity: |
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Common stock, no par value; 180,000,000 shares authorized; 60,672,034 and 65,897,866 issued and outstanding at September 30, 2018 and December 31, 2017, respectively |
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| 331,381 |
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| 424,694 | ||||||
Common stock, no par value; 180,000,000 shares authorized; 60,672,034 issued at June 30, 2019 and December 31, 2018; and 60,200,534 and 60,672,034 outstanding at June 30, 2019 and December 31, 2018, respectively |
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| 330,209 |
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| 331,395 | ||||||
Retained earnings |
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| 187,516 |
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| 154,324 |
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| 199,820 |
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| 187,450 |
Accumulated other comprehensive loss |
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| (302) |
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| (1,461) |
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| (70) |
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| (674) |
Treasury stock at cost, 471,500 shares held at June 30, 2019 |
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| (7,073) |
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Total stockholders’ equity |
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| 518,595 |
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| 577,557 |
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| 522,886 |
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| 518,171 |
Non-controlling interest |
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| 15,507 |
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| 15,027 |
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| 19,254 |
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| 14,940 |
Total equity |
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| 534,102 |
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| 592,584 |
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| 542,140 |
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| 533,111 |
Total liabilities and equity |
| $ | 870,600 |
| $ | 920,993 |
| $ | 906,247 |
| $ | 870,962 |
See accompanying notes to the condensed consolidated financial statements.
3
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
The following presents the portion of the condensed consolidated balances attributable to the Company’s consolidated variable interest entities, which, as of SeptemberJune 30, 20182019 and December 31, 2017,2018, include the Pier Park North joint venture (“Pier Park North JV”), Pier Park Crossings LLC (“Pier Park Crossings JV”), Windmark JV, LLC (“Windmark JV”), Panama City Timber Finance Company, LLC and Northwest Florida Timber Finance, LLC as discussed in Note 2. Summary of Significant Accounting Policies. Basis of Presentation and Principles of Consolidation. As of December 31, 2017,June 30, 2019, the consolidated balances attributable to the Company’s consolidated variable interest entities also include Artisan Park, L.L.C., see Note 9. Real Estate Joint Ventures for additional information.Origins Crossings, LLC (“Origins Crossings JV”) and SJWCSL, LLC (“Watercrest JV”). The following assets may only be used to settle obligations of the consolidated variable interest entities and the following liabilities are only obligations of the variable interest entities and do not have recourse to the general credit of the Company, except for covenants and limited guarantees discussed in Note 10. Debt, Net.
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| September 30, |
| December 31, |
| June 30, |
| December 31, | ||||
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| 2018 |
| 2017 |
| 2019 |
| 2018 | ||||
ASSETS |
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Investment in real estate |
| $ | 67,050 |
| $ | 58,441 |
| $ | 89,584 |
| $ | 70,124 |
Cash and cash equivalents |
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| 2,984 |
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| 5,084 |
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| 4,301 |
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| 2,113 |
Other assets |
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| 12,801 |
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| 11,889 |
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| 17,834 |
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| 16,165 |
Investments held by special purpose entity |
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| 207,338 |
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| 207,989 | ||||||
Investments held by special purpose entities |
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| 207,055 |
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| 207,384 | ||||||
Total assets |
| $ | 290,173 |
| $ | 283,403 |
| $ | 318,774 |
| $ | 295,786 |
LIABILITIES |
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Debt, net |
| $ | 53,371 |
| $ | 46,783 |
| $ | 69,096 |
| $ | 60,262 |
Other liabilities |
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| 5,292 |
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| 4,357 |
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| 6,507 |
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| 5,773 |
Senior Notes held by special purpose entity |
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| 176,715 |
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| 176,537 |
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| 176,899 |
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| 176,775 |
Total liabilities |
| $ | 235,378 |
| $ | 227,677 |
| $ | 252,502 |
| $ | 242,810 |
See accompanying notes to the condensed consolidated financial statements.
4
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
(Unaudited)
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| Three Months Ended |
| Nine Months Ended |
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| Three Months Ended |
| Six Months Ended |
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| September 30, |
| September 30, |
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| June 30, |
| June 30, |
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| 2018 |
| 2017 |
| 2018 |
| 2017 |
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| 2019 |
| 2018 |
| 2019 |
| 2018 |
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Revenue: |
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Real estate revenue |
| $ | 6,200 |
| $ | 10,707 |
| $ | 46,061 |
| $ | 19,383 |
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| $ | 15,553 |
| $ | 32,159 |
| $ | 20,144 |
| $ | 39,861 |
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Resorts and leisure revenue |
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| 12,565 |
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| 18,198 |
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| 33,284 |
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| 45,633 |
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Hospitality revenue |
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| 15,560 |
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| 12,847 |
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| 22,991 |
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| 19,925 |
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Leasing revenue |
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| 3,138 |
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| 3,033 |
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| 9,279 |
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| 8,431 |
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| 3,674 |
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| 3,517 |
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| 7,181 |
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| 6,935 |
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Timber revenue |
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| 1,773 |
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| 2,050 |
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| 5,350 |
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| 4,702 |
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| 759 |
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| 1,911 |
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| 1,254 |
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| 3,577 |
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Total revenue |
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| 23,676 |
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| 33,988 |
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| 93,974 |
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| 78,149 |
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| 35,546 |
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| 50,434 |
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| 51,570 |
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| 70,298 |
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Expenses: |
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Cost of real estate revenue |
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| 3,709 |
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| 6,405 |
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| 10,831 |
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| 10,350 |
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| 6,846 |
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| 2,954 |
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| 8,679 |
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| 7,122 |
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Cost of resorts and leisure revenue |
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| 9,669 |
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| 14,513 |
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| 26,488 |
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| 38,200 |
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Cost of hospitality revenue |
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| 9,002 |
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| 9,449 |
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| 16,193 |
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| 16,158 |
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Cost of leasing revenue |
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| 784 |
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| 842 |
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| 2,450 |
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| 2,308 |
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| 1,121 |
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| 1,213 |
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| 2,060 |
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| 2,327 |
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Cost of timber revenue |
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| 148 |
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| 167 |
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| 554 |
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| 562 |
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| 193 |
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| 193 |
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| 334 |
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| 406 |
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Other operating and corporate expenses |
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| 5,113 |
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| 4,968 |
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| 16,068 |
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| 15,303 |
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| 5,094 |
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| 5,010 |
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| 11,062 |
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| 10,955 |
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Depreciation, depletion and amortization |
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| 2,309 |
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| 2,306 |
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| 6,836 |
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| 6,291 |
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| 2,422 |
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| 2,271 |
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| 4,533 |
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| 4,527 |
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Total expenses |
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| 21,732 |
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| 29,201 |
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| 63,227 |
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| 73,014 |
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| 24,678 |
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| 21,090 |
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| 42,861 |
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| 41,495 |
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Operating income |
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| 1,944 |
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| 4,787 |
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| 30,747 |
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| 5,135 |
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| 10,868 |
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| 29,344 |
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| 8,709 |
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| 28,803 |
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Other income (expense): |
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Investment income, net |
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| 2,575 |
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| 6,452 |
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| 12,221 |
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| 31,110 |
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| 2,535 |
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| 5,981 |
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| 8,580 |
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| 9,646 |
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Interest expense |
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| (2,926) |
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| (3,038) |
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| (8,905) |
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| (9,117) |
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| (3,024) |
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| (2,954) |
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| (5,966) |
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| (5,979) |
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Other income, net |
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| 268 |
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| 583 |
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| 787 |
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| 4,646 |
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| 3,283 |
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| 243 |
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| 4,979 |
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| 520 |
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Total other (expense) income, net |
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| (83) |
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| 3,997 |
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| 4,103 |
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| 26,639 |
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Total other income, net |
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| 2,794 |
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| 3,270 |
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| 7,593 |
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| 4,187 |
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Income before income taxes |
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| 1,861 |
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| 8,784 |
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| 34,850 |
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| 31,774 |
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| 13,662 |
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| 32,614 |
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| 16,302 |
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| 32,990 |
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Income tax benefit (expense) |
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| 3,483 |
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| (2,643) |
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| (2,815) |
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| (10,831) |
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Income tax expense |
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| (3,434) |
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| (6,547) |
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| (4,095) |
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| (6,298) |
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Net income |
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| 5,344 |
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| 6,141 |
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| 32,035 |
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| 20,943 |
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| 10,228 |
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| 26,067 |
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| 12,207 |
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| 26,692 |
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Net loss (income) attributable to non-controlling interest |
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| 139 |
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| (198) |
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| 400 |
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| 132 |
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Net loss attributable to non-controlling interest |
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| 145 |
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| 128 |
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| 163 |
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| 260 |
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Net income attributable to the Company |
| $ | 5,483 |
| $ | 5,943 |
| $ | 32,435 |
| $ | 21,075 |
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| $ | 10,373 |
| $ | 26,195 |
| $ | 12,370 |
| $ | 26,952 |
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NET INCOME PER SHARE |
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Basic and Diluted |
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Weighted average shares outstanding |
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| 61,066,731 |
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| 70,202,807 |
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| 63,418,118 |
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| 72,037,772 |
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| 60,200,534 |
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| 63,760,022 |
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| 60,260,488 |
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| 64,613,298 |
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Net income per share attributable to the Company |
| $ | 0.09 |
| $ | 0.08 |
| $ | 0.51 |
| $ | 0.29 |
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| $ | 0.17 |
| $ | 0.41 |
| $ | 0.21 |
| $ | 0.42 |
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See accompanying notes to the condensed consolidated financial statements.
5
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
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| Three Months Ended |
| Nine Months Ended |
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| Three Months Ended |
| Six Months Ended |
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| September 30, |
| September 30, |
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| June 30, |
| June 30, |
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| 2018 |
| 2017 |
| 2018 |
| 2017 |
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| 2019 |
| 2018 |
| 2019 |
| 2018 |
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Net income: |
| $ | 5,344 |
| $ | 6,141 |
| $ | 32,035 |
| $ | 20,943 |
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| $ | 10,228 |
| $ | 26,067 |
| $ | 12,207 |
| $ | 26,692 |
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Other comprehensive income (loss): |
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Other comprehensive (loss) income: |
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Available-for-sale investment items: |
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Net unrealized (loss) gain on available-for-sale investments |
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| (1,244) |
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| (683) |
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| (1,726) |
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| 3,967 |
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| (9) |
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| 321 |
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| 790 |
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| (482) |
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Net unrealized gain (loss) on restricted investments |
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| — |
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| 4 |
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| (9) |
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| 4 |
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| 7 |
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| — |
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| 18 |
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| (9) |
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Reclassification of net realized loss (gain) included in earnings |
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| — |
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| 104 |
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| 1,050 |
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| (10,757) |
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Reclassification of net realized (gain) loss included in earnings |
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| — |
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| (28) |
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| 2 |
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| 1,050 |
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Reclassification into retained earnings (1) |
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| — |
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| — |
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| 932 |
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| — |
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| — |
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| — |
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| — |
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| 932 |
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Reclassification of other-than-temporary impairment loss included in earnings |
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| 1,660 |
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| 403 |
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| 1,723 |
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| 769 |
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| — |
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| — |
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| — |
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| 63 |
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Total before income taxes |
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| 416 |
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| (172) |
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| 1,970 |
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| (6,017) |
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| (2) |
|
| 293 |
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| 810 |
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| 1,554 |
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Income tax (expense) benefit (2) |
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| (105) |
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| (75) |
|
| (811) |
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| 2,319 |
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Total other comprehensive income (loss), net of tax |
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| 311 |
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| (247) |
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| 1,159 |
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| (3,698) |
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Income tax expense (2) |
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| — |
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| (74) |
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| (206) |
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| (706) |
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Total other comprehensive (loss) income, net of tax |
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| (2) |
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| 219 |
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| 604 |
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| 848 |
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Total comprehensive income, net of tax |
| $ | 5,655 |
| $ | 5,894 |
| $ | 33,194 |
| $ | 17,245 |
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| $ | 10,226 |
| $ | 26,286 |
| $ | 12,811 |
| $ | 27,540 |
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(1) | The reclassification into retained earnings for the six months ended June 30, 2018 relates to the adoption of Accounting Standards Update (“ASU”) 2016‑01 Financial Instruments - Overall, as amended (“ASU 2016‑01”). The new guidance was effective January 1, 2018, and required equity investments to be measured at fair value with changes in fair value recognized in results of operations rather than the condensed consolidated statements of comprehensive income. |
(2) | Income tax expense for the |
See accompanying notes to the condensed consolidated financial statements.
6
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |||
|
| Outstanding |
|
|
|
|
|
|
|
| Comprehensive |
|
| Treasury |
|
| Non-controlling |
|
|
|
|
| Shares |
|
| Amount |
|
| Retained Earnings |
|
| (Loss) Income |
|
| Stock |
|
| Interest |
|
| Total |
Balance at December 31, 2017 |
| 65,897,866 |
| $ | 424,694 |
| $ | 154,324 |
| $ | (1,461) |
| $ | — |
| $ | 15,027 |
| $ | 592,584 |
Allocation of ownership interest in Pier Park Crossings JV |
| — |
|
| (490) |
|
| — |
|
| — |
|
| — |
|
| 490 |
|
| — |
Additional ownership interest acquired in Artisan Park, LLC |
| — |
|
| 297 |
|
| — |
|
| — |
|
| — |
|
| (297) |
|
| — |
Capital contribution from non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 887 |
|
| 887 |
Capital distribution to non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (200) |
|
| (200) |
Issuance of common stock for director’s fees |
| 2,778 |
|
| 57 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 57 |
Issuance of common stock for officer compensation |
| 9,956 |
|
| 192 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 192 |
Repurchase of common shares |
| (5,238,566) |
|
| — |
|
| — |
|
| — |
|
| (93,369) |
|
| — |
|
| (93,369) |
Retirement of treasury stock |
| — |
|
| (93,369) |
|
| — |
|
| — |
|
| 93,369 |
|
| — |
|
| — |
Adoption of ASU 2014-09 Revenue From Contracts with Customers, as amended |
| — |
|
| — |
|
| 1,140 |
|
| — |
|
| — |
|
| — |
|
| 1,140 |
Adoption of ASU 2016-01 Financial Instruments - Overall, as amended |
| — |
|
| — |
|
| (696) |
|
| 696 |
|
| — |
|
| — |
|
| — |
Adoption of ASU 2018-02 Income Statement - Reporting Comprehensive Income |
| — |
|
| — |
|
| 313 |
|
| (313) |
|
| — |
|
| — |
|
| — |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| 776 |
|
| — |
|
| — |
|
| 776 |
Net income |
| — |
|
| — |
|
| 32,435 |
|
| — |
|
| — |
|
| (400) |
|
| 32,035 |
Balance at September 30, 2018 |
| 60,672,034 |
| $ | 331,381 |
| $ | 187,516 |
| $ | (302) |
| $ | — |
| $ | 15,507 |
| $ | 534,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |||
|
| Outstanding |
|
|
|
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
| Non-controlling |
|
|
|
|
| Shares |
|
| Amount |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Interest |
|
| Total |
Balance at March 31, 2019 |
| 60,200,534 |
| $ | 331,408 |
| $ | 189,447 |
| $ | (68) |
| $ | (7,073) |
| $ | 16,606 |
| $ | 530,320 |
Allocation of ownership interest in Watercrest JV |
| — |
|
| (1,209) |
|
| — |
|
| — |
|
| — |
|
| 1,209 |
|
| — |
Capital contribution from non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,784 |
|
| 1,784 |
Capital distribution to non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (200) |
|
| (200) |
Stock based compensation expense |
| — |
|
| 10 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 10 |
Other comprehensive loss, net of tax |
| — |
|
| — |
|
| — |
|
| (2) |
|
| — |
|
| — |
|
| (2) |
Net income |
| — |
|
| — |
|
| 10,373 |
|
| — |
|
| — |
|
| (145) |
|
| 10,228 |
Balance at June 30, 2019 |
| 60,200,534 |
| $ | 330,209 |
| $ | 199,820 |
| $ | (70) |
| $ | (7,073) |
| $ | 19,254 |
| $ | 542,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |||
|
| Outstanding |
|
|
|
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
| Non-controlling |
|
|
|
|
| Shares |
|
| Amount |
|
| Earnings |
|
| (Loss) Income |
|
| Stock |
|
| Interest |
|
| Total |
Balance at March 31, 2018 |
| 65,142,997 |
| $ | 425,223 |
| $ | 155,838 |
| $ | (832) |
| $ | (13,695) |
| $ | 14,662 |
| $ | 581,196 |
Allocation of ownership interest in Pier Park Crossings JV |
| — |
|
| (490) |
|
| — |
|
| — |
|
| — |
|
| 490 |
|
| — |
Capital contribution from non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 823 |
|
| 823 |
Stock based compensation expense |
| — |
|
| 15 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 15 |
Issuance of common stock for officer compensation, net of tax withholding |
| — |
|
| (12) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (12) |
Repurchase of common shares |
| (3,300,335) |
|
| — |
|
| — |
|
| — |
|
| (58,768) |
|
| — |
|
| (58,768) |
Other comprehensive income, net of tax |
| — |
|
| — |
|
| — |
|
| 219 |
|
| — |
|
| — |
|
| 219 |
Net income |
| — |
|
| — |
|
| 26,195 |
|
| — |
|
| — |
|
| (128) |
|
| 26,067 |
Balance at June 30, 2018 |
| 61,842,662 |
| $ | 424,736 |
| $ | 182,033 |
| $ | (613) |
| $ | (72,463) |
| $ | 15,847 |
| $ | 549,540 |
See accompanying notes to the condensed consolidated financial statements.
7
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |||
|
| Outstanding |
|
|
|
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
| Non-controlling |
|
|
|
|
| Shares |
|
| Amount |
|
| Earnings |
|
| (Loss) Income |
|
| Stock |
|
| Interest |
|
| Total |
Balance at December 31, 2018 |
| 60,672,034 |
| $ | 331,395 |
| $ | 187,450 |
| $ | (674) |
| $ | — |
| $ | 14,940 |
| $ | 533,111 |
Allocation of ownership interest in Watercrest JV |
| — |
|
| (1,209) |
|
| — |
|
| — |
|
| — |
|
| 1,209 |
|
| — |
Capital contribution from non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,468 |
|
| 3,468 |
Capital distribution to non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (200) |
|
| (200) |
Stock based compensation expense |
| — |
|
| 23 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 23 |
Repurchase of common shares |
| (471,500) |
|
| — |
|
| — |
|
| — |
|
| (7,073) |
|
| — |
|
| (7,073) |
Other comprehensive income, net of tax |
| — |
|
| — |
|
| — |
|
| 604 |
|
| — |
|
| — |
|
| 604 |
Net income |
| — |
|
| — |
|
| 12,370 |
|
| — |
|
| — |
|
| (163) |
|
| 12,207 |
Balance at June 30, 2019 |
| 60,200,534 |
| $ | 330,209 |
| $ | 199,820 |
| $ | (70) |
| $ | (7,073) |
| $ | 19,254 |
| $ | 542,140 |
See accompanying notes to the condensed consolidated financial statements.
8
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |||
|
| Outstanding |
|
|
|
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
| Non-controlling |
|
|
|
|
| Shares |
|
| Amount |
|
| Earnings |
|
| (Loss) Income |
|
| Stock |
|
| Interest |
|
| Total |
Balance at December 31, 2017 |
| 65,897,866 |
| $ | 424,694 |
| $ | 154,324 |
| $ | (1,461) |
| $ | — |
| $ | 15,027 |
| $ | 592,584 |
Allocation of ownership interest in Pier Park Crossings JV |
| — |
|
| (490) |
|
| — |
|
| — |
|
| — |
|
| 490 |
|
| — |
Additional ownership interest acquired in Artisan Park, LLC |
| — |
|
| 297 |
|
| — |
|
| — |
|
| — |
|
| (297) |
|
| — |
Capital contribution from non-controlling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 887 |
|
| 887 |
Stock based compensation expense |
| — |
|
| 43 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 43 |
Issuance of common stock for officer compensation, net of tax withholding |
| 9,956 |
|
| 192 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 192 |
Repurchase of common shares |
| (4,065,160) |
|
| — |
|
| — |
|
| — |
|
| (72,463) |
|
| — |
|
| (72,463) |
Adoption of ASU 2014-09 Revenue From Contracts with Customers, as amended, net of tax |
| — |
|
| — |
|
| 1,140 |
|
| — |
|
| — |
|
| — |
|
| 1,140 |
Adoption of ASU 2016-01 Financial Instruments - Overall, as amended, net of tax |
| — |
|
| — |
|
| (696) |
|
| 696 |
|
| — |
|
| — |
|
| — |
Adoption of ASU 2018-02 Income Statement - Reporting Comprehensive Income |
| — |
|
| — |
|
| 313 |
|
| (313) |
|
| — |
|
| — |
|
| — |
Other comprehensive income, net of tax |
| — |
|
| — |
|
| — |
|
| 465 |
|
| — |
|
| — |
|
| 465 |
Net income |
| — |
|
| — |
|
| 26,952 |
|
| — |
|
| — |
|
| (260) |
|
| 26,692 |
Balance at June 30, 2018 |
| 61,842,662 |
| $ | 424,736 |
| $ | 182,033 |
| $ | (613) |
| $ | (72,463) |
| $ | 15,847 |
| $ | 549,540 |
See accompanying notes to the condensed consolidated financial statements.
79
THE ST. JOE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
| Six Months Ended | ||||||||
|
| September 30, |
|
| June 30, | ||||||||
|
| 2018 |
| 2017 |
|
| 2019 |
| 2018 | ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 32,035 |
| $ | 20,943 |
|
| $ | 12,207 |
| $ | 26,692 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
| 6,836 |
|
| 6,291 |
|
|
| 4,533 |
|
| 4,527 |
Stock based compensation |
|
| 249 |
|
| 47 |
|
|
| 23 |
|
| 235 |
Loss (gain) on sale of investments |
|
| 961 |
|
| (10,757) |
| ||||||
Loss on sale of investments |
|
| 2 |
|
| 1,086 | |||||||
Unrealized gain on investments, net |
|
| (641) |
|
| — |
|
|
| (133) |
|
| (729) |
Other-than-temporary impairment loss |
|
| 1,723 |
|
| 769 |
|
|
| — |
|
| 63 |
Deferred income tax (benefit) expense |
|
| (1,795) |
|
| 4,312 |
| ||||||
Deferred income tax expense (benefit) |
|
| 3,685 |
|
| (54) | |||||||
Impairment loss on investment in real estate |
|
| 99 |
|
| 52 |
|
|
| — |
|
| 99 |
Cost of real estate sold |
|
| 9,839 |
|
| 9,043 |
|
|
| 8,167 |
|
| 6,545 |
Expenditures for and acquisition of real estate to be sold |
|
| (13,580) |
|
| (6,137) |
|
|
| (14,602) |
|
| (8,288) |
Accretion income and other |
|
| (1,571) |
|
| (2,574) |
|
|
| (680) |
|
| (1,038) |
Loss on disposal of property and equipment |
|
| 13 |
|
| 81 |
|
|
| — |
|
| 8 |
Gain on land contribution to equity method investment |
|
| (1,472) |
|
| — | |||||||
Gain on insurance proceeds for damage to property and equipment |
|
| (4,071) |
|
| — | |||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable |
|
| 559 |
|
| (1,548) |
| ||||||
Other assets |
|
| 5,160 |
|
| (1,835) |
|
|
| (1,816) |
|
| (331) |
Other liabilities |
|
| 1,096 |
|
| 4,077 |
|
|
| 6,044 |
|
| 2,184 |
Income taxes receivable |
|
| 4,976 |
|
| 26,671 |
|
|
| 410 |
|
| 6,720 |
Net cash provided by operating activities |
|
| 45,959 |
|
| 49,435 |
|
|
| 12,297 |
|
| 37,719 |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for operating property |
|
| (18,042) |
|
| (25,872) |
|
|
| (26,599) |
|
| (9,659) |
Expenditures for property and equipment |
|
| (1,692) |
|
| (2,520) |
|
|
| (7,409) |
|
| (1,252) |
Proceeds from the disposition of assets |
|
| 5,000 |
|
| — |
|
|
| — |
|
| 5,000 |
Purchases of investments - debt securities |
|
| (62) |
|
| (84,927) |
| ||||||
Proceeds from insurance claims |
|
| 10,796 |
|
| — | |||||||
Purchases of investments - equity securities |
|
| (10,442) |
|
| (19,081) |
|
|
| (5) |
|
| (10,442) |
Purchases of restricted investments |
|
| (40) |
|
| (38) | |||||||
Maturities of investments - debt securities |
|
| 7,000 |
|
| — | |||||||
Sales of investments - debt securities |
|
| 64,631 |
|
| 122,734 |
|
|
| — |
|
| 63,548 |
Sales of investments - equity securities |
|
| 11,051 |
|
| 21,522 |
|
|
| — |
|
| 7,328 |
Sales of restricted investments |
|
| 1,155 |
|
| 1,082 | |||||||
Maturities of assets held by special purpose entities |
|
| 785 |
|
| 787 |
|
|
| 414 |
|
| 414 |
Net cash provided by investing activities |
|
| 51,229 |
|
| 12,643 |
| ||||||
Net cash (used in) provided by investing activities |
|
| (14,688) |
|
| 55,981 | |||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution from non-controlling interest |
|
| 887 |
|
| 188 |
|
|
| 1,784 |
|
| 887 |
Capital distribution to non-controlling interest |
|
| (200) |
|
| (1,530) |
|
|
| (200) |
|
| — |
Capital contribution to unconsolidated affiliate |
|
| (159) |
|
| — |
|
|
| (254) |
|
| — |
Repurchase of common shares |
|
| (93,369) |
|
| (135,995) |
|
|
| (7,073) |
|
| (72,463) |
Borrowings on debt |
|
| 9,304 |
|
| 1,624 |
|
|
| 10,653 |
|
| 5,737 |
Principal payments for debt |
|
| (1,103) |
|
| (1,050) |
|
|
| (1,040) |
|
| (871) |
Principal payments under finance lease obligation |
|
| (14) |
|
| — | |||||||
Debt issuance costs |
|
| (1,159) |
|
| (20) |
|
|
| (813) |
|
| (1,158) |
Net cash used in financing activities |
|
| (85,799) |
|
| (136,783) |
| ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| 11,389 |
|
| (74,705) |
| ||||||
Net cash provided by (used in) financing activities |
|
| 3,043 |
|
| (67,868) | |||||||
Net increase in cash, cash equivalents and restricted cash |
|
| 652 |
|
| 25,832 | |||||||
Cash, cash equivalents and restricted cash at beginning of the period |
|
| 192,365 |
|
| 243,087 |
|
|
| 198,073 |
|
| 192,451 |
Cash, cash equivalents and restricted cash at end of the period |
| $ | 203,754 |
| $ | 168,382 |
|
| $ | 198,725 |
| $ | 218,283 |
See accompanying notes to the condensed consolidated financial statements.
810
THE ST. JOE COMPANY
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(Dollars in thousands)
(Unaudited)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the statementstatements of cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
| Six Months Ended |
| |||||||||
|
| September 30, |
|
| June 30, |
| |||||||||
|
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| |||||
Cash and cash equivalents |
| $ | 200,884 |
| $ | 166,773 |
|
| $ | 195,587 |
|
| $ | 215,095 |
|
Restricted cash included in other assets |
|
| 2,870 |
|
| 1,609 |
|
|
| 3,138 |
|
|
| 3,188 |
|
Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
| $ | 203,754 |
| $ | 168,382 |
|
| $ | 198,725 |
|
| $ | 218,283 |
|
Restricted cash includes amounts set aside as letters of credit collateral and as a requirement of financing for certain of the Company’s developments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
| Six Months Ended |
| ||||||||
|
| September 30, |
|
| June 30, |
| ||||||||
|
|
| 2018 |
| 2017 |
|
|
| 2019 |
| 2018 |
| ||
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
| $ | 10,884 |
| $ | 10,879 |
|
| $ | 5,985 |
| $ | 5,822 |
|
Income taxes |
| $ | 2,005 |
| $ | 5,403 |
|
| $ | — |
| $ | 2,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing and investment activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in Community Development District debt |
| $ | (409) |
| $ | 59 |
| |||||||
Non-cash allocation of ownership interest in JV |
| $ | 1,209 |
| $ | 490 |
| |||||||
Non-cash contribution to equity method investment |
| $ | (1,730) |
| $ | — |
| |||||||
Increase in capital contribution from non-controlling interest |
| $ | 1,683 |
| $ | — |
| |||||||
Increase (decrease) in Community Development District debt |
| $ | 1,229 |
| $ | (207) |
| |||||||
(Decrease) increase in expenditures for operating properties and property and equipment financed through accounts payable |
| $ | (655) |
| $ | 4,125 |
|
| $ | (2,814) |
| $ | 563 |
|
See notes to the condensed consolidated financial statements.
911
THE ST. JOE COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise stated)
(Unaudited)
1. Nature of Operations
The St. Joe Company together with its consolidated subsidiaries (“St. Joe” or the “Company”) is a Florida real estate development, asset management and operating company with real estate assets and operations currently concentrated primarily in Northwest Florida. Approximately 90% of the Company’s real estate land holdings are located within fifteen miles of the Gulf of Mexico.
The Company conducts primarily all of its business in the following four reportable operating segments: 1) residential real estate, 2) resorts and leisure,hospitality, 3) commercial leasing and sales and 4) forestry.
In prior periods, the Company’s reportable operating segments were 1) residential real estate, 2) commercial real estate, 3) resorts and leisure, 4) leasing operations and 5) forestry. Commencing in the fourth quarter of 2017,2018, the Company’s commercial real estatepreviously titled “resorts and leisure” segment and leasing operations segment were combined into a new segment titled “commercial leasing and sales”. This change is consistentwas retitled “hospitality,” with the Company’s belief that the decision making and management of the assets in these segments are being made as one group. Prior to the fourth quarter of 2017, commercial real estate and leasing operations were treated as individual operating segments. All prior year segment information has been reclassified to conform to the 2018 presentation. The change in reporting segments had no effect on the condensed consolidated balance sheets, statements of income, statements of comprehensive income or statements of cash flows for the periods presented. See Note 17. presentedSegment Information..
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10‑Q. Accordingly, certain information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements are not included herein. The unaudited interim condensed consolidated financial statements include the accounts of the Company and all of its majority-owned and controlled subsidiaries and variable interest entities where the Company isdeems itself the primary beneficiary. Investments in joint ventures (“JV”) and limited partnerships in which the Company is not the primary beneficiary are accounted for by the equity method. All significant intercompany transactions and balances have been eliminated in consolidation. The December 31, 20172018 condensed consolidated balance sheet amounts have been derived from the Company’s December 31, 20172018 audited consolidated financial statements. Certain prior period amounts in the accompanying condensed consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on the Company’s previously reported total assets and liabilities, stockholders’ equity or net income. Operating results for the ninesix months ended SeptemberJune 30, 20182019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.2019.
A variable interest entity (“VIE”) is an entity in which a controlling financial interest may be achieved through arrangements that do not involve voting interests. A VIE is required to be consolidated by its primary beneficiary, which is the entity that possesses the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to the entity. The Company consolidates VIEs when it is the primary beneficiary of the VIE, including real estate joint venturesJVs determined to be VIEs. See Note 9. Real Estate Joint Ventures.
The interim condensed consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes
10
included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2017.2018. The Company adheres to the same accounting policies in preparation of its unaudited interim condensed consolidated financial statements as the Company’s December 31, 20172018 annual financial statements, except for recently adopted accounting pronouncements detailed below. As required under GAAP, interim accounting for certain expenses, including income taxes, are based on full year assumptions. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates.
12
Concentration of Risks and Uncertainties
The Company’s real estate investments are concentrated in Northwest Florida in a number of specific development projects. Uncertain economic or other conditions could have an adverse impact on the Company’s real estate values and could cause the Company to sell assets at depressed values in order to pay ongoing obligations.
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, investments, other receivables, investments held by special purpose entity or entities (“SPE”), and investments in retained interests. The Company deposits and invests cash with local and regional financial institutions, and as of SeptemberJune 30, 2018,2019, these balances exceeded the amount of F.D.I.C. insurance provided on such deposits. In addition, as of SeptemberJune 30, 20182019 the company had $10.0 million invested in U.S. Treasury securities, $3.2$2.8 million invested in two issuers of corporate debt securities that are non-investment grade, $35.1$36.3 million invested in fourfive issuers of preferred stock that are non-investment grade and one issuer of preferred stock that is investment grade, as well as investments of $175.2$154.2 million in short term commercial paper from thirteenwenty-two issuers.issuers and short term U.S. Treasury securities of $7.0 million.
Earnings Per Share
Basic and diluted earnings per share are calculated by dividing net income attributable to the Company by the average number of common shares outstanding for the period. For the three and ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, basic and diluted average shares outstanding were the same. There were no outstanding common stock equivalents as of SeptemberJune 30, 20182019 or SeptemberJune 30, 2017.2018. Non-vested restricted stock is included in outstanding shares at the time of grant.
Revenue and Revenue Recognition
Revenue consists primarily of real estate sales and related fees, resorts and leisure operations, leasing operations, and timber sales. Taxes collected from customers and remitted to governmental authorities (e.g. sales tax) are excluded from revenue, costs and expenses.
Effective January 1, 2018, with the adoption of ASU 2014-09 Revenue from Contracts with Customers, as amended (“Topic 606”), estimated lot residuals (a percentage of the sales price of a completed home received when the home price or gross profit of the home exceeds a negotiated threshold) and certain estimated fees are recognized as revenue at the time of sale to homebuilders, subject to constraints, and any change in circumstances from the estimated amounts will be updated at each reporting period. For the three and nine months ended September 30, 2018, real estate revenue includes less than $0.1 million and $0.6 million, respectively, of estimated lot residuals and less than $0.1 million and $0.6 million, respectively, of certain estimated fees related to homebuilder homesite sales. Prior to 2018, these lot residuals and fees were recognized in revenue when consideration was received by the Company in periods subsequent to the initial recognition of revenue for the sale of the homesite.
Recently Adopted Accounting Pronouncements
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 that established the principles used to recognize revenue for all entities. In March 2016, the FASB issued ASU 2016‑08 that further clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016‑10 that clarified guidance on identifying performance obligations and to improve the operability and understandability of licensing implementation guidance. In May 2016, the FASB issued ASU 2016‑11 that rescinded SEC guidance pursuant
11
to announcements at the March 3, 2016 Emerging Issues Task Force Meeting. In May 2016, the FASB issued ASU 2016‑12 that provided narrow-scope improvements and practical expedients to Revenue from Contracts with Customers. In December 2016, the FASB issued ASU 2016‑20 that included technical corrections and improvements to Topic 606. The Company adopted the new guidance as of January 1, 2018 and elected to implement Topic 606 using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained earnings. The impact of adopting this guidance resulted in an adjustment to increase retained earnings by $1.5 million, offset by a decrease of $0.4 million related to tax effects, for a net effect of $1.1 million, an increase to accounts receivable, net by $2.1 million and a decrease to investment in real estate, net by $0.6 million as of January 1, 2018, related to the recognition of estimated lot residuals and certain fees for homesites sold to homebuilders, where the homes had not yet been sold to customers as of December 31, 2017.
Financial Instruments
In January 2016, the FASB issued ASU 2016‑01 that amended existing guidance to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in results of operations. Additionally, certain disclosure requirements and other aspects of accounting for financial instruments changed as a result of the new guidance. In February 2018, the FASB issued ASU 2018‑03 that included technical corrections and improvements to ASU 2016‑01. The Company adopted ASU 2016‑01 and ASU 2018‑03 simultaneously, effective January 1, 2018, and implemented it using a cumulative-effect adjustment between accumulated other comprehensive loss and retained earnings of $0.9 million, offset by an adjustment of $0.2 million related to tax effects, for a net effect of $0.7 million as of the date of adoption. As a result of the adoption of this guidance the change in the fair value of the Company’s equity investments is recognized in the condensed consolidated statements of income rather than the condensed consolidated statements of comprehensive income.
Statement of Cash Flows
In August 2016, the FASB issued ASU 2016‑15, which amended the classification of certain cash receipts and cash payments, to reduce the diversity in how these cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted the new guidance as of January 1, 2018. As this guidance only affects the classification within the statement of cash flows, it did not have any impact on the Company’s cash flows.
Statement of Cash Flows - Restricted Cash
In November 2016, the FASB issued ASU 2016‑18, which required that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted the new guidance as of January 1, 2018, using a retrospective transition method to each period presented. The adoption of this guidance did not have a material impact on the Company’s cash flows.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued ASU 2018‑02, which allowed a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The ASU also required additional disclosures that include a description of the accounting policy for releasing income tax effects from accumulated other comprehensive income, whether the Company elected to reclassify the effects from the Tax Act and information about other tax effects related to the Tax Act that are reclassified from accumulated other comprehensive income to retained earnings, if any. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years and should be applied either in the period of adoption or retrospectively to each period in which the effect of the Tax Act is recognized. Early adoption is permitted, including adoption in an interim period. The Company elected to early adopt the new guidance as of January 1, 2018, and implemented it using a
12
cumulative-effect adjustment to retained earnings from accumulated other comprehensive loss of $0.3 million related to unrealized gains and losses on available-for-sale securities as of the date of adoption. The new guidance also required the Company to disclose its policy on accounting for income tax effects in accumulated other comprehensive income (loss). In general, the Company applies the aggregate portfolio method with respect to available-for-sale debt securities.
Recently Issued Accounting Pronouncements
Leases
In February 2016, the FASB issued ASU 2016‑02, Leases (“ASU 2016-02”) that amendsamended the existing accounting standards for lease accounting, including requiring lessees to recognize both finance and operating leases with terms of more than 12 months on the balance sheet. The accounting applied by a lessor is largely unchanged from existing guidance.by this amendment. This amendment also requiresrequired certain quantitative and qualitative disclosures about leasing arrangements. In January 2018, the FASB issued ASU 2018‑01, which providesprovided an optional transition practical expedient to not evaluate under the new lease standard, existing or expired land easements that were not previously accounted for as leases. In July 2018, the FASB issued ASU 2018-10 that providesprovided clarifications and improvements to ASU 2016-02. In July 2018, the FASB issued ASU 2018-11 that providesprovided entities with an additional and optional transition method to apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the openingbeginning balance of retained earnings in the period of adoption. In December 2018, the FASB issued ASU 2018-20 that provided an accounting policy election for certain narrow-scope improvements for lessors. In March 2019, the FASB issued ASU 2019-01 that provided clarifications and improvements to ASU 2016-02. During the Company’s evaluation of ASU 2016-02, as amended, (“Topic 842”) the following practical expedients and accounting policies with respect to Topic 842 have been elected and/or adopted effective January 1, 2019:
· | The Company, as lessee and as lessor, did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases or (iii) initial direct costs for any expired or existing leases. |
· | The Company, as lessee, did not apply the recognition requirements of Topic 842 to short-term (twelve months or less) leases. Instead, the Company, as lessee, will recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. |
· | The Company, as lessor, did not separate nonlease components from lease components and, instead, will account for each separate lease component and the nonlease components associated with that lease as a single component if the nonlease components otherwise would be accounted for under Accounting Standards |
13
Codification Topic 606, Revenue from Contracts with Customers. The primary reason for this election is related to instances where common area maintenance is, or may be, a component of base rent within a lease agreement. |
The Company adopted the new guidance, will be effective for annualincluding amendments, as of January 1, 2019 and interimhas elected to implement Topic 842 retrospectively using the cumulative-effect adjustment transition method as of the date of adoption. As a result, prior periods beginning after December 15, 2018. Accordingly,have not been restated. As of the standard will be effective fordate of adoption, a cumulative-effect adjustment was not necessary and the Company beginning January 1, 2019. The Company intendsrecognized an operating lease right-of use assets of $0.4 million and corresponding operating lease liabilities of $0.4 million based on the present value of minimum rental payments related to elect certain available practical expedients upon adoption, including ASU 2018-01 and ASU 2018-11. Theleases for which the Company is completing its analysis of the information necessary to fully adopt and remains on schedule.lessee. The Company is still evaluating if this standard will have a material impact on its consolidated balance sheets, but does not expect adoption will have a material impact on its consolidated income statements. The Company is continuing to assess potential impacts of the standard. It currently expects the most significant impact will be the recognition ofoperating lease right-of-use assets and corresponding operating lease liabilities are included within other assets and other liabilities, respectively, on the condensed consolidated balance sheets. There were no adjustments related to the leases for operating leases.which the Company is the lessor. The adoption of this guidance did not materially impact results of operations or cash flows.
Recently Issued Accounting Pronouncements
Financial Instruments - Credit Losses
In June 2016, the FASB issued ASU 2016‑13,Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), that requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected and requires that credit losses from available-for-sale debt securities be presented as an allowance for credit loss. In November 2018, the FASB issued ASU 2018-19, which clarifies that impairment of receivables from operating leases should be accounted for using lease guidance. In April 2019, the FASB issued ASU 2019-04, which clarifies and improves ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This new guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its financial condition, results of operations and cash flows.
13
3. Investment in Real Estate
Real estate by property type and segment includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
| June 30, |
| December 31, | ||||
|
| 2018 |
| 2017 |
| 2019 |
| 2018 | ||||
Development property: |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
| $ | 103,384 |
| $ | 100,279 |
| $ | 112,759 |
| $ | 105,323 |
Resorts and leisure |
|
| 2,427 |
|
| 4,131 | ||||||
Hospitality |
|
| 4,554 |
|
| 3,726 | ||||||
Commercial leasing and sales |
|
| 69,086 |
|
| 53,896 |
|
| 81,674 |
|
| 73,128 |
Forestry |
|
| 2,146 |
|
| 2,488 |
|
| 1,885 |
|
| 2,144 |
Corporate |
|
| 2,464 |
|
| 2,571 |
|
| 2,542 |
|
| 2,497 |
Total development property |
|
| 179,507 |
|
| 163,365 |
|
| 203,414 |
|
| 186,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating property: |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
| 7,344 |
|
| 7,344 |
|
| 7,344 |
|
| 7,344 |
Resorts and leisure |
|
| 100,948 |
|
| 103,616 | ||||||
Hospitality |
|
| 95,817 |
|
| 93,046 | ||||||
Commercial leasing and sales |
|
| 111,296 |
|
| 110,491 |
|
| 127,406 |
|
| 111,471 |
Forestry |
|
| 19,874 |
|
| 19,510 |
|
| 20,524 |
|
| 19,765 |
Other |
|
| 50 |
|
| 50 |
|
| 50 |
|
| 50 |
Total operating property |
|
| 239,512 |
|
| 241,011 |
|
| 251,141 |
|
| 231,676 |
Less: Accumulated depreciation |
|
| 70,123 |
|
| 71,752 |
|
| 70,499 |
|
| 67,500 |
Total operating property, net |
|
| 169,389 |
|
| 169,259 |
|
| 180,642 |
|
| 164,176 |
Investment in real estate, net |
| $ | 348,896 |
| $ | 332,624 |
| $ | 384,056 |
| $ | 350,994 |
14
Development property consists of land the Company is developing or intends to develop for sale or future operations and includes direct costs associated with the land, development and construction costs and indirect costs. Residential real estate includes residential communities. Resorts and leisureHospitality development property consists of the improvementland and expansion of the existing beach club property, landconstruction costs related to two gulf-front vacation rental homes and development costs and improvements tofor other property. Commercial leasing and sales development property primarily consists of land and development costs for commercial and industrial uses, including the Pier Park Crossings JV, Origins Crossings JV, land holdings near the Northwest Florida Beaches International Airport and Port of Port St. Joe. Development property in the resorts and leisurehospitality and commercial leasing and sales segments will be reclassified as operating property as it is placed into service.
Operating property includes property that the Company uses for operations and activities. Residential real estate operating property consists primarily of residential utility assets. The resorts and leisurehospitality operating property includes the WaterColor Inn, WaterSound Inn, certain vacation rental properties, golf courses, a beach club, marinas and marinas.certain vacation rental properties. Commercial leasing and sales operating property includes property developed or purchased by the Company and used for retail and commercial rental purposes, including property in the Pier Park North JV, VentureCrossings, Pier Park Crossings JV and Beckrich Office Park, as well as other properties. Forestry operating property includes the Company’s timberlands. Operating property may be sold in the future as part of the Company’s principal real estate business.
4. Investments
Available-For-Sale Investments
Investments classified as available-for-sale securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 | ||||||||||
|
|
|
|
| Gross Unrealized |
| Gross Unrealized |
|
|
| ||
|
| Amortized Cost |
| Gains |
| (Losses) |
| Fair Value | ||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
| $ | 2,928 |
| $ | — |
| $ | (96) |
| $ | 2,832 |
|
|
| 2,928 |
|
| — |
|
| (96) |
|
| 2,832 |
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| 2,210 |
|
| 11 |
|
| — |
|
| 2,221 |
Money market fund |
|
| 113 |
|
| — |
|
| — |
|
| 113 |
|
|
| 2,323 |
|
| 11 |
|
| — |
|
| 2,334 |
|
| $ | 5,251 |
| $ | 11 |
| $ | (96) |
| $ | 5,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | ||||||||||
|
|
|
|
| Gross Unrealized |
| Gross Unrealized |
|
|
| ||
|
| Amortized Cost |
| Gains |
| (Losses) |
| Fair Value | ||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 6,936 |
| $ | 1 |
| $ | — |
| $ | 6,937 |
Corporate debt securities |
|
| 2,908 |
|
| — |
|
| (887) |
|
| 2,021 |
|
|
| 9,844 |
|
| 1 |
|
| (887) |
|
| 8,958 |
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| 3,274 |
|
| — |
|
| (9) |
|
| 3,265 |
Money market fund |
|
| 167 |
|
| — |
|
| — |
|
| 167 |
|
|
| 3,441 |
|
| — |
|
| (9) |
|
| 3,432 |
|
| $ | 13,285 |
| $ | 1 |
| $ | (896) |
| $ | 12,390 |
During the three months ended June 30, 2019 there were no realized gains or losses from the sale of available-for-sale securities. During the six months ended June 30, 2019 net realized losses from the sale of available-for-sale securities were less than $0.1 million. During six months ended June 30, 2019 proceeds from the sale of available-for-sale securities were $1.2 million and purchases of available-for-sale securities were less than $0.1 million.
1415
4. Investments
Available-For-Sale Investments
At SeptemberDuring the six months ended June 30, 2018, investments - debt securities and restricted investments classified as available-for-sale securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Unrealized |
| Gross Unrealized |
|
|
| ||
|
| Amortized Cost |
| Gains |
| Losses |
| Fair Value | ||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 9,996 |
| $ | — |
| $ | 2 |
| $ | 9,994 |
Corporate debt securities |
|
| 3,566 |
|
| 4 |
|
| 387 |
|
| 3,183 |
|
|
| 13,562 |
|
| 4 |
|
| 389 |
|
| 13,177 |
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| 3,275 |
|
| — |
|
| 13 |
|
| 3,262 |
Money market fund |
|
| 167 |
|
| — |
|
| — |
|
| 167 |
|
|
| 3,442 |
|
| — |
|
| 13 |
|
| 3,429 |
|
| $ | 17,004 |
| $ | 4 |
| $ | 402 |
| $ | 16,606 |
At December 31, 2017, investments - debt securities, investments - equity securities and restricted investments classified as available-for-sale securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Unrealized |
| Gross Unrealized |
|
|
| ||
|
| Amortized Cost |
| Gains |
| Losses |
| Fair Value | ||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 9,892 |
| $ | — |
| $ | 22 |
| $ | 9,870 |
Corporate debt securities |
|
| 67,781 |
|
| 411 |
|
| 1,817 |
|
| 66,375 |
|
|
| 77,673 |
|
| 411 |
|
| 1,839 |
|
| 76,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments - equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
| 35,955 |
|
| 423 |
|
| 1,355 |
|
| 35,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| 4,264 |
|
| — |
|
| 13 |
|
| 4,251 |
Money market fund |
|
| 218 |
|
| — |
|
| — |
|
| 218 |
|
|
| 4,482 |
|
| — |
|
| 13 |
|
| 4,469 |
|
| $ | 118,110 |
| $ | 834 |
| $ | 3,207 |
| $ | 115,737 |
During the nine months ended September 30, 2018, realized losses from the sale of available-for-sale securities were $1.0 million and proceeds from the sale of available-for-sale securities were $64.6 million.
During the three and nine months ended September 30, 2017,net realized losses from the sale of available for-sale securities were $0.1$1.1 million, and realized gains from the sale of available-for-sale securities were $10.8 million, respectively. During the nine months ended September 30, 2017 proceeds from the sale of available-for-sale securities were $144.3$64.6 million and purchases of available-for sale securities were less than $0.1 million.
15
The following table provides the U.S. Treasury securities, corporate debt securities and restrictedavailable-for-sale investments unrealized loss position and related fair values as of September 30, 2018:values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less Than 12 Months |
| 12 Months or Greater | ||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized | ||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 9,994 |
| $ | 2 |
| $ | — |
| $ | — |
Corporate debt securities |
|
| — |
|
| — |
|
| 2,405 |
|
| 387 |
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| — |
|
| — |
|
| 3,262 |
|
| 13 |
|
| $ | 9,994 |
| $ | 2 |
| $ | 5,667 |
| $ | 400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 | ||||||||||
|
| Less Than 12 Months |
| 12 Months or Greater | ||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized | ||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
| $ | — |
| $ | — |
| $ | 2,832 |
| $ | 96 |
The following table provides the U.S. Treasury securities, corporate debt securities, preferred stock and restricted investments unrealized loss position and related fair values as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | ||||||||||
|
| Less Than 12 Months |
| 12 Months or Greater |
| Less Than 12 Months |
| 12 Months or Greater | ||||||||||||||||
|
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized |
|
|
|
| Unrealized | ||||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 9,870 |
| $ | 22 |
| $ | — |
| $ | — | ||||||||||||
Corporate debt securities |
|
| 15,515 |
|
| 691 |
|
| 29,595 |
|
| 1,126 |
| $ | — |
| $ | — |
| $ | 1,843 |
| $ | 887 |
Investments - equity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Preferred stock |
|
| 11,263 |
|
| 1,337 |
|
| 1,986 |
|
| 18 | ||||||||||||
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| — |
|
| — |
|
| 4,251 |
|
| 13 |
|
| — |
|
| — |
|
| 3,265 |
|
| 9 |
|
| $ | 36,648 |
| $ | 2,050 |
| $ | 35,832 |
| $ | 1,157 |
| $ | — |
| $ | — |
| $ | 5,108 |
| $ | 896 |
As of SeptemberJune 30, 2018,2019, the Company had unrealized losses of $0.4$0.1 million related to U.S. Treasury securities,corporate debt securities. The Company had unrealized losses of $0.9 million as of December 31, 2018 related to corporate debt securities and restricted investments. The Company had unrealized losses of $3.2 million as of December 31, 2017 related to U.S. Treasury securities, corporate debt securities, preferred stock and restricted investments. As of SeptemberJune 30, 20182019 and December 31, 2017,2018, the Company did not intend to sell the investments - debt securities with a material unrealized loss and it is more likely than not that the Company will not be required to sell any of these securities prior to their anticipated recovery, which could be maturity. During the three and ninesix months ended SeptemberJune 30, 2018, the Company determined unrealized losses related to its corporate debt securities were other-than-temporarily impaired and recorded an impairment of $1.7$0.1 million for credit-related loss in investment income, net in the Company’s condensed consolidated statements of income. During the three months ended September 30, 2017, the Company determined unrealized losses related to its corporate debt securities were other-than-temporarily impaired and recorded an impairment of $0.4 million for credit-related loss in investment income, net in the Company’s condensed consolidated statements of income. During the nine months ended September 30, 2017, the Company determined unrealized losses related to its corporate debt securities and preferred stock were other-than-temporarily impaired and recorded an impairment of $0.8 million for credit-related loss in investment income, net in the Company’s condensed consolidated statements of income.
16
The amortized cost and estimated fair value of investments - debt securities and restricted investments classified as available-for-sale, at September 30, 2018, by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities since certain borrowers have the right to call or prepay obligations.
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
| June 30, 2019 | ||||
|
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | ||||
Due in one year or less |
| $ | 12,707 |
| $ | 12,318 |
| $ | 2,928 |
| $ | 2,832 |
Due after one year through five years |
|
| 785 |
|
| 785 | ||||||
Due after five years through ten years |
|
| 70 |
|
| 74 | ||||||
|
|
| 13,562 |
|
| 13,177 | ||||||
Restricted investments |
|
| 3,442 |
|
| 3,429 |
|
| 2,323 |
|
| 2,334 |
|
| $ | 17,004 |
| $ | 16,606 |
| $ | 5,251 |
| $ | 5,166 |
Investments - Equity Securities
At SeptemberAs of June 30, 2019 and December 31, 2018 investments - equity securities included $35.1$36.3 million and $36.1 million, respectively, of preferred stock investments recorded at fair value. During the three and ninesix months ended SeptemberJune 30, 2018,2019 the Company had an unrealized lossesloss on investments - equity securities of $0.1$1.9 million and an unrealized gainsgain on investments -– equity securities of $0.6$0.1 million, respectively, whichrespectively. During the three and six months ended June 30, 2018 the Company had an unrealized gain on investments – equity securities of $1.3 million and $0.7 million, respectively. These amounts were included within investment income, net on the condensed consolidated statements of income due to the adoptionincome.
16
Investment Management Agreement
Mr. Bruce R. Berkowitz is the Chairman of the Company’s Board of Directors (the “Board”). He is the Manager of, and controls entities that own and control, Fairholme Holdings, LLC (“Fairholme”), which wholly owns Fairholme Capital Management, L.L.C. (“FCM”), a registeredan investment advisor registered with the Securities and Exchange CommissionSEC) and the Fairholme Trust Company, L.L.C. (“FTC”), a non-depository trust company regulated by the Florida Office of Financial Regulation.Regulation). Mr. Berkowitz is the Chief Investment Officer of FCM, and the Chief Executive Officer and a director of FTC. Since April 2013, FCM has provided investment advisory services to the Company directly, or more recently, as the sub-advisor to FTC, which has resulted in a total of $62.3 million of pre-tax income to the Company from April 2013 through September 30, 2018.FTC. Neither FCM nor FTC receives any compensation for services as the Company’s investment advisor. As of SeptemberJune 30, 2018,2019, clients of FCM and FTC beneficially owned approximately 41.43% of the Company’s common stock and Fairholme, including Mr. Berkowitz and clients of FCM and FTC, collectively beneficially owned 45.15%44.03% of the Company’s common stock. FCM and its client, The Fairholme Fund, a series of the Fairholme Funds, Inc., may be deemed affiliates of the Company.
Both Mr. Cesar Alvarez and Mr. Howard Frank are members of the Company’s Board and also serve as directors of Fairholme Funds, Inc. Mr. Alvarez is also a director of FTC.
Pursuant to the terms of an Investment Management Agreement, as amended, with the Company (the “Agreement”“Investment Management Agreement”), FTC agreed to supervise and direct the investments of investment accounts established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company’s Board. The investment guidelines are set forth in the Investment Management Agreement and require that, as of the date of any investment: (i) no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government), (ii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10% of the investment account, but not 15%, requires the consent of at least two members of the Investment Committee, (iii) 25% of the investment account must be held in cash or cash equivalents, (iv) the investment account is permitted to be invested in common equity securities; however, common stock investments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of a single issuer and, cumulatively, the common stock held in the Company’s investment portfolio shall not exceed $100.0 million market value, and (v) the aggregate market value of investments in common stock, preferred stock or other equity investments cannot exceed 25% of the market value of the Company’s investment portfolio at the time of purchase.
17
5. Financial Instruments and Fair Value Measurements
Fair Value Measurements
The financial instruments measured at fair value on a recurring basis at September 30, 2018 wereare as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 | ||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
|
|
|
|
|
|
|
|
|
| Total Fair | ||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value | ||||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 6,214 |
| $ | — |
| $ | — |
| $ | 6,214 |
| $ | 1,816 |
| $ | — |
| $ | — |
| $ | 1,816 |
Commercial paper |
|
| 175,245 |
|
| — |
|
| — |
|
| 175,245 |
|
| 154,241 |
|
| — |
|
| — |
|
| 154,241 |
U.S. Treasury securities |
|
| 6,982 |
|
| — |
|
| — |
|
| 6,982 | ||||||||||||
|
|
| 181,459 |
|
| — |
|
| — |
|
| 181,459 |
|
| 163,039 |
|
| — |
|
| — |
|
| 163,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments - debt securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U.S. Treasury securities |
|
| 9,994 |
|
| — |
|
| — |
|
| 9,994 | ||||||||||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Corporate debt securities |
|
| — |
|
| 3,183 |
|
| — |
|
| 3,183 |
|
| — |
|
| 2,832 |
|
| — |
|
| 2,832 |
|
|
| 9,994 |
|
| 3,183 |
|
| — |
|
| 13,177 |
|
| — |
|
| 2,832 |
|
| — |
|
| 2,832 |
Investments - equity securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Investments - equity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Preferred stock |
|
| 10,862 |
|
| 24,282 |
|
| — |
|
| 35,144 |
|
| 10,792 |
|
| 25,478 |
|
| — |
|
| 36,270 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| 3,262 |
|
| — |
|
| — |
|
| 3,262 |
|
| 2,221 |
|
| — |
|
| — |
|
| 2,221 |
Money market fund |
|
| 167 |
|
| — |
|
| — |
|
| 167 |
|
| 113 |
|
| — |
|
| — |
|
| 113 |
|
|
| 3,429 |
|
| — |
|
| — |
|
| 3,429 |
|
| 2,334 |
|
| — |
|
| — |
|
| 2,334 |
|
| $ | 205,744 |
| $ | 27,465 |
| $ | — |
| $ | 233,209 |
| $ | 176,165 |
| $ | 28,310 |
| $ | — |
| $ | 204,475 |
The financial instruments measured at fair value on a recurring basis at December 31, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | ||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
|
|
|
|
|
|
|
|
|
| Total Fair | ||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value | ||||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 10,505 |
| $ | — |
| $ | — |
| $ | 10,505 |
| $ | 43,346 |
| $ | — |
| $ | — |
| $ | 43,346 |
Commercial paper |
|
| 159,970 |
|
| — |
|
| — |
|
| 159,970 |
|
| 107,586 |
|
| — |
|
| — |
|
| 107,586 |
U.S. Treasury securities |
|
| 29,998 |
|
| — |
|
| — |
|
| 29,998 | ||||||||||||
|
|
| 170,475 |
|
| — |
|
| — |
|
| 170,475 |
|
| 180,930 |
|
| — |
|
| — |
|
| 180,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments - debt securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Investments - debt securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U.S. Treasury securities |
|
| 9,870 |
|
| — |
|
| — |
|
| 9,870 |
|
| 6,937 |
|
| — |
|
| — |
|
| 6,937 |
Corporate debt securities |
|
| — |
|
| 66,375 |
|
| — |
|
| 66,375 |
|
| — |
|
| 2,021 |
|
| — |
|
| 2,021 |
|
|
| 9,870 |
|
| 66,375 |
|
| — |
|
| 76,245 |
|
| 6,937 |
|
| 2,021 |
|
| — |
|
| 8,958 |
Investments - equity securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Investments - equity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Preferred stock |
|
| 10,717 |
|
| 24,306 |
|
| — |
|
| 35,023 |
|
| 10,470 |
|
| 25,662 |
|
| — |
|
| 36,132 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bond |
|
| 4,251 |
|
| — |
|
| — |
|
| 4,251 |
|
| 3,265 |
|
| — |
|
| — |
|
| 3,265 |
Money market fund |
|
| 218 |
|
| — |
|
| — |
|
| 218 |
|
| 167 |
|
| — |
|
| — |
|
| 167 |
|
|
| 4,469 |
|
| — |
|
| — |
|
| 4,469 |
|
| 3,432 |
|
| — |
|
| — |
|
| 3,432 |
|
| $ | 195,531 |
| $ | 90,681 |
| $ | — |
| $ | 286,212 |
| $ | 201,769 |
| $ | 27,683 |
| $ | — |
| $ | 229,452 |
Money market funds, commercial paper, U.S. Treasury securities, certain preferred stocksstock investments and short-term bonds are measured based on quoted market prices in an active market and categorized within levelLevel 1 of the fair value hierarchy. Money market funds, and commercial paper and short term U.S. Treasury securities with a maturity date of
18
90 days or less from the date of purchase are classified as cash equivalents in the Company’s condensed consolidated balance sheets.
18
The Company’s corporate debt securities and certain preferred stock investments are not traded on a nationally recognized exchange, but are traded in the U.S. over-the-counter market where there is less trading activity and the investments are measured primarily using pricing data from external pricing services that report prices observed for recently executed market transactions. For these reasons, the Company has determined that corporate debt securities and certain preferred stock investments are categorized as levelLevel 2 financial instruments since their fair values were determined from market inputs in an inactive market.
Restricted investments are included within other assets on the condensed consolidated balance sheets and include certain of the surplus assets that were transferred from the Company’s Pension Plan to a suspense account in the Company’s 401(k) Plan in December 2014. The Company has retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account are included in the Company’s condensed consolidated financial statements until they are allocated to participants. As of SeptemberJune 30, 20182019 and December 31, 2017,2018, the assets held in the suspense account were invested in Vanguard Money Market Funds, which invest in short-term, high quality securities or short-term U.S. government securities and seek to provide current income and preserve shareholders’ principal investment and a Vanguard Short-Term Bond Fund, which invests in money market instruments and short-term high quality bonds, including asset-backed, government, and investment grade corporate securities with an expected maturity of 0‑3 years. The Vanguard Money Market Funds and Vanguard Short-Term Bond Fund are measured based on quoted market prices in an active market and categorized within levelLevel 1 of the fair value hierarchy. The Company’s Retirement Plan Investment Committee is responsible for investing decisions and allocation decisions of the suspense account. Refer to Note 15.8. Employee Benefit PlanOther Assets.
Fair Value of Financial Instruments
The Company uses the following methods and assumptions in estimating fair value for financial instruments:
· | The fair value of the investments held by |
· | The fair value of the investments held by |
· | The fair value of the senior notes held by |
The carrying amount and fair value, measured on a nonrecurring basis, of the Company’s financial instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 |
| December 31, 2017 |
| June 30, 2019 |
| December 31, 2018 | ||||||||||||||||||||||||
|
| Carrying |
|
|
|
|
|
| Carrying |
|
|
|
|
|
| Carrying |
|
|
|
|
|
| Carrying |
|
|
|
|
| ||||
|
| value |
| Fair value |
| Level |
| value |
| Fair value |
| Level |
| value |
| Fair value |
| Level |
| value |
| Fair value |
| Level | ||||||||
Assets |
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Investments held by SPEs: |
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Time deposit |
| $ | 200,000 |
| $ | 200,000 |
| 3 |
| $ | 200,000 |
| $ | 200,000 |
| 3 |
| $ | 200,000 |
| $ | 200,000 |
| 3 |
| $ | 200,000 |
| $ | 200,000 |
| 3 |
U.S. Treasury securities and cash |
| $ | 7,338 |
| $ | 6,916 |
| 1 |
| $ | 7,989 |
| $ | 7,797 |
| 1 |
| $ | 7,055 |
| $ | 6,997 |
| 1 |
| $ | 7,384 |
| $ | 7,092 |
| 1 |
Liabilities |
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Senior Notes held by SPE |
| $ | 176,715 |
| $ | 187,606 |
| 3 |
| $ | 176,537 |
| $ | 198,530 |
| 3 |
| $ | 176,899 |
| $ | 204,080 |
| 3 |
| $ | 176,775 |
| $ | 193,293 |
| 3 |
Investments and Senior Notes Held by Special Purpose Entities
In connection with a real estate sale in 2014, the Company received consideration including a $200.0 million fifteen-year installment note (the “Timber Note”) issued by Panama City Timber Finance Company, LLC. The Company contributed the Timber Note and assigned its rights as a beneficiary under a letter of credit to Northwest Florida Timber Finance, LLC. Northwest Florida Timber Finance, LLC monetized the Timber Note by issuing $180.0 million aggregate principal amount of its 4.8% Senior Secured Notes due in 2029 (the “Senior Notes”) at an issue price of 98.5% of face
19
value to third party investors. The investments held by Panama City Timber Finance Company, LLC as of SeptemberJune 30, 2018,2019, consist of a $200.0 million time deposit that, subsequent to April 2, 2014, pays interest at 4.0% and matures in March 2029, U.S. Treasuries of $6.9$6.7 million and cash of $0.4 million. The Senior Notes held by Northwest
19
Florida Timber Finance, LLC as of SeptemberJune 30, 20182019 consist of $176.7$176.9 million, net of the $3.3$3.1 million discount and debt issuance costs. Panama City Timber Finance Company, LLC and Northwest Florida Timber Finance, LLC are VIEs, which the Company consolidates as the primary beneficiary of each entity.
6. Claim Settlement ReceivableHurricane Michael
On March 24, 2016,October 10, 2018, Hurricane Michael made landfall in the Florida Panhandle, which resulted in widespread damage to the area. The majority of the Company’s properties incurred minimal or no damage; however the Company’s Bay Point Marina in Bay County and Port St. Joe Marina in Gulf County, as well as certain timber and commercial leasing assets were impacted. The marinas suffered significant damage requiring long-term restoration and will remain closed during the reconstruction of significant portions of these assets, which is currently underway.
The Company maintains property and business interruption insurance, subject to certain deductibles, and is continuing to assess claims under such policies; however, the timing and amount of insurance proceeds are uncertain and may not be sufficient to cover all losses. Timing differences are likely to exist between the impairment losses, capital expenditures made to repair or restore properties and recognition and receipt of insurance proceeds reflected in the Company’s financial statements.
GAAP guidance provides that property damaged by a natural disaster be evaluated for impairment loss in the period the loss occurs, recording an insurance receivable for the lesser of the expected net insurance recovery or the net book value of damaged assets that are planned to be replaced. Insurance recoveries for business interruption, clean-up and demolition costs, post-event costs or property damage in excess of net book value will be recognized in income in the period received or when all contingencies associated with the recoveries are resolved and the insurance companies have committed to a recovery amount. During the three and six months ended June 30, 2019, $1.3 million of insurance proceeds were received related to business interruption insurance, included within cost of hospitality revenue on the condensed consolidated statements of income. Costs incurred due to business interruption, primarily at the marinas, are continuing to be evaluated. The Company does not expect revenue at these locations until the properties have been rebuilt, but will incur costs for employee retention and property maintenance.
During the fourth quarter of 2018, the Company entered intorecorded a full and final release agreement with BP p.l.c. and various related entities pursuant to which the Company,loss on its own behalf and on behalfdisposal of certain wholly owned subsidiaries, released any and all claimsassets related to the Deepwater Horizon oil spill, which occurred on April 20, 2010. In exchange for this release,net book value of the marinas and certain forestry and commercial leasing assets. During the three and six months ended June 30, 2019, the Company will receive $13.2recognized $3.8 million from BP Exploration & Production Inc., a large portionand $4.1 million, respectively of which will reimburseinsurance proceeds, included in other income, net on the condensed consolidated statements of income.
During the three and six months ended June 30, 2019, the Company has incurred costs of $0.8 million and $1.1 million, respectively for additional hurricane expenses incurred. Infor repairs, clean-up costs, landscape repairs, demolition costs, professional fees and temporary housing for employees included in other income, net on the condensed consolidated statements of income.
The Company expects that its results of operations related to the marinas and timber assets will be impacted in the near term.
20
7. Leases
Leasing revenue consists of rental revenue from multi-family, retail, office and commercial property, cell towers and other assets, which is recognized as earned, using the straight-line method over the life of each October 2018 and 2017,lease.
The components of leasing revenue are as follows:
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| Three Months Ended |
| Six Months Ended | ||
| June 30, 2019 |
| June 30, 2019 | ||
Leasing revenue |
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Lease payments | $ | 2,724 |
| $ | 5,404 |
Variable lease payments |
| 950 |
|
| 1,777 |
Total leasing revenue | $ | 3,674 |
| $ | 7,181 |
Minimum future base rental revenue on non-cancelable leases subsequent to June 30, 2019, for the next five years ending December 31 are:
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2019 |
| $ | 5,725 |
2020 |
|
| 11,016 |
2021 |
|
| 9,810 |
2022 |
|
| 8,977 |
2023 |
|
| 7,010 |
|
| $ | 42,538 |
As of June 30, 2019, the Company received payments of $2.7 millionleased certain office equipment under a finance lease and had operating leases for property and equipment used in October 2016,hospitality operations with remaining lease terms up to the Company received a payment of $5.0 million. The remaining settlement amountyear 2024. Certain leases include options to purchase, terminate or renew for one or more years, which are included in the lease term used to establish right-of-use assets and lease liabilities when it is reasonably certain that the option will be receivedexercised. Finance lease right-of-use assets are included within property, plant and equipment and operating lease right-of-use assets are included within other assets on the condensed consolidated balance sheets, which represent the Company’s right to use an underlying asset during a lease term for leases in a paymentexcess of $2.7 million dueone year. Corresponding finance lease liability and operating lease liabilities are included within other liabilities on the condensed consolidated balance sheets and are related to the Company’s obligation to make lease payments for leases in October 2019.excess of one year. Prior to the adoption ASU 2016-02 on January 1, 2019 lease assets and liabilities for operating leases were not recognized. The Company also received a guaranty of payments from BP North America Corporation Inc. As of March 24, 2016,uses its incremental borrowing rate to determine the Company recorded the claim settlement receivable using an imputed interest rate of 3.0%, based on its best estimate of the prevailing market rates for the source of credit, resulting in an initial present value of $12.5 million and a discountthe lease payments since the rate implicit in each lease is not readily determinable.
21
The claim settlementcomponents of $12.5 million was recognizedlease expense are as other income in the Company’s consolidated statementsfollows:
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| Three Months Ended |
| Six Months Ended | ||
| June 30, 2019 |
| June 30, 2019 | ||
Lease cost |
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Finance lease cost: |
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Amortization of right-of-use assets | $ | 12 |
| $ | 16 |
Interest on lease liability |
| 3 |
|
| 4 |
Operating lease cost |
| 53 |
|
| 105 |
Short-term lease cost |
| 237 |
|
| 301 |
Total lease cost | $ | 305 |
| $ | 426 |
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Other information |
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Weighted-average remaining lease term - finance lease (in years) |
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|
| 4.7 |
Weighted-average remaining lease term - operating leases (in years) |
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| 1.7 |
Weighted-average discount rate - finance lease |
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| 5.0% |
Weighted-average discount rate - operating leases |
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|
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| 5.0% |
The aggregate payments of incomefinance lease liability subsequent to June 30, 2019, for the year endedyears ending December 31 2016. are:
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|
2019 |
| $ | 27 |
2020 |
|
| 54 |
2021 |
|
| 54 |
2022 |
|
| 54 |
2023 |
|
| 54 |
Thereafter |
|
| 10 |
Total |
|
| 253 |
Less imputed interest |
|
| (27) |
Total finance lease liability |
| $ | 226 |
The discount is being accreted over the termaggregate payments of the receivable using the effective interest method. Interest incomeoperating lease liabilities subsequent to June 30, 2019, for the three and nine months ended September 30, 2018 was less than $0.1 million and $0.1 million, respectively. Interest income for the three and nine months ended September 30, 2017 was $0.1 million and $0.2 million, respectively.years ending December 31 are:
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2019 |
| $ | 91 |
2020 |
|
| 149 |
2021 |
|
| 82 |
2022 |
|
| 5 |
2023 |
|
| 2 |
Total |
|
| 329 |
Less imputed interest |
|
| (17) |
Total operating lease liabilities |
| $ | 312 |
7. Sale
22
In December 2017, the Company entered into and consummated an Asset Purchase Agreement (the “PCR Purchase Agreement”) with PCR Rentals LLC (“PCR”) for the sale of the Company’s short term vacation rental management business (the “PCR Rentals Sale”). The PCR Purchase Agreement contained representations and warranties, confidentiality and indemnification provisions of the type customarily found in these types of transactions. The Company also has a limited right of first refusal on any third party offer to purchase the vacation rental management business that will end upon the earlier of (i) 18 months after the date of the PCR Rentals Sale or (ii) the later of (x) the date of payoff of a promissory note secured by certain assets of PCR (the “PCR Note”) and (y) nine months after the date of the PCR Rentals Sale. On February 14, 2018, the PCR Note was paid in full, and as a result the right of first refusal will expire in November 2018.
8. Other Assets
Other assets consist of the following:
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| September 30, |
| December 31, |
| June 30, |
| December 31, | ||||
|
| 2018 |
| 2017 |
| 2019 |
| 2018 | ||||
Restricted investments |
| $ | 2,334 |
| $ | 3,432 | ||||||
Accounts receivable, net |
|
| 9,899 |
|
| 14,061 | ||||||
Homesite sales receivable |
|
| 3,775 |
|
| 2,977 | ||||||
Claim settlement receivable |
|
| 2,720 |
|
| 2,679 | ||||||
Notes receivable |
|
| 3,155 |
|
| 2,265 | ||||||
Income tax receivable |
|
| 3,504 |
|
| 3,914 | ||||||
Prepaid expenses |
|
| 7,905 |
|
| 6,751 | ||||||
Straight-line rent |
|
| 3,480 |
|
| 3,581 | ||||||
Operating lease right-of-use assets |
|
| 312 |
|
| — | ||||||
Investment in unconsolidated joint venture |
|
| 3,089 |
|
| 1,105 | ||||||
Other assets |
|
| 6,451 |
|
| 5,069 | ||||||
Retained interest investments |
| $ | 11,388 |
| $ | 11,147 |
|
| 11,935 |
|
| 11,536 |
Accounts receivable, net |
|
| 7,988 |
|
| 8,460 | ||||||
Notes receivable |
|
| 3,963 |
|
| 9,522 | ||||||
Prepaid expenses |
|
| 7,074 |
|
| 6,625 | ||||||
Straight line rent |
|
| 3,656 |
|
| 3,804 | ||||||
Other assets |
|
| 5,598 |
|
| 4,637 | ||||||
Accrued interest receivable for Senior Notes held by SPE |
|
| 935 |
|
| 2,938 |
|
| 2,938 |
|
| 2,938 |
Total other assets |
| $ | 40,602 |
| $ | 47,133 |
| $ | 61,497 |
| $ | 60,308 |
Restricted Investments
Restricted investments include certain of the surplus assets that were transferred from the Company’s Pension Plan to a suspense account in the Company’s 401(k) Plan in December 2014. The Company has retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account are included in the Company’s condensed consolidated financial statements until they are allocated to participants. The Company expenses the fair value of the assets at the time the assets are allocated to participants, which is expected to be allocated up to the next two years. During both the six months ended June 30, 2019 and 2018, the Company recorded an expense of $1.1 million, for the fair value of the assets, less expenses that were allocated to participants. Any gain or loss on these assets is reflected in the Company’s condensed consolidated statements of income and was less than a $0.1 million loss for the three and six months ended June 30, 2019 and 2018. Refer to Note 5. Financial Instruments and Fair Value Measurements.
Accounts Receivable, Net
As of December 31, 2018, accounts receivable, net included $6.7 million of insurance proceeds receivable from the Company’s insurance carriers for property damage related to Hurricane Michael, which were received during the six months ended June 30, 2019. See Note 6. Hurricane Michael for additional information.
Homesite Sales Receivable
Homesite sales receivable from contracts with customers include estimated homesite residuals and certain estimated fees that are recognized as revenue at the time of sale to homebuilders, subject to constraints. Any change in circumstances from the estimated amounts will be updated at each reporting period. The receivable will be collected as the homebuilders build the homes and sell to retail consumers, which can occur over multiple years. The following table presents the changes in homesite sales receivable:
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| Increases Due To |
|
| Decreases Due to |
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| Balance |
|
| Revenue Recognized |
|
| Amounts |
|
| Balance |
|
|
| January 1, 2019 |
|
| for Homesites Sold |
|
| Received/Transferred |
|
| June 30, 2019 |
Homesite sales receivable |
| $ | 2,977 |
| $ | 2,006 |
| $ | (1,208) |
| $ | 3,775 |
23
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|
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|
|
|
|
|
|
|
| Increases Due To |
|
| Decreases Due to |
|
|
|
|
|
| Balance |
|
| Revenue Recognized |
|
| Amounts |
|
| Balance |
|
|
| January 1, 2018 |
|
| for Homesites Sold |
|
| Received/Transferred |
|
| June 30, 2018 |
Homesite sales receivable |
| $ | 2,585 |
| $ | 1,125 |
| $ | (1,015) |
| $ | 2,695 |
Claim Settlement Receivable
The remaining settlement amount of $2.7 million related to the Deepwater Horizon oil spill is due in October 2019.
Notes Receivable
Notes receivable consists of the following:
|
|
|
|
|
|
|
|
| June 30, |
| December 31, | ||
|
| 2019 |
| 2018 | ||
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, due June 2021 |
| $ | 1,514 |
| $ | — |
Pier Park Community Development District notes, non-interest bearing, due September 2022 |
|
| 546 |
|
| 803 |
Interest bearing note with a JV partner, secured by the partner's membership interest in the JV - 8.0% interest rate, due May 2039 |
|
| 363 |
|
| — |
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, due September 2019 |
|
| 249 |
|
| 749 |
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, due June 2020 |
|
| 253 |
|
| 422 |
Interest bearing homebuilder note, secured by the real estate sold — 6.3% interest rate, due March 2020 |
|
| 135 |
|
| 150 |
Various mortgage notes, secured by certain real estate, bearing interest at various rates |
|
| 95 |
|
| 141 |
Total notes receivable |
| $ | 3,155 |
| $ | 2,265 |
The Company evaluates the carrying value of the notes receivable and the need for an allowance for doubtful notes receivable at each reporting date. As of June 30, 2019 and December 31, 2018, there was no allowance for doubtful notes receivable.
Retained Interest Investments
The Company has a beneficial interest in certain bankruptcy-remote qualified SPEs used in the installment sale monetization of certain sales of timberlands in 2007 and 2008. The SPEs’ assets are not available to satisfy the Company’s liabilities or obligations and the liabilities of the SPEs are not the Company’s liabilities or obligations. Therefore, the SPEs’ assets and liabilities are not consolidated in the Company’s condensed consolidated financial
20
statements as of SeptemberJune 30, 20182019 and December 31, 2017.2018. The Company’s continuing involvement with the SPEs is the receipt of the net interest payments and the remaining principal of approximately $17.0$16.7 million to be received at the end of the installment notes’ fifteen year maturity period, in 2022 through 2024. The Company has a beneficial or retained interest investment related to these SPEs of $11.4$11.9 million and $11.1$11.5 million as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively, recorded in other assets on the Company’s condensed consolidated balance sheets.
Accounts Receivable, Net
As of September 30, 2018, accounts receivable, net includes $2.4 million related to estimated lot residuals and certain estimated fees that are recognized as revenue at the time of sale to homebuilders, subject to constraints, and any change in circumstances from the estimated amounts will be updated at each reporting period. The receivable will be collected as the homebuilders build the homes and sell to retail buyers, which can occur over multiple years.
Notes Receivable
Notes receivable consists of the following:
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
PCR Note, secured by certain assets, 10% interest rate, principal payments due beginning September 2018 per agreed upon schedule, and any remaining amount outstanding is due by December 2020, paid in full February 2018 |
| $ | — |
| $ | 5,000 |
Pier Park Community Development District notes, non-interest bearing, due September 2022 |
|
| 803 |
|
| 1,527 |
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, principal payment of $0.1 million due February 2019 and any remaining amount outstanding is due by February 2020 |
|
| 1,160 |
|
| — |
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, principal payment of $0.1 million due September 2018 and any remaining amount outstanding is due by September 2019 |
|
| 809 |
|
| 904 |
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, principal payment of $0.1 million due June 2018 and any remaining amount outstanding is due by June 2019 |
|
| 506 |
|
| 857 |
Interest bearing homebuilder note, secured by the real estate sold — 5.5% interest rate, principal payment of $0.1 million due November 2018 and any remaining amount outstanding is due by November 2019 |
|
| 336 |
|
| 1,060 |
Interest bearing homebuilder note, secured by the real estate sold — 6.3% interest rate, principal payment of less than $0.1 million due March 2019 and any remaining amount outstanding is due by March 2020 |
|
| 200 |
|
| — |
Various mortgage notes, secured by certain real estate, bearing interest at various rates |
|
| 149 |
|
| 174 |
Total notes receivable |
| $ | 3,963 |
| $ | 9,522 |
The Company evaluates the carrying value of the notes receivable and the need for an allowance for doubtful notes receivable at each reporting date. As of September 30, 2018 and December 31, 2017, there was no allowance for doubtful notes receivable.
9. Real Estate Joint Ventures
The Company enters into real estate joint ventures,JVs, from time to time, for the purpose of developing real estate in which the Company may or may not have a controlling financial interest. GAAP requires consolidation of VIEs in which an enterprise has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company examines specific criteria
2124
and uses judgment when determining whether the Company is the primary beneficiary and must consolidate a VIE. The Company continues to assess whether it is the primary beneficiary on an ongoing basis.
Latitude Margaritaville Watersound JV
LMWS, LLC (“Latitude Margaritaville Watersound JV”) was created in June 2019, when the Company entered into a JV agreement to develop a 55+ active adult residential community in Bay County, Florida. The JV parties are working together to develop the first phase of the community, which is anticipated to include 3,500 homes. The community will be located on land that will be contributed to the JV by the Company. As of June 30, 2019, the Company owned a 50.0% voting interest in the JV. Each JV member will initially contribute an equal amount of cash and the Company’s additional land contribution will be returned as each residential unit is sold by the JV until the cumulative distributions equal the land contribution value. The day-to-day activities of the JV will be managed through a board of managers, with each JV partner having equal voting rights. The Company has significant involvement in the design of the development and approves all major decisions, including project development, annual budgets and financing. As of June 30, 2019, Latitude Margaritaville Watersound JV did not have any activity and the Company is currently evaluating whether it is the VIE’s primary beneficiary.
Consolidated Real Estate Joint Ventures
Watercrest JV
Watercrest JV was created in May 2019, when the Company entered into a JV agreement to develop and operate a new assisted living and memory care community in Santa Rosa Beach, Florida. The JV parties are working together to develop and construct a 107 unit community. The community will be located on land that was contributed to the JV by the Company. As of June 30, 2019, the Company owned an 87.0% interest in the consolidated JV. The Company’s partner is responsible for the day-to-day activities of the JV. However, the Company has significant involvement in the design of the development and approves all major decisions, including project development, annual budgets and financing. The Company determined Watercrest JV is a VIE and that the Company is the VIE’s primary beneficiary as of June 30, 2019.
Origins Crossings JV
Origins Crossings JV was created in January 2019, when the Company entered into a JV agreement to develop, manage and lease apartments in Watersound, Florida. The JV parties are working together to develop and construct a 217 unit apartment community. The community will be located on land near the entrance to the Watersound Origins community, which was contributed to the JV by the Company. As of June 30, 2019, the Company owned a 75.0% interest in the consolidated JV. The Company’s partner is responsible for the day-to-day activities of the JV. However, the Company has significant involvement in the design of the development and approves all major decisions, including project development, annual budgets and financing. The Company determined Origins Crossings JV is a VIE and that the Company is the VIE’s primary beneficiary as of June 30, 2019.
Pier Park Crossings JV
In April 2017, the Company entered into a joint ventureJV agreement to develop, manage and lease apartments in Panama City Beach, Florida. The joint ventureJV parties are working together to design, develop and construct a 240 unit multi-family apartment home community. The community will beis located on land in the Pier Park area that was contributed to the joint ventureJV by the Company. As of SeptemberJune 30, 20182019 and December 31, 2017,2018, the Company owned a 75.0% equity interest in the consolidated joint venture.JV. The Company’s partners arepartner is responsible for the day-to-day activities of the joint venture.JV. However, the Company has significant involvement in the design of the development and approves all major decisions, including project development, annual budgets and financing. The Company determined Pier Park Crossings JV is a VIE and that the Company is the VIE’s primary beneficiary as of SeptemberJune 30, 20182019 and December 31, 2017.2018.
In December 2016, the Company transferred all
25
Windmark JV LLC (“Windmark JV”).
As of SeptemberJune 30, 20182019 and December 31, 2017,2018, the Company owned a 49.0% equity interest in Windmark JV. A wholly owned subsidiary of the Company is the managing member of Windmark JV and runs its day-to-day operations. Windmark JV owns and its members make major decisions related to the management and development of the Windmark Beach project. For financial accounting purposes,The Company determined Windmark JV is a VIE and that the Company is deemed to control Windmark JV, which is consolidated within the financial results of the CompanyVIE’s primary beneficiary as of SeptemberJune 30, 20182019 and December 31, 2017.2018. On July 5, 2019, the Company repurchased the 51.0% equity interests in the Windmark JV from the two other members of the Windmark JV for a total consideration of $11.6 million and, as a result, the Company now owns 100.0% of the Windmark project.
Pier Park North JV
During 2012, the Company entered into a joint ventureJV agreement with a partner to develop a retail center at Pier Park North. As of SeptemberJune 30, 20182019 and December 31, 2017,2018, the Company owned a 60.0% equity interest in the consolidated joint venture.JV. The Company’s partner is responsible for the day-to-day activities of the joint venture.JV. However, the Company has significant involvement in the design of the development and approves all major decisions, including project development, annual budgets and financing. The Company determined the joint venturePier Park North JV is a VIE and that the Company is the VIE’s primary beneficiary as of SeptemberJune 30, 20182019 and December 31, 2017.
As of December 31, 2017, the Company was the primary beneficiary of Artisan Park, L.L.C and entitled to 74.0% of the profit or loss of this VIE. The Company is responsible for the day-to-day activities of Artisan Park L.L.C. Effective January 1, 2018, the Company acquired 100.0% ownership interest of Artisan Park, L.L.C.2018.
Unconsolidated Joint Ventures
InPier Park TPS, LLC
Pier Park TPS, LLC (“Pier Park TPS JV”) was created in April 2018, when the Company entered into a joint ventureJV agreement to develop and operate a 124 room hotel in Panama City Beach, Florida. The hotel will be located on land in the Pier Park area that is currently owned by the Company that will be contributed to the joint venture.JV on January 14, 2019 with a fair value of $1.7 million. In addition, during the six months ended June 30, 2019, the Company contributed cash of $0.2 million and mitigation bank credits of $0.1 million. As of SeptemberDecember 31, 2018, the Company had an investment in the JV project of $1.1 million that was contributed to the JV during the first quarter of 2019. As of June 30, 2019 and December 31, 2018, the investment in the unconsolidated JV was $3.1 million and $1.1 million, respectively, which is included in other assets on the condensed consolidated balance sheets. The hotel is currently under construction and the Company did not recognize any income or loss on this investment for the three and six months ended June 30, 2019. As of June 30, 2019 and December 31, 2018, the Company owned a 50.0% equity interest in the joint venture.JV. The Company’s partners arepartner is responsible for the day-to-day activities of the joint venture.JV. The Company has determined that itPier Park TPS JV is a VIE, but that the Company is not the primary beneficiary since it does not have the power to direct the activities that most significantly impact the economic performance of the joint venture.JV. The Company determinedCompany’s investment in Pier Park TPS LLC (“Pier Park TPS JV”) is an unconsolidated joint venture thatJV is accounted for using the equity method. As of September 30, 2018,See Note 18. Commitments and Contingencies for additional information related to debt guaranteed by the investment in the unconsolidated joint venture was $0.2 million and the Company’s maximum exposure to loss in the unconsolidated joint ventureCompany.
Summarized financial information for Pier Park TPS JV is generally limited to its investment in the joint venture. For the three and nine months ended September 30, 2018, the Company did not recognize any income accounted for under the equity method.as follows:
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| June 30, |
| December 31, | ||
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| 2019 |
| 2018 | ||
BALANCE SHEETS: |
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Investment in real estate |
| $ | 7,589 |
| $ | 285 |
Cash and cash equivalents |
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| 29 |
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| 64 |
Total assets |
| $ | 7,618 |
| $ | 349 |
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Other liabilities |
| $ | 1,440 |
| $ | 3 |
Equity |
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| 6,178 |
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| 346 |
Total liabilities and equity |
| $ | 7,618 |
| $ | 349 |
As of September 30, 2018 and December 31, 2017, the Company was a partner in ALP Liquidating Trust (“ALP”) that is accounted for using the equity method. The joint venture was entered into to develop and sell certain mixed use residential and commercial projects. In 2008, the Company wrote-off its investment in ALP as a result of ALP reserving its assets to satisfy potential claims and obligations in accordance with its publicly reported liquidation basis of accounting. Subsequently, ALP changed its method of accounting to a going concern basis and reinstated its equity and stated it would report certain expenses as they are incurred. The Company has not recorded any additional equity income
2226
as a result of ALP’s change in accounting. As of September 30, 2018, the Company beneficially owned 23.9% of ALP’s outstanding beneficial interest units.
Financial information for ALP is provided to the Company on a delayed basis. The summarized information as of June 30, 2018 and December 31, 2017 includes total assets of $10.1 million and $10.2 million, respectively, total liabilities of $0.2 million and $0.1 million, respectively and total equity of $9.9 million and $10.1 million, respectively. For the three and six months ended June 30, 2018, ALP reported a net loss of less than $0.1 million and $0.2 million, respectively. For the three and six months ended June 30, 2017, ALP reported a net loss of $0.2 million and $0.4 million, respectively.
10. Debt, Net
Debt consists of the following at September 30, 2018:following:
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| Unamortized |
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| Discount and |
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| Debt Issuance |
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| Principal |
| Costs |
| Net | |||
PPN JV Loan, due November 2025, bearing interest at 4.1% |
| $ | 46,644 |
| $ | 462 |
| $ | 46,182 |
Loan in the Pier Park Crossings JV, insured by The United States Department of Housing and Urban Development, due June 2060, bearing interest at 4.0% |
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| 8,311 |
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| 1,121 |
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| 7,190 |
Community Development District debt, secured by certain real estate or other collateral, due May 2023 — May 2039, bearing interest at 3.6% to 6.0% |
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| 6,407 |
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| — |
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| 6,407 |
Pier Park Outparcel Construction Loan, due March 2027, bearing interest at LIBOR plus 1.7% (effective rate of 4.0% at September 30, 2018) |
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| 1,598 |
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| 17 |
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| 1,581 |
WaterColor Crossings Construction Loan, due February 2029, bearing interest at LIBOR plus 1.7% (effective rate of 4.0% at September 30, 2018) |
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| 993 |
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| 27 |
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| 966 |
Total debt |
| $ | 63,953 |
| $ | 1,627 |
| $ | 62,326 |
Debt consists of the following at December 31, 2017:
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| June 30, 2019 |
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| December 31, 2018 | ||||||||||||||
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| Unamortized |
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| Unamortized |
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| Unamortized |
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| Discount and |
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| Discount and |
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| Discount and |
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| Debt Issuance |
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| Debt Issuance |
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| Debt Issuance |
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| Principal |
| Costs |
| Net |
| Principal |
| Costs |
| Net |
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| Principal |
| Costs |
| Net | |||||||||
PPN JV Loan, due November 2025, bearing interest at 4.1% |
| $ | 47,295 |
| $ | 512 |
| $ | 46,783 |
| $ | 45,973 |
| $ | 413 |
| $ | 45,560 |
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| $ | 46,423 |
| $ | 446 |
| $ | 45,977 |
Community Development District debt, secured by certain real estate or other collateral, due May 2031 — May 2039, bearing interest at 3.6% to 7.0% |
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| 7,241 |
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| — |
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| 7,241 | |||||||||||||||||||
Pier Park Outparcel Construction Loan, due March 2027, bearing interest at LIBOR plus 1.7% (effective rate of 3.3% at December 31, 2017) |
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| 1,624 |
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| 18 |
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| 1,606 | |||||||||||||||||||
Pier Park Crossings JV Loan, insured by HUD, due June 2060, bearing interest at 4.0% |
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| 24,636 |
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| 1,101 |
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| 23,535 |
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| 15,399 |
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| 1,114 |
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| 14,285 | |||||||||
Community Development District debt, secured by certain real estate or other collateral, due May 2023 through May 2039, bearing interest at 3.6% to 6.0% |
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| 7,023 |
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| — |
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| 7,023 |
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| 6,324 |
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| — |
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| 6,324 | |||||||||
Pier Park Outparcel Construction Loan, due March 2027, bearing interest at LIBOR plus 1.7% (effective rate of 4.1% at June 30, 2019) |
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| 1,562 |
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| 15 |
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| 1,547 |
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| 1,585 |
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| 16 |
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| 1,569 | |||||||||
WaterColor Crossings Construction Loan, due February 2029, bearing interest at LIBOR plus 1.7% (effective rate of 4.1% at June 30, 2019) |
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| 1,446 |
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| 24 |
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| 1,422 |
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| 1,245 |
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| 26 |
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| 1,219 | |||||||||
Beach Homes Loan, due May 2029, bearing interest at LIBOR plus 1.7% (effective rate of 4.1% at June 30, 2019) |
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| 1,178 |
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| 21 |
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| 1,157 |
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| — |
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| — |
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| — | |||||||||
Total debt |
| $ | 56,160 |
| $ | 530 |
| $ | 55,630 |
| $ | 81,818 |
| $ | 1,574 |
| $ | 80,244 |
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| $ | 70,976 |
| $ | 1,602 |
| $ | 69,374 |
In October 2015, the Pier Park North JV refinanced a construction loan by enteringentered into a $48.2 million loan (the “PPN JV Loan”). As of September 30, 2018, the PPN JV Loan was, secured by a first lien on, and security interest in, a majority of the Pier Park North JV’s property. In connection with the PPN JV Loan, the Company entered into a limited guarantee in favor of the lender, based on its percentage ownership of the joint venture.JV. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North JV; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary bankruptcy or insolvency proceedings and upon breach of covenants in the security instrument.
In May 2018, the Pier Park Crossings JV entered into a $36.6 million loan, insured by the United StatesU.S. Department of Housing and Urban Development (“HUD”), to finance the construction of apartments in Panama City Beach, Florida (the “PPC JV Loan”). The PPC JV Loan provides for interest only payments during the first twenty-four months and monthly principal and interest payments thereafter through maturity in June 2060. The PPC JV Loan may not be
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prepaid prior to July 1, 2020. From July 1, 2020 through June 30, 2030, a prepayment premium is due to the lender of 1.0% - 10.0% of the principal prepaid.any prepaid principal. The PPC JV Loan is secured by the Pier Park Crossings JV’s real property and the assignment of rents and leases.
Community Development District (“CDD”) bonds financed the construction of infrastructure improvements at some of the Company’s projects.communities. The principal and interest payments on the bonds are paid by assessments on the properties benefited by the improvements financed by the bonds. The Company has recorded a liability for CDD debt that is associated with platted property, which is the point at which it becomes fixed or determinable. Additionally, the Company has recorded a liability for the portion of the CDD debt that is associated with unplatted property if it is probable and reasonably estimable that the Company will ultimately be responsible for repayment. The Company’s total outstanding CDD debt assigned to property it owns was $20.0$18.9 million and $21.7$19.9 million as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively. The Company pays interest on this total outstanding CDD debt. During the second quarter of 2018, the CDD at SouthWood completed a refinance of its 2008 and 2011 bonds into 2018 bonds, reducing the interest rates.
In March 2017, a wholly owned subsidiary of the Company entered into a $1.6 million construction loan to finance the construction of a commercial leasing property located in Panama City Beach, Florida (the “Pier Park Outparcel
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Construction Loan”). The Pier Park Outparcel Construction Loan provides for interest only payments during the first twelve months and monthly principal and interest payments thereafter with a final balloon payment at maturity. The Pier Park Outparcel Construction Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the Pier Park Outparcel Construction Loan, the Company executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Pier Park Outparcel Construction Loan until the project meets certain cash flow stabilization requirements.
In February 2018, a wholly owned subsidiary of the Company entered into a $1.9 million construction loan to finance the construction of a commercial leasing property located in Santa Rosa Beach, Florida (the “WaterColor Crossings Construction Loan”). The WaterColor Crossings Construction Loan provides for interest only payments during the first twelve months and monthly principal and interest payments thereafter with a final balloon payment at maturity. The WaterColor Crossings Construction Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the WaterColor Crossings Construction Loan, the Company executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the WaterColor Crossings Construction Loan.
In May 2018, a wholly owned subsidiary of the Company entered into a $1.7 million construction loan to finance the construction of two beach homes located in Panama City Beach, Florida (the “Beach Homes Loan”). The Beach Homes Loan provides for interest only payments during the first twelve months and monthly principal and interest payments thereafter with a final balloon payment at maturity. The Beach Homes Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the Beach Homes Loan, the Company executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Beach Homes Loan.
In May 2019, the Origins Crossings JV entered into a $37.9 million loan the (“Origins Crossings JV Loan”) to finance the construction of apartments in Watersound, Florida. The Origins Crossings JV Loan provides for interest only payments for the first thirty months and principal and interest payments thereafter through maturity in May 2024. The Origins Crossings JV Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the Origins Crossings JV Loan, the Company executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Origins Crossings JV Loan. The Company is the sole guarantor and will receive a fee related to the guarantee from its JV partner based on the JV partner’s ownership percentage. As of SeptemberJune 30, 2018,2019, there was no principal balance and the CompanyJV incurred less than $0.1$0.5 million of loan costs related to the Origins Crossings JV Loan.
In June 2019, the Watercrest JV entered into a $22.5 million loan the (“Watercrest JV Loan”) to finance the construction of a senior living facility in Santa Rosa Beach, HomesFlorida. The Watercrest JV Loan provides for interest only payments for the first thirty-six months and principal and interest payments thereafter through maturity in June 2047. The Watercrest JV Loan is secured by the real property, assignment of rents, leases and deposits and the security interest in the rents and personal property. In connection with the Watercrest JV Loan, the Company executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Watercrest JV Loan. The Company is the sole guarantor and will receive a fee related to the guarantee from its JV partner based on the JV partner’s ownership percentage. The Company entered into an interest rate swap to hedge cash flows tied to changes in the underlying floating interest rate tied to LIBOR. The interest rate swap is effective June 1, 2021 and matures on June 1, 2024 and fixed the variable rate debt on the notional amount of related debt of $20.0 million to a rate of 4.37%. As of June 30, 2019, there was no principal balance and the JV incurred $0.3 million of loan costs related to the Watercrest JV Loan.
The aggregate maturities of debt subsequent to SeptemberJune 30, 2018,2019, for the years ending December 31 are:
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| September 30, |
| June 30, | ||
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| 2018 |
| 2019 | ||
2018 |
| $ | 260 | |||
2019 |
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| 1,583 |
| $ | 553 |
2020 |
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| 1,792 |
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| 1,986 |
2021 |
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| 1,976 |
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| 2,194 |
2022 |
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| 1,957 |
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| 2,208 |
2023 |
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| 2,232 | |||
Thereafter |
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| 56,385 |
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| 72,645 |
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| $ | 63,953 |
| $ | 81,818 |
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11. Other Liabilities
Other liabilities consist of the following:
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| September 30, |
| December 31, |
| June 30, |
| December 31, | ||||
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| 2018 |
| 2017 |
| 2019 |
| 2018 | ||||
Accounts payable |
| $ | 10,526 |
| $ | 7,524 |
| $ | 14,480 |
| $ | 10,148 |
Finance lease liability |
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| 226 |
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| — | ||||||
Operating lease liabilities |
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| 312 |
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| — | ||||||
Accrued compensation |
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| 2,884 |
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| 2,664 |
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| 2,269 |
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| 3,112 |
Other accrued liabilities |
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| 5,807 |
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| 2,560 | ||||||
Deferred revenue |
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| 17,715 |
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| 17,864 |
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| 20,205 |
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| 17,478 |
Membership deposits and initiation fees |
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| 9,962 |
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| 9,704 | ||||||
Club initiation fees |
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| 6,457 |
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| 5,676 | ||||||
Club membership deposits |
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| 4,153 |
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| 4,286 | ||||||
Advance deposits |
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| 1,512 |
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| 1,468 |
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| 1,999 |
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| 1,277 |
Other accrued liabilities |
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| 6,694 |
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| 5,185 | ||||||
Accrued interest expense for Senior Notes held by SPE |
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| 713 |
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| 2,850 |
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| 2,850 |
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| 2,850 |
Total other liabilities |
| $ | 50,006 |
| $ | 47,259 |
| $ | 58,758 |
| $ | 47,387 |
Other accrued liabilities include $2.3 million of accrued property taxes as of June 30, 2019, which are generally paid annually in November. As of December 31, 2018 the Company had no accrued property taxes.
Deferred revenue as of SeptemberJune 30, 20182019 and December 31, 20172018 includes $12.5 million related to a 2006 agreement pursuant to which the Company agreed to sell land to the Florida Department of Transportation. Revenue is recognized when title to a specific parcel is legally transferred.
Membership deposits andClub initiation fees consist of deposits and fees received for club memberships. Initiation fees are recognized as revenue over the estimated average duration of membership, which is evaluated periodically. The following table presents the changes in club initiation fees related to contracts with customers:
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| Balance |
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| Increases Due To |
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| Balance |
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| January 1, 2019 |
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| Cash Received |
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| Revenue Recognized |
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| June 30, 2019 |
Contract liabilities |
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Club initiation fees |
| $ | 5,676 |
| $ | 1,663 |
| $ | (882) |
| $ | 6,457 |
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| Balance |
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| Increases Due To |
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| Balance |
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| January 1, 2018 |
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| Cash Received |
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| Revenue Recognized |
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| June 30, 2018 |
Contract liabilities |
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Club initiation fees |
| $ | 5,199 |
| $ | 695 |
| $ | (576) |
| $ | 5,318 |
Advance deposits consist of deposits received on hotel rooms and vacationlodging rentals. Advance deposits are recorded as other liabilities in the condensed consolidated balance sheets without regard to whether they are refundable and are recognized as income at the time the service is provided for the related deposit.
Other accrued liabilities include $3.4 million
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12. Income Taxes
Income tax expense benefit attributable to income from operations differed from the amount computed by applying the statutory federal income tax rate of 21% as of SeptemberJune 30, 20182019 and 35% as of September 30, 20172018 to pre-tax income or loss as a result of the following:
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| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| Six Months Ended | ||||||||||||||||
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| September 30, |
| September 30, |
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| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Tax at the federal statutory rate |
| $ | 420 |
| $ | 3,005 |
| $ | 7,402 |
| $ | 11,167 |
| $ | 2,869 |
| $ | 6,875 |
| $ | 3,424 |
| $ | 6,982 |
State income taxes (net of federal benefit) |
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| 88 |
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| 301 |
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| 1,532 |
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| 1,117 |
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| 601 |
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| 1,423 |
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| 717 |
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| 1,445 |
2017 qualified timber gains at the federal statutory rate of 23.8% (1) |
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| — |
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| — |
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| (524) |
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| — |
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| — |
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| — |
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| — |
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| (524) |
Decrease in valuation allowance |
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| (3,480) |
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| (250) |
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| (4,931) |
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| (846) |
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| — |
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| (1,418) |
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| — |
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| (1,451) |
Change in federal AMT credit carryforward (1) |
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| (511) |
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| — |
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| (511) |
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| — | ||||||||||||
Other |
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| — |
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| (413) |
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| (153) |
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| (607) |
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| (36) |
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| (333) |
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| (46) |
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| (154) |
Total income tax (benefit) expense |
| $ | (3,483) |
| $ | 2,643 |
| $ | 2,815 |
| $ | 10,831 | ||||||||||||
Total income tax expense |
| $ | 3,434 |
| $ | 6,547 |
| $ | 4,095 |
| $ | 6,298 |
(1) | The Bipartisan Budget Act of 2018 was signed into law on February 9, 2018 (the “2018 Act”). The 2018 Act retroactively re-established the preferential 23.8% tax rate on C Corporation Qualified Timber Gains, extending its applicability from 2016 to include the 2017 tax year. The benefit of this retroactive tax rate reduction is |
AsSignificant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. The Company regularly assesses the likelihood of September 30, 2018adverse outcomes resulting from potential examinations to determine the adequacy of its provision for income taxes and December 31, 2017,applies a “more-likely-than-not” in determining the Company had state net operating loss carryforwards of $364.3 millionfinancial statement recognition and $391.7 million, respectively and no federal net operating loss carryforwards. The majority of state net operating losses are available to offset future taxable income through 2036. As of December 31, 2017, the Company had
25
an income tax receivable of $8.4 million related to the reclassificationmeasurement of a federal AMT credit carryforward following the enactment of the Tax Acttax position taken or expected to be taken in December 2017, which is refundable to the Company in the years 2018 through 2021. During the nine months ended September 30, 2018, the federal AMT credit carryforward increased $1.0 million, including $0.5 million for the Qualified Timber Gain preferential rate and $0.5 million for actual deductible expenses, both of which were included on the Company’s 2017a tax return. During the nine months ended September 30, 2018, the Company also applied $6.0 million of current income tax payable to this receivable, resulting in an income tax receivable of $3.4 million as of September 30, 2018.
The Tax Act was enacted on December 22, 2017 and changed many aspects of U.S. corporate income taxation including reducing the U.S. federal corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017.return. The Company recognized the tax effects of the Tax Act during the year ended December 31, 2017, which included a $33.5 million income tax benefit from the reassessment of net deferred tax balances to reflect the newly enacted tax rate.
In general, a valuation allowance is recorded if, based on the available evidence, it is more likely thanhas not that some portion or all of the deferred tax asset will not be realized. Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in future years in the appropriate tax jurisdictions to obtain a benefit from the reversal of deductible temporary differences and from loss carryforwards.
In the third quarter of 2018, the Company reassessed its valuation allowance requirements and evaluated all available evidence in its analysis, including historical and projected pre-tax profits. Based on this assessment the Company determined that it had the ability to realize the net operating loss carryforward and release the valuation allowance. During the three and nine months ended September 30, 2018, the Company recorded $3.5 million and $5.0 million, respectively, of tax benefits related to the reversal of its valuation allowance established on deferred tax assets. As of December 31, 2017, the Company had a valuation allowance of $5.0 million.
The Company had approximately $2.1 million of totalidentified any unrecognized tax benefits as of both Septembereither June 30, 2018 and2019 or December 31, 2017. Of this total, there are no amounts of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. There were no decreases or increases related to prior year or current year tax positions.2018.
13. Accumulated Other Comprehensive Loss
Following is a summary of the changes in the balances of accumulated other comprehensive loss, which is presented net of tax, as of September 30, 2018:tax:
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| Unrealized Gain | |
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Accumulated other comprehensive loss at December 31, |
| $ |
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Other comprehensive income before reclassifications |
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Amounts reclassified from accumulated other comprehensive loss |
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Other comprehensive income |
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Accumulated other comprehensive loss at |
| $ |
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Following is a summary of the tax effects allocated to other comprehensive income (loss) for the three months ended September 30, 2018 and 2017:
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| Three Months Ended September 30, 2018 | |||||||
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| Before- |
| Tax Benefit or |
| Net-of- | |||
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| Tax Amount |
| (Expense) |
| Tax Amount | |||
Unrealized loss on investments - debt securities: |
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Unrealized loss on available-for-sale investments |
| $ | (1,244) |
| $ | 316 |
| $ | (928) |
Reclassification adjustment for other-than-temporary impairment loss included in earnings |
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| 1,660 |
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| (421) |
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| 1,239 |
Net unrealized gain |
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| 416 |
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| (105) |
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| 311 |
Other comprehensive income |
| $ | 416 |
| $ | (105) |
| $ | 311 |
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| Three Months Ended September 30, 2017 | |||||||
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| Before- |
| Tax Benefit or |
| Net-of- | |||
|
| Tax Amount |
| (Expense) |
| Tax Amount | |||
Unrealized (loss) gain on investments and restricted investments: |
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale investments |
| $ | (683) |
| $ | 263 |
| $ | (420) |
Unrealized gain on restricted investments |
|
| 4 |
|
| (2) |
|
| 2 |
Reclassification adjustment for net loss included in earnings |
|
| 104 |
|
| (40) |
|
| 64 |
Reclassification adjustment for other-than-temporary impairment loss included in earnings |
|
| 403 |
|
| (296) |
|
| 107 |
Net unrealized loss |
|
| (172) |
|
| (75) |
|
| (247) |
Other comprehensive loss |
| $ | (172) |
| $ | (75) |
| $ | (247) |
Following is a summary of the tax effects allocated to other comprehensive income (loss) for the nine months ended September 30, 2018 and 2017:income:
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2018 | |||||||
|
| Before- |
| Tax Benefit or |
| Net-of- | |||
|
| Tax Amount |
| (Expense) |
| Tax Amount | |||
Unrealized loss on investments - debt securities and restricted investments: |
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale investments |
| $ | (1,726) |
| $ | 438 |
| $ | (1,288) |
Unrealized loss on restricted investments |
|
| (9) |
|
| 2 |
|
| (7) |
Reclassification adjustment for net loss included in earnings |
|
| 1,050 |
|
| (266) |
|
| 784 |
Reclassification adjustment for other-than-temporary impairment loss included in earnings |
|
| 1,723 |
|
| (436) |
|
| 1,287 |
Reclassification into retained earnings for the adoption of ASU 2016-01 (1) |
|
| 932 |
|
| (236) |
|
| 696 |
Reclassification into retained earnings for the adoption of ASU 2018-02 (2) |
|
| — |
|
| (313) |
|
| (313) |
Net unrealized gain |
|
| 1,970 |
|
| (811) |
|
| 1,159 |
Other comprehensive income |
| $ | 1,970 |
| $ | (811) |
| $ | 1,159 |
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2019 | |||||||
|
| Before- |
| Tax Benefit or |
| Net-of- | |||
|
| Tax Amount |
| (Expense) |
| Tax Amount | |||
Unrealized (loss) gain on investments - debt securities and restricted investments: |
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale investments |
| $ | (9) |
| $ | 2 |
| $ | (7) |
Unrealized gain on restricted investments |
|
| 7 |
|
| (2) |
|
| 5 |
Net unrealized loss |
|
| (2) |
|
| — |
|
| (2) |
Other comprehensive loss |
| $ | (2) |
| $ | — |
| $ | (2) |
30
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2018 | |||||||
|
| Before- |
| Tax (Expense) or |
| Net-of- | |||
|
| Tax Amount |
| Benefit |
| Tax Amount | |||
Unrealized gain on investments: |
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale investments |
| $ | 321 |
| $ | (81) |
| $ | 240 |
Reclassification adjustment for net gain included in earnings |
|
| (28) |
|
| 7 |
|
| (21) |
Net unrealized gain |
|
| 293 |
|
| (74) |
|
| 219 |
Other comprehensive income |
| $ | 293 |
| $ | (74) |
| $ | 219 |
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 | |||||||
|
| Before- |
| Tax |
| Net-of- | |||
|
| Tax Amount |
| Expense |
| Tax Amount | |||
Unrealized gain on investments - debt securities and restricted investments: |
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale investments |
| $ | 790 |
| $ | (201) |
| $ | 589 |
Unrealized gain on restricted investments |
|
| 18 |
|
| (5) |
|
| 13 |
Reclassification adjustment for net loss included in earnings |
|
| 2 |
|
| — |
|
| 2 |
Net unrealized gain |
|
| 810 |
|
| (206) |
|
| 604 |
Other comprehensive income |
| $ | 810 |
| $ | (206) |
| $ | 604 |
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 | |||||||
|
| Before- |
| Tax Benefit or |
| Net-of- | |||
|
| Tax Amount |
| (Expense) |
| Tax Amount | |||
Unrealized loss on investments - debt securities and restricted investments: |
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale investments |
| $ | (482) |
| $ | 123 |
| $ | (359) |
Unrealized loss on restricted investments |
|
| (9) |
|
| 2 |
|
| (7) |
Reclassification adjustment for net loss included in earnings |
|
| 1,050 |
|
| (266) |
|
| 784 |
Reclassification adjustment for other-than-temporary impairment loss included in earnings |
|
| 63 |
|
| (16) |
|
| 47 |
Reclassification into retained earnings for the adoption of ASU 2016-01 (1) |
|
| 932 |
|
| (236) |
|
| 696 |
Reclassification into retained earnings for the adoption of ASU 2018-02 (2) |
|
| — |
|
| (313) |
|
| (313) |
Net unrealized gain |
|
| 1,554 |
|
| (706) |
|
| 848 |
Other comprehensive income |
| $ | 1,554 |
| $ | (706) |
| $ | 848 |
(1) | The reclassification into retained earnings relates to the adoption of ASU 2016‑01. The new guidance was effective January 1, 2018, and required equity investments to be measured at fair value with changes in fair value recognized in results of operations rather than the condensed consolidated statements of comprehensive income. |
(2) | The reclassification into retained earnings relates to the adoption of ASU 2018‑02. The new guidance was effective January 1, 2018, and allowed a reclassification from accumulated other comprehensive |
27
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2017 | |||||||
|
| Before- |
| Tax (Expense) or |
| Net-of- | |||
|
| Tax Amount |
| Benefit |
| Tax Amount | |||
Unrealized gain on investments: |
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale investments |
| $ | 3,967 |
| $ | (1,526) |
| $ | 2,441 |
Unrealized gain on restricted investments |
|
| 4 |
|
| (2) |
|
| 2 |
Reclassification adjustment for net gain included in earnings |
|
| (10,757) |
|
| 4,143 |
|
| (6,614) |
Reclassification adjustment for other-than-temporary impairment loss included in earnings |
|
| 769 |
|
| (296) |
|
| 473 |
Net unrealized loss |
|
| (6,017) |
|
| 2,319 |
|
| (3,698) |
Other comprehensive loss |
| $ | (6,017) |
| $ | 2,319 |
| $ | (3,698) |
14. Stockholders’ Equity
Stock Repurchase Program
The Company’s Board has approved a stock repurchase program (the “Stock Repurchase Program”) pursuant to which the Company is authorized to repurchase shares of its common stock. The Stock Repurchase Program has no expiration date.
During the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, the Company repurchased 5,238,566471,500 and 7,811,9374,065,160 shares, respectively, of its common stock at an average purchase price of $17.82$15.00 and $17.42,$17.82, per share, respectively, for an aggregate purchase price of $93.4$7.1 million and $136.0$72.5 million, respectively, pursuant to its Stock Repurchase Program. No
31
shares were repurchased during the three months ended June 30, 2019. As of SeptemberJune 30, 2018,2019, the Company had a total authority of $42.9$35.8 million available for purchase of shares of its common stock pursuant to its Stock Repurchase Program. The Company may repurchase its common stock in open market purchases from time to time, in privately negotiated transactions or otherwise, pursuant to Rule 10b‑18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and amount of any additional shares to be repurchased will depend upon a variety of factors, including market and business conditions. Repurchases may be commenced or suspended at any time or from time to time without prior notice. The Stock Repurchase Program will continue until otherwise modified or terminated by the Company’s Board at any time in its sole discretion.
In September 2018, the Company retired 5,238,566 shares of treasury stock at an aggregate cost of $93.4 million.
Issuance of Common Stock for Director’s Fees
On May 20, 2019, the Company’s Board approved granting to each non-employee director an equity grant with an aggregate fair market value of $50,000 or, at the director’s election, its cash equivalent. On July 1, 2019, 5,708 shares of restricted stock were granted to two of the Company’s directors pursuant to the Board’s May 20, 2019 approval and the Company’s 2015 Performance and Equity Incentive Plan (the “2015 Plan”). This restricted stock will vest on the date of the Company’s 2020 Annual Meeting of Shareholders. Two non-employee directors elected to receive cash in lieu of the stock, which was paid in July 2019.
On May 23, 2018, the Company’s Board approved granting to each non-employee director an equity grant with an aggregate fair market value of $50,000 or, at the director’s election, its cash equivalent. On July 2, 2018, 2,778 shares of restricted stock were granted to one of the Company’s directors pursuant to the Board’s May 23, 2018 approval and the Company’s 2015 Performance and Equity Incentive Plan (the “2015 Plan”).Plan. This restricted stock will vestvested on May 20, 2019, the date of the Company’s 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting”) and is subject to forfeiture upon termination of service on the Board prior to the 2019 Annual Meeting.Shareholders. Three non-employee directors elected to receive cash in lieu of the stock.
On May 25, 2017, the Company’s Board approved granting to each non-employee director an equity grant with an aggregate fair market value of $50,000 or, at the director’s election, its cash equivalent. On July 3, 2017, 5,334 shares of restricted stock were granted to two of the Company’s directors pursuant to the Board’s May 25, 2017 approval and the Company’s 2015 Plan. This restricted stock vested on May 23, 2018, the date of the Company’s 2018 Annual Meeting of Shareholders. Four non-employee directors elected to receive cash in lieu of the stock.
On May 17, 2016, the Board approved the issuance of 8,919 restricted stock awards to three members of the Board as part of their 2016 compensation package and pursuant to the 2015 Plan. These restricted stock awards vested 25% on the date of issue and 25% on August 17, 2016, November 17, 2016 and February 17, 2017.
28
For each of the three and ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, the Company recorded expense of less than $0.1 million, related to restricted stock awards to the Company’s directors.
Issuance of Common Stock for Officer Compensation
Pursuant to the Company’s 2015 Plan, the Company’s named executive officers (“NEOs”) were provided with the opportunity to elect to receive up to 50% of their discretionary cash incentive award for 2017 performance in shares of Company stock and four of the Company’s NEOs elected to do so. On March 15, 2018, 9,956 shares, net of shares withheld for taxes, of restricted stock were granted to four of the Company’s NEOs. The restricted stock vested immediately.
For the ninesix months ended SeptemberJune 30, 2018, the Company recorded expense of $0.2 million related to restricted stock awards to the Company’s NEOs.
32
15. Employee Benefit PlanRevenue Recognition
Revenue consists primarily of real estate sales, hospitality operations, leasing operations, and timber sales. Taxes collected from customers and remitted to governmental authorities (e.g., sales tax) are excluded from revenue, costs and expenses. The Company maintains a 401(k) retirement plan covering substantially all officersfollowing represents revenue disaggregated by segment, good or service and employeestiming:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2019 | ||||||||||||||||
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
|
|
|
| Leasing |
|
|
|
|
|
|
|
|
|
|
|
| Real Estate |
|
| Hospitality |
|
| and Sales |
|
| Forestry |
|
| Other |
|
| Total |
Revenue by Major Good/Service: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue |
| $ | 13,825 |
| $ | — |
| $ | 103 |
| $ | 1,185 |
| $ | 440 |
| $ | 15,553 |
Hospitality revenue |
|
| — |
|
| 15,560 |
|
| — |
|
| — |
|
| — |
|
| 15,560 |
Leasing revenue |
|
| — |
|
| 38 |
|
| 3,438 |
|
| 198 |
|
| — |
|
| 3,674 |
Timber revenue |
|
| — |
|
| — |
|
| — |
|
| 759 |
|
| — |
|
| 759 |
Total revenue |
| $ | 13,825 |
| $ | 15,598 |
| $ | 3,541 |
| $ | 2,142 |
| $ | 440 |
| $ | 35,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized at a point in time |
| $ | 13,825 |
| $ | 14,780 |
| $ | 103 |
| $ | 1,944 |
| $ | 440 |
| $ | 31,092 |
Recognized over time |
|
| — |
|
| 780 |
|
| — |
|
| — |
|
| — |
|
| 780 |
Over lease term |
|
| — |
|
| 38 |
|
| 3,438 |
|
| 198 |
|
| — |
|
| 3,674 |
Total revenue |
| $ | 13,825 |
| $ | 15,598 |
| $ | 3,541 |
| $ | 2,142 |
| $ | 440 |
| $ | 35,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2018 | ||||||||||||||||
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
|
|
|
| Leasing |
|
|
|
|
|
|
|
|
|
|
|
| Real Estate |
|
| Hospitality |
|
| and Sales |
|
| Forestry |
|
| Other |
|
| Total |
Revenue by Major Good/Service: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue (a) |
| $ | 28,724 |
| $ | — |
| $ | 454 |
| $ | 726 |
| $ | 2,255 |
| $ | 32,159 |
Hospitality revenue |
|
| — |
|
| 12,847 |
|
| — |
|
| — |
|
| — |
|
| 12,847 |
Leasing revenue |
|
| — |
|
| 423 |
|
| 2,891 |
|
| 203 |
|
| — |
|
| 3,517 |
Timber revenue |
|
| 31 |
|
| — |
|
| — |
|
| 1,880 |
|
| — |
|
| 1,911 |
Total revenue |
| $ | 28,755 |
| $ | 13,270 |
| $ | 3,345 |
| $ | 2,809 |
| $ | 2,255 |
| $ | 50,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized at a point in time |
| $ | 28,755 |
| $ | 12,349 |
| $ | 454 |
| $ | 2,606 |
| $ | 2,255 |
| $ | 46,419 |
Recognized over time |
|
| — |
|
| 498 |
|
| — |
|
| — |
|
| — |
|
| 498 |
Over lease term |
|
| — |
|
| 423 |
|
| 2,891 |
|
| 203 |
|
| — |
|
| 3,517 |
Total revenue |
| $ | 28,755 |
| $ | 13,270 |
| $ | 3,345 |
| $ | 2,809 |
| $ | 2,255 |
| $ | 50,434 |
(a) | Residential real estate includes revenue of $23.1 million for the three months ended June 30, 2018 for a one-time receipt of RiverTown impact fees related to the 2014 RiverTown transaction. |
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2019 | ||||||||||||||||
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
|
|
|
| Leasing |
|
|
|
|
|
|
|
|
|
|
|
| Real Estate |
|
| Hospitality |
|
| and Sales |
|
| Forestry |
|
| Other |
|
| Total |
Revenue by Major Good/Service: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue |
| $ | 17,187 |
| $ | — |
| $ | 1,026 |
| $ | 1,373 |
| $ | 558 |
| $ | 20,144 |
Hospitality revenue |
|
| — |
|
| 22,991 |
|
| — |
|
| — |
|
| — |
|
| 22,991 |
Leasing revenue |
|
| — |
|
| 74 |
|
| 6,726 |
|
| 381 |
|
| — |
|
| 7,181 |
Timber revenue |
|
| — |
|
| — |
|
| — |
|
| 1,254 |
|
| — |
|
| 1,254 |
Total revenue |
| $ | 17,187 |
| $ | 23,065 |
| $ | 7,752 |
| $ | 3,008 |
| $ | 558 |
| $ | 51,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized at a point in time |
| $ | 17,187 |
| $ | 21,700 |
| $ | 1,026 |
| $ | 2,627 |
| $ | 558 |
| $ | 43,098 |
Recognized over time |
|
| — |
|
| 1,291 |
|
| — |
|
| — |
|
| — |
|
| 1,291 |
Over lease term |
|
| — |
|
| 74 |
|
| 6,726 |
|
| 381 |
|
| — |
|
| 7,181 |
Total revenue |
| $ | 17,187 |
| $ | 23,065 |
| $ | 7,752 |
| $ | 3,008 |
| $ | 558 |
| $ | 51,570 |
As part of the Pension Plan termination in 2014, the Company directed the Pension Plan to transfer $7.9 million of the Pension Plan’s surplus assets into a suspense account in the Company’s 401(k) Plan. The Company has retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account are included in the Company’s condensed consolidated financial statements until they are allocated to participants. As of September 30, 2018, and December 31, 2017, the fair value of these assets was recorded in restricted investments on the Company’s condensed consolidated balance sheets and were $3.4 million and $4.5 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2018 | ||||||||||||||||
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
|
|
|
| Leasing |
|
|
|
|
|
|
|
|
|
|
|
| Real Estate |
|
| Hospitality |
|
| and Sales |
|
| Forestry |
|
| Other |
|
| Total |
Revenue by Major Good/Service: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue (a) |
| $ | 35,682 |
| $ | — |
| $ | 764 |
| $ | 910 |
| $ | 2,505 |
| $ | 39,861 |
Hospitality revenue |
|
| — |
|
| 19,925 |
|
| — |
|
| — |
|
| — |
|
| 19,925 |
Leasing revenue |
|
| — |
|
| 794 |
|
| 5,731 |
|
| 410 |
|
| — |
|
| 6,935 |
Timber revenue |
|
| 108 |
|
| — |
|
| — |
|
| 3,469 |
|
| — |
|
| 3,577 |
Total revenue |
| $ | 35,790 |
| $ | 20,719 |
| $ | 6,495 |
| $ | 4,789 |
| $ | 2,505 |
| $ | 70,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized at a point in time |
| $ | 35,790 |
| $ | 19,102 |
| $ | 764 |
| $ | 4,379 |
| $ | 2,505 |
| $ | 62,540 |
Recognized over time |
|
| — |
|
| 823 |
|
| — |
|
| — |
|
| — |
|
| 823 |
Over lease term |
|
| — |
|
| 794 |
|
| 5,731 |
|
| 410 |
|
| — |
|
| 6,935 |
Total revenue |
| $ | 35,790 |
| $ | 20,719 |
| $ | 6,495 | �� | $ | 4,789 |
| $ | 2,505 |
| $ | 70,298 |
(a) | Residential real estate includes revenue of $23.1 million for the six months ended June 30, 2018 for a one-time receipt of RiverTown impact fees related to the 2014 RiverTown transaction. |
The Company expenses the fair value of the assets at the time the assets are allocated to participants, which is expected to be allocated up to the next three years. During the nine months ended September 30, 2018 and 2017, the Company recorded an expense of $1.1 million and $1.2 million, respectively, for the fair value of the assets, less expenses, that were allocated to participants. Any gain or loss on these assets is reflected in the Company’s condensed consolidated statements of income and was less than a $0.1 million loss for the three and nine months ended September 30, 2018 and less than a $0.1 million gain for the three and nine months ended September 30, 2017. Refer to Note 5. Financial Instruments and Fair Value Measurements.
2934
16. Other Income (Expense)
Other income (expense) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| September 30, |
| September 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
Investment income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
| $ | 1,802 |
| $ | 4,445 |
| $ | 7,025 |
| $ | 13,016 |
|
| $ | 2,302 |
| $ | 2,342 |
| $ | 4,115 |
| $ | 5,222 |
|
Accretion income |
|
| 218 |
|
| 375 |
|
| 641 |
|
| 1,696 |
|
|
| 23 |
|
| 202 |
|
| 84 |
|
| 423 |
|
Net realized gain (loss) on the sale of investments |
|
| 125 |
|
| (104) |
|
| (961) |
|
| 10,757 |
| |||||||||||||
Net realized loss on the sale of investments |
|
| — |
|
| (8) |
|
| (2) |
|
| (1,086) |
| |||||||||||||
Other-than-temporary impairment loss |
|
| (1,660) |
|
| (403) |
|
| (1,723) |
|
| (769) |
|
|
| — |
|
| — |
|
| — |
|
| (63) |
|
Unrealized (loss) gain on investments, net |
|
| (89) |
|
| — |
|
| 641 |
|
| — |
|
|
| (1,915) |
|
| 1,267 |
|
| 133 |
|
| 729 |
|
Interest income from investments in SPEs |
|
| 2,049 |
|
| 2,050 |
|
| 6,148 |
|
| 6,151 |
|
|
| 2,048 |
|
| 2,049 |
|
| 4,096 |
|
| 4,099 |
|
Interest accrued on notes receivable and other interest |
|
| 130 |
|
| 89 |
|
| 450 |
|
| 259 |
|
|
| 77 |
|
| 129 |
|
| 154 |
|
| 322 |
|
Total investment income, net |
|
| 2,575 |
|
| 6,452 |
|
| 12,221 |
|
| 31,110 |
|
|
| 2,535 |
|
| 5,981 |
|
| 8,580 |
|
| 9,646 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense and amortization of discount and issuance costs for Senior Notes issued by SPE |
|
| (2,197) |
|
| (2,195) |
|
| (6,590) |
|
| (6,582) |
|
|
| (2,200) |
|
| (2,197) |
|
| (4,399) |
|
| (4,393) |
|
Other interest expense |
|
| (729) |
|
| (843) |
|
| (2,315) |
|
| (2,535) |
|
|
| (824) |
|
| (757) |
|
| (1,567) |
|
| (1,586) |
|
Total interest expense |
|
| (2,926) |
|
| (3,038) |
|
| (8,905) |
|
| (9,117) |
|
|
| (3,024) |
|
| (2,954) |
|
| (5,966) |
|
| (5,979) |
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on land contribution to equity method investment |
|
| — |
|
| — |
|
| 1,472 |
|
| — |
| |||||||||||||
Accretion income from retained interest investments |
|
| 316 |
|
| 279 |
|
| 909 |
|
| 813 |
|
|
| 327 |
|
| 303 |
|
| 647 |
|
| 593 |
|
Miscellaneous (expense) income, net |
|
| (48) |
|
| 304 |
|
| (122) |
|
| 3,833 |
| |||||||||||||
Insurance proceeds |
|
| 3,792 |
|
| — |
|
| 4,071 |
|
| — |
| |||||||||||||
Hurricane expense |
|
| (805) |
|
| — |
|
| (1,127) |
|
| — |
| |||||||||||||
Miscellaneous expense, net |
|
| (31) |
|
| (60) |
|
| (84) |
|
| (73) |
| |||||||||||||
Other income, net |
|
| 268 |
|
| 583 |
|
| 787 |
|
| 4,646 |
|
|
| 3,283 |
|
| 243 |
|
| 4,979 |
|
| 520 |
|
Total other (expense) income, net |
| $ | (83) |
| $ | 3,997 |
| $ | 4,103 |
| $ | 26,639 |
| |||||||||||||
Total other income, net |
| $ | 2,794 |
| $ | 3,270 |
| $ | 7,593 |
| $ | 4,187 |
|
Investment Income, Net
Interest and dividend income includes interest income accrued or received on the Company’s corporate debt securities, commercial paper and money market funds, and dividend income received from the Company’s investment in preferred stock and other investments.stock. Accretion income includes the amortization of the premium or accretion of discount related to the Company’s available-for-sale securities, which is amortized based on an effective interest rate method over the term of the available-for-sale securities. Net realized gain (loss)loss on the sale of investments include the gains or losses recognized on the sale of available-for-sale securities prior to maturity. Other-than-temporary impairment loss includes impairments related to the Company’s corporate debt securities for the three and ninesix months ended SeptemberJune 30, 2018 and impairments related to the Company’s corporate debt securities and preferred stock for the three and nine months ended September 30, 2017.
2018. Unrealized (loss) gain on investments, net includes unrealized gains or losses on investments - equity securities due to the adoption of ASU 2016‑01. Prior to 2018, unrealized gains or losses related to these investments were recorded in accumulated other comprehensive loss.securities.
Interest income from investments in SPEs primarily includes interest accrued or receivedearned on the investments held by Panama City Timber Finance Company, LLC, which is used to pay the interest expense for Senior Notes held by Northwest Florida Timber Finance, LLC.
Interest Expense
Interest expense includes interest expenseincurred related to the Company’s CDD debt, PPN JV LoanSenior Notes issued by Northwest Florida Timber Finance, LLC, project financing and Pier Park Outparcel Construction Loan.finance leases. Borrowing costs, including the discount and issuance costs for the Senior Notes issued by Northwest Florida Timber Finance, LLC, are amortized based on the effective interest method at an effective rate of 4.9%.
3035
Other Income, Net
Other income, net primarily includes gain on land contribution, income from the Company’s retained interest investments, insurance settlement proceeds, hurricane expenses and other income and expense items. The six months ended June 30, 2019, include a gain of $1.5 million on land contributed to our unconsolidated Pier Park TPS JV. See Note 9, Real Estate Joint Ventures for additional information. During the ninethree and six months ended SeptemberJune 30, 2017,2019, the Company negotiated anreceived $3.8 million and $4.1 million, respectively, of insurance settlement that resulted in proceeds and incurred $0.8 million and $1.1 million, respectively, of $3.5 million,hurricane expenses related to Hurricane Michael. See Note 6. Hurricane Michael for reimbursement of certain attorney fees and related costs incurred by the Company. This amount wasadditional information. These amounts were included in other income, net in the condensed consolidated statements of income.
The Company records the accretion of investment income from its retained interest investment over the life of the retained interest using the effective yield method with rates ranging from 3.7% to 12.2%11.7%.
17. Segment Information
The Company conducts primarily all of its business in the following four reportable operating segments: (1) residential real estate, (2) resorts and leisure,hospitality, (3) commercial leasing and sales and (4) forestry. Prior to the fourth quarter of 2017, commercial real estate and leasing operations were treated as individual operating segments. See Note 1. Nature of Operations for additional information.
The Company’s reportable segments are strategic business units that offer different products and services. They are each managed separately and decisions about allocations of resources are determined by management based on these strategic business units.
The adoption of Topic 606 impacted the Company’s residential real estate segment as detailed below and had a de minimis impact on the resorts and leisure segment, but did not impact the commercial leasing and sales or forestry segments. The following summary details the Company’s revenue and the related timing of revenue recognition, along with cost of revenue by segment.
Revenue from real estate sales, including sales of homesites, commercial properties, operating properties and rural or timberland, is recognized at the point in time when a sale is closed and title transfers to the buyer, the buyer’s initial investment is adequate, any receivables are probable of collection, the usual risks and rewards of ownership have been transferred to the buyer and the Company does not have significant continuing involvement with the real estate sold.
The residential real estate segment generates revenue from the sale of developed homesites; the sale of parcels of entitled, undeveloped land; a lot residual on homebuilder sales that provides the Company a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold; the sale of tap and impact fee credits; marketing fees and other fees on certain transactions. Prior to 2018, these lot residuals and certain fees were recognized in revenue when consideration was received by the Company in periods subsequent to the initial recognition of revenue for the sale of the homesite. Effective January 1, 2018, with the adoption of Topic 606, estimated lot residuals and certain estimated fees are recognized as revenue at the point in time of the sale to homebuilders, subject to constraints, and any change in circumstances from the estimated amounts will be updated at each reporting period. See Note 2. Summary of Significant Accounting Policies. The residential real estate segment incurs cost of revenue primarily from costs directly associated with the land, development and construction of real estate sold and indirect costs such as development overhead, capitalized interest, marketing, project administration and selling costs.
As part of the Company’s April 2014 RiverTown real estate sale, the buyer, an affiliate of Mattamy (Jacksonville) Partnership d/b/a Mattamy Homes (“Mattamy”), was obligated to pay certain impact fees to the Company prior to April 2, 2019 and, depending on circumstances, potentially thereafter. On April 3, 2018, the Board of County Commissioners for St. Johns County adopted revised impact fee schedules that went into effect as of July 3, 2018, and increased impact fee rates for residential units. In June 2018, the Company received $23.1 million from Mattamy to pay the estimated impact fees based on Mattamy’s current development plans and the impact fee schedule in effect at the time of the payment. For the nine months ended September 30, 2018, the impact fees of $23.1 million were included in real estate revenue in the Company’s condensed consolidated statements of income. Mattamy may be required to pay to the Company additional impact fees based on its future development plans. Any consideration the Company may receive for additional impact fees will be based on a variety of factors outside the Company’s control, including impact fee
31
increases or decreases by St. Johns County, home sizes and the number of homes built in the project. The Company received impact fees for a total of less than $0.1 million and $0.2 million during the three months ended September 30, 2018 and 2017, respectively. The Company received impact fees for a total of $23.5 million and $0.5 million during the nine months ended September 30, 2018 and 2017, respectively. From April 2014 through September 30, 2018, the Company has received approximately $25.1 million in impact fee payments from Mattamy.
The resort and leisure segment generates revenue and incurs costs from the WaterColor Inn and WaterSound Inn, the vacation rental program, management of The Pearl Hotel, membership sales, membership reservations, restaurants, golf courses, a beach club, marina operations and other related resort activities. The revenue is generally recognized at the point in time as services are provided.
WaterColor Inn, WaterSound Inn, Vacation Rentals and Other Management Services - WaterColor Inn, WaterSound Inn and vacation rentals generate revenue from (1) the WaterColor Inn, WaterSound Inn and other management services, (2) management of The Pearl Hotel, (3) vacation rentals and (4) restaurants. The WaterColor Inn and WaterSound Inn generate revenue from service and rental fees and incur expenses from the cost of services and goods provided, maintenance of the inns’ facilities, personnel costs and third-party management fees. Revenue generated from the Company’s management services of The Pearl Hotel includes a monthly management fee, fifty percent of certain resort fees and a percentage of The Pearl Hotel’s gross operating profit. Expenses include primarily internal administrative costs. Prior to the sale of the short term vacation rental management business during December 2017, the vacation rental management business generated revenue from the rental of private homes owned by third parties and other services, which included the entire rental fee collected from the customer, including the homeowner’s portion. A percentage of the fee was remitted to the homeowner and presented in the cost of resorts and leisure revenue. Following the December 2017 sale, the Company no longer manages third party vacation rentals, but continues to manage vacation rental properties the Company owns. The vacation rental business incurs expenses from the holding cost of assets the Company owns and standard lodging personnel, such as front desk, reservations and marketing personnel. The Company’s restaurants generate revenue from food and beverage sales and incur expenses from the cost of services and goods provided and standard restaurant personnel costs.
Clubs - Club operations include the Company’s golf courses, beach club and facilities that generate revenue from membership sales, membership reservations, daily play at the golf courses, merchandise sales and food and beverage sales and incur expenses from the services provided, maintenance of the golf courses, beach club and facilities, personnel costs and third-party management fees. Club membership revenue is recognized when billed to the member and the non-refundable initiation fee is deferred and recognized ratably over the estimated membership period.
Marinas - The Company’s marinas generate revenue from boat slip rentals recognized over the term of the lease and fuel sales recognized at the time of sale, and incur expenses from cost of services provided, maintenance of the marina facilities, personnel costs and third-party management fees.
The commercial leasing and sales segment includes leasing retail, office and commercial property, cell towers, and other assets as well as planning, development, entitlement, management and sale of the Company’s commercial land holdings for a variety of uses, including a broad range of retail, office, hotel, multi-family and industrial uses. Leasing revenue consists of long term rental revenue, which is recognized as earned, using the straight-line method over the life of each lease. Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments change during the lease term. Accordingly, a receivable or liability is recorded representing the difference between the straight-line rent and the rent that is contractually due from the tenant. The commercial leasing and sales segment incurs leasing expenses primarily from maintenance and management of the Company’s properties, personnel costs and asset holding costs. Leasing operations include properties located in the Company’s Beckrich Office Park, consolidated Pier Park North JV and Windmark JV, as well as the Company’s industrial park, VentureCrossings and other properties. The commercial leasing and sales segment also generates revenue from the sale of developed and undeveloped land for retail, office, hotel, multi-family and industrial uses, from the sale of undeveloped land or land with limited development and entitlements and from the sale of commercial operating properties, which are recognized at the point in time when a sale is closed and title transfers to the buyer, the buyer’s initial investment is adequate, any receivables are probable of collection, the usual risks and rewards of ownership have been transferred to the buyer and the Company does not have significant continuing involvement with the real estate sold. Real estate sales in the
32
commercial leasing and sales segment incur costs of revenue directly associated with the land, development, construction and selling costs. Pier Park North JV, Pier Park Crossings JV and other assets, which are subject to third-party financing incur interest and financing expenses related to the loans as described in Note 10. Debt, Net.
The forestry segment produces and sells pulpwood, sawtimber and other forest products and may sell the Company’s timber or rural land holdings. Revenue from the sale of the Company’s forestry products is primarily from open market sales of timber on site without the associated delivery costs and is derived from either pay-as-cut sales contracts or timber bid sales. Under a pay-as-cut sales contract, the risk of loss and title to the specified timber transfers to the buyer when cut by the buyer, and the buyer or some other third party is responsible for all logging and hauling costs, if any. Revenue is recognized at the point in time when risk of loss and title are transferred. Timber bid sales are agreements in which the buyer agrees to purchase and harvest specified timber (i.e., mature pulpwood and/or sawlogs) on a tract of land over the term of the contract. Unlike a pay-as-cut sales contract, risk of loss and title to the trees transfer to the buyer when the contract is signed and revenue is recognized accordingly. The buyer pays the full purchase price when the contract is signed and the Company does not have any additional performance obligations. The forestry segment incurs costs of revenue from internal costs of forestry management and property taxes.
The forestry segment may also generate revenue from the sale of the Company’s timber holdings, undeveloped land or land with limited development and easements, which are recognized at the point in time when a sale is closed and title transfers to the buyer, the buyer’s initial investment is adequate, any receivables are probable of collection, the usual risks and rewards of ownership have been transferred to the buyer and the Company does not have significant continuing involvement with the real estate sold. Costs incurred as part of a sale of these lands may include the cost of timber, land, minimal development costs and selling costs. Leasing revenue within the forestry segment consists primarily of hunting leases, which is recognized as income over the term of each lease.
The Company uses income before income taxes and non-controlling interest and other measures for purposes of making decisions about allocating resources to each segment and assessing each segment’s performance, which the Company believes represents current performance measures.
The accounting policies of the segments are set forth in Note 2 to the Company’s consolidated financial statements contained in Item 15 of the Company’s Annual Report on Form 10‑K for the year ended December 31, 2017.2018. Total revenue represents sales to unaffiliated customers, as reported in the Company’s condensed consolidated statements of income. All significant intercompany transactions have been eliminated in consolidation. The categorycaption entitled “Other” under operating revenue consists of mitigation credit and title fee revenue and non-allocatedrevenue. The caption entitled “Other” under income (loss) before income taxes consists of corporate general and administrativeoperating expenses, net of investmentcorporate other income.
3336
Information by business segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| Six Months Ended | ||||||||||||||||
|
| September 30, |
| September 30, |
| June 30, |
| June 30, | ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Operating revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate (a) |
| $ | 1,959 |
| $ | 9,411 |
| $ | 37,749 |
| $ | 15,391 |
| $ | 13,825 |
| $ | 28,755 |
| $ | 17,187 |
| $ | 35,790 |
Resorts and leisure |
|
| 12,565 |
|
| 18,198 |
|
| 33,284 |
|
| 45,633 | ||||||||||||
Hospitality |
|
| 15,598 |
|
| 13,270 |
|
| 23,065 |
|
| 20,719 | ||||||||||||
Commercial leasing and sales |
|
| 6,225 |
|
| 3,470 |
|
| 12,720 |
|
| 11,028 |
|
| 3,541 |
|
| 3,345 |
|
| 7,752 |
|
| 6,495 |
Forestry revenue |
|
| 2,627 |
|
| 2,719 |
|
| 7,415 |
|
| 5,630 |
|
| 2,142 |
|
| 2,809 |
|
| 3,008 |
|
| 4,789 |
Other (b) |
|
| 300 |
|
| 190 |
|
| 2,806 |
|
| 467 |
|
| 440 |
|
| 2,255 |
|
| 558 |
|
| 2,505 |
Consolidated operating revenue |
| $ | 23,676 |
| $ | 33,988 |
| $ | 93,974 |
| $ | 78,149 |
| $ | 35,546 |
| $ | 50,434 |
| $ | 51,570 |
| $ | 70,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
(Loss) income before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential real estate (a) |
| $ | (368) |
| $ | 1,802 |
| $ | 26,048 |
| $ | 3,026 |
| $ | 5,553 |
| $ | 24,957 |
| $ | 5,808 |
| $ | 26,417 |
Resorts and leisure |
|
| 1,747 |
|
| 2,916 |
|
| 3,615 |
|
| 4,521 | ||||||||||||
Hospitality |
|
| 5,312 |
|
| 2,403 |
|
| 4,505 |
|
| 1,868 | ||||||||||||
Commercial leasing and sales |
|
| 609 |
|
| (164) |
|
| 329 |
|
| (301) |
|
| (171) |
|
| (190) |
|
| 2,319 |
|
| (280) |
Forestry |
|
| 2,072 |
|
| 2,437 |
|
| 5,830 |
|
| 4,808 |
|
| 1,725 |
|
| 2,226 |
|
| 2,305 |
|
| 3,757 |
Other |
|
| (2,199) |
|
| 1,793 |
|
| (972) |
|
| 19,720 |
|
| 1,243 |
|
| 3,218 |
|
| 1,365 |
|
| 1,228 |
Consolidated income before income taxes |
| $ | 1,861 |
| $ | 8,784 |
| $ | 34,850 |
| $ | 31,774 |
| $ | 13,662 |
| $ | 32,614 |
| $ | 16,302 |
| $ | 32,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
Total assets: |
|
|
|
|
|
|
Residential real estate |
| $ | 122,654 |
| $ | 117,732 |
Resorts and leisure |
|
| 75,334 |
|
| 83,151 |
Commercial leasing and sales |
|
| 177,048 |
|
| 163,271 |
Forestry |
|
| 20,715 |
|
| 20,212 |
Other |
|
| 474,849 |
|
| 536,627 |
Total assets |
| $ | 870,600 |
| $ | 920,993 |
(a) | Includes revenue of $23.1 million for the |
(b) | Includes revenue of $2.2 million for the |
|
|
|
|
|
|
|
|
| June 30, |
| December 31, | ||
|
| 2019 |
| 2018 | ||
Total assets: |
|
|
|
|
|
|
Residential real estate |
| $ | 137,530 |
| $ | 125,642 |
Hospitality |
|
| 84,103 |
|
| 70,746 |
Commercial leasing and sales |
|
| 205,238 |
|
| 182,658 |
Forestry |
|
| 20,737 |
|
| 20,189 |
Other |
|
| 458,639 |
|
| 471,727 |
Total assets |
| $ | 906,247 |
| $ | 870,962 |
18. Commitments and Contingencies
The Company establishes an accrued liability when it believes it is both probable that a material loss has been incurred and the amount of the loss can be reasonably estimated. The Company will evaluate the range of reasonably estimated losses and record an accrued liability based on what it believes to be the minimum amount in the range, unless it believes an amount within the range is a better estimate than any other amount. In such cases, there may be an exposure to loss in excess of the amounts accrued. The Company evaluates quarterly whether further developments could affect the amount of the accrued liability previously established or would make a loss contingency both probable and reasonably estimable.
The Company also provides disclosure when it believes it is reasonably possible that a material loss will be incurred or when it believes it is reasonably possible that the amount of a loss will exceed the recorded liability. The Company reviews loss contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. This estimated range of possible losses is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as
34
known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.
37
The Company is subject to a variety of litigation, claims, other disputes and governmental proceedings that arise from time to time in the ordinary course of its business, including litigation related to its prior homebuilding and development activities. The Company cannot assuremake assurances that it will be successful in defending these matters. Based on current knowledge, the Company does not believe that loss contingencies arising from pending litigation, claims, other disputes and governmental proceedings, including those described herein, will have a material adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period.
The Company is subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. It is the Company’s policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and a range of loss can be reasonably estimated. As assessments and cleanups proceed, these accruals are reviewed and adjusted, if necessary, as additional information becomes available. The Company is in the process of assessing certain properties in regard to the effects, if any, on the environment from the disposal or release of wastes or substances. Management is unable to quantify future rehabilitation costs above present accruals at this time or provide a reasonably estimated range of loss.
Other litigation, claims, disputes and governmental proceedings, including environmental matters, are pending against the Company. Accrued aggregate liabilities related to the matters described above and other litigation matters were $1.3$1.2 million as of each SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable. Due to uncertainties related to these matters, accruals are based only on the information available at the time. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a givenfor any particular reporting period.
The Company has retained certain self-insurance risks with respect to losses for third party liability and property damage, including its timber assets.
At Septemberboth June 30, 20182019 and December 31, 2017,2018, the Company was required to provide surety bonds that guarantee completion of certain infrastructure in certain development projects and mitigation banks of $8.1$9.4 million, and $8.6 million, respectively and standby letters of credit of less than $0.1 million at December 31, 2017, which may potentially result in liability to the Company if certain obligations of the Company are not met.
As of SeptemberJune 30, 2018,2019, the Company had a total of $41.5$96.9 million in construction and development related contractual obligations.obligations, of which a portion will be funded through committed financing arrangements.
19. Subsequent Event
On October 10, 2018 Hurricane Michael impactedIn January 2019, the Florida Panhandle, which resultedCompany’s unconsolidated Pier Park TPS JV, entered into a $14.4 million loan, maturing in widespread damageJanuary 2026 (the “Pier Park TPS JV Loan”). The Pier Park TPS JV Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the Pier Park TPS JV Loan, the Company and a wholly owned subsidiary of the Company (the “Guarantor”) entered into a joint and several guarantee in favor of the lender, to guarantee the payment and performance of the borrower. The Guarantors’ liability under the Pier Park TPS JV Loan will be automatically reduced to 50.0%, or a further 25.0% of the outstanding principal balance upon reaching and maintaining certain debt service coverage. In addition, the guarantee can become full recourse in the case of the failure of Guarantor to abide by or perform any of the covenants or warranties to be performed on the part of such Guarantor; any sale, conveyance or transfer of the property; upon the filing or commencement of voluntary bankruptcy or insolvency proceedings; the entry of monetary judgement or assessment or the filing of any tax lien against either the borrower or Guarantor; and the dissolution of the borrower or Guarantor. As of June 30, 2019, there was no principal balance outstanding related to the area. The majority of the Company’s properties incurred minimal or no damage; however the Company’s Bay Point Marina in Bay County and Port St. Joe Marina in Gulf County, as well as certain timber and commercial leasing assets were impacted. The marinas suffered significant loss requiring long-term restoration and remain closed.
The Company’s timber assets are self-insured and an initial assessment of timber operations revealed an approximate 3% loss of total timber assets, primarily located in eastern Bay County and Gulf County. Approximately 234,000 tons of timber were affected and will be salvaged or lost. The majority of the Company’s other timberlands, have little or no damage.Pier Park TPS JV Loan.
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GAAP guidance provides that property damaged by a natural disaster be evaluated for impairment loss in the period the loss occurs. The impairment loss will represent the Company’s estimate of property damage. The Company is continuing to make a full assessment of the extent of the impact.
The Company maintains property and business interruption insurance, subject to certain deductibles, and is currently assessing claims under such policies; however, the timing and amount of insurance proceeds are uncertain and may not be sufficient to cover all losses. Timing differences are likely to exist between the impairment losses, capital expenditures made to repair or restore properties and recognition and receipt of insurance proceeds reflected in our financial statements.
The Company expects that its results of operations related to the marinas and timber assets will be impacted in the near term.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our annual report on Form 10‑K. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties described in “Forward-Looking Statements” below and “Risk Factors” on page 79 of our annual report on Form 10‑K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this quarterly report on Form 10-Q, unless required by law.
Business Overview
We areSt. Joe is a real estate development, asset management and operating company with real estate assets currentlyand operations concentrated primarilyin Northwest Florida, which we predominantly use, or intend to use, for or in connection with, our various residential real estate developments, hospitality operations, commercial developments and leasing operations and our forestry operations.
We have significant residential and commercial land-use entitlements in hand or in process. We actively seek higher and better uses for our real estate assets through a range of activities from strategic land planning and development, infrastructure improvements and promoting economic development in Northwest Florida. We may explore the sale of such assets opportunistically or when we believe that we or others can better deploy those resources.
As a real estate development company, we seek to enhance the value of our real estate assets by undertaking targeted types of residential and commercial real estate development opportunities. These targeted opportunities are intended to meet market demand where historically we sold land for other developers to meet that market demand. As an operating company, we operate some of the finest hospitality assets that Northwest Florida has to offer. As an asset management company, we actively manage leasing operations and forestry operations to capture and enhance the value of our real estate assets. As an operating company, we operate some of the finest resorts and leisure operations that Northwest Florida has to offer, including the award-winning WaterColor Inn. Approximately 90% of our real estate land holdings are located within fifteen miles of the Gulf of Mexico.
We expect to use our land holdings, our cash and cash equivalents and investments to increase recurring revenue, while creating long-term value for our shareholders. We believe that our present real estate holdings and liquidity position and our land holdings provide us with numerous opportunities to increase recurring revenue and create long-term value for our shareholders by allowing us to focus on our core business activity of real estate development and asset management and resort operations. We actively seek higher and better uses for our diverse real estate assets through a wide range of strategic activities from land planning and development, to targeted infrastructure improvements and promoting economic development in the Northwest Florida region. We have significant residential and commercial land-use entitlements in hand or in process related to our land.management.
We seek opportunities to invest our funds in ways that could increase our returns. These investments may include longer term commercial or residential real estate or real estate related investments (in which we may play an active or passive role), investments in real estate investment trusts and other investments in liquid or illiquid securities where we believe we can increase our returns.
Our real estate investment strategy focuses on projects that meet our investment return criteria. The time frame for these expenditures and investments tends towill vary based on the type of project. However, our practice is to only incur such expenditures when our analysis indicates that a project will generate a return equal to or greater than the threshold return over its life.
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Segments
We conduct primarily all of our business in the following four reportable operating segments: (1) residential real estate, (2) resorts and leisure,hospitality, (3) commercial leasing and sales and (4) forestry. Prior toCommencing in the fourth quarter of 2017, commercial real estate2018, our previously titled “resorts and leasing operations were treated as individual operating segments. See Note 1. Natureleisure” segment was retitled “hospitality,” with no effect on the condensed consolidated
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balance sheets, statements of income, statements of comprehensive income or statements of cash flows for additional information.the periods presented.
The following table sets forth the relative contribution of these operating segments to our consolidated operating revenue during the three and nine months ended September 30, 2018 and 2017:revenue:
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Residential real estate (a) |
| 8.3 | % | 27.7 | % | 40.2 | % | 19.7 |
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| 38.9 | % | 57.0 | % | 33.3 | % | 50.9 | % |
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Resorts and leisure |
| 53.1 | % | 53.5 | % | 35.4 | % | 58.4 |
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Hospitality |
| 43.9 | % | 26.3 | % | 44.7 | % | 29.5 | % |
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Commercial leasing and sales |
| 26.3 | % | 10.2 | % | 13.5 | % | 14.1 |
| % |
| 10.0 | % | 6.6 | % | 15.0 | % | 9.2 | % |
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Forestry |
| 11.1 | % | 8.0 | % | 7.9 | % | 7.2 |
| % |
| 6.0 | % | 5.6 | % | 5.9 | % | 6.8 | % |
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Other (b) |
| 1.2 | % | 0.6 | % | 3.0 | % | 0.6 |
| % |
| 1.2 | % | 4.5 | % | 1.1 | % | 3.6 | % |
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Consolidated operating revenue |
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 |
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| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
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(a) | Includes revenue of $23.1 million for the |
(b) | Other includes mitigation bank credit sales and title fee revenue. For the |
For more information regarding our operating segments, see Note 17. Segment Information of our condensed consolidated financial statements included in this quarterly report.
Residential Real Estate
Our residential real estate segment typically plans and develops residential communities of various sizes.sizes across a wide range of price points and sells homesites to builders or retail consumers. From time to time, our residential real estate segment also evaluates opportunities to sell some of our resorts and leisurehospitality properties.
Below is a description of some of our major residential development communities in Northwest Florida that we are currently in the process of planning or developing. As is true with all of our projects, whatthe parcels of residential real estate which will actually be developed, including the number of unitshomesites that wewill ultimately approvebe approved for development in any residential development community, will depend on our development strategy, the extent to which the anticipated returns of the project meet our investment return criteria and the availability of capital resources to fund the development.
The Watersound Origins communityis a residentiallarge scale, mixed use community in South Walton County, Florida with direct access to Lake Powell. The project has received government approval for 1,074 single family units with an additional multi-family component. To date, 317 lotsAs of June 30, 2019, 562 homesites are fully developed, of which 305412 have sold, and 359 lotssold. Currently 580 homesites are currently under site development. Purchase agreements with builders for 515 lots have been fully executed. The Watersound Origins community currently includes a six-hole golf course,development, which is owned by us and operated by our resorts and leisure segment.will be completed in phases. As of June 30, 2019, we had 624 homesites under contract.
The Breakfast Point communityis a residential community in Panama City Beach, Florida. The projectcommunity has received government approval for 369 single family units. To date, 281 lotshomesites. As of June 30, 2019, 369 homesites are fully developed, andof which 330 have sold. Currently 88 lots areAs of June 30, 2019, we had 39 homesites under site development. In additioncontract with builders. Planning is currently in process to expand the Breakfast Point community to include an additional future phase.
The Breakfast Point East community ,is a proposed residential community in Bay County, Florida adjacent property to theand east of the Breakfast Point community. The community has received government approval for 1,760 single family unitshomesites and 440 multi-family units. Engineering is currently in process for Phase 1 of Breakfast Point East.
The SouthWood communityis a large scale, mixed use community located in Tallahassee, Florida. The projectcommunity has received government approval for 4,770 residential units, includinghomesites, which includes 2,074 single family residences and 2,696 multi-family units.multi-family. To date, 2,697 lots and residential units2,746 homesites are sold and there are no lotssold. Engineering is currently in process for 70 homesites. As of June 30, 2019, we had 70 homesites under site development. Purchase agreementscontract with two builders for 120 lots/units have been fully executed. SouthWood also includes a golfbuilders.
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clubhouse, 18‑hole golf course and a town center with dining, retail shops and offices. The SouthWood Golf Club was operated by our resorts and leisure segment and a portion of the town center is leased and operated by our commercial leasing and sales segment. In July 2018, we sold the golf course and clubhouse that are now owned and operated by a third party.
The WindMark Beach community communityis a residential community in Port St. Joe, Florida. The projectcommunity has received governmental approval for 1,516 residential units.homesites. To date, 224 lotshomesites are fully developed and sold. Currently, engineering is in process for 94 lots.homesites are under site development, all of which are under contract with a builder.
The Latitude Margaritaville Watersound communityis a proposedplanned 55+ active adult residential community in Bay County, Florida with direct access to the IntraCoastalGulf Intracoastal Waterway. The residential project is proposed tocommunity will be developed as a joint ventureJV with our JV partner Minto Communities USA, a homebuilder and community developer, Minto Communities USA.developer. Planning, engineering, and permitting approvals are in process for the sales center and first phase, which is estimated to include approximately 3,0003,500 residential units.homesites.
The Titus Park community is a new residential community located in east Bay County, Florida. The residential community is proposed to be developed in multiple phases. Currently clearing is in process for 154 homesites. As of July 11, 2019, the 154 homesites were under contract with a builder.
The College Station community is a new residential community located in east Bay County, Florida. The residential community is proposed to be developed in multiple phases. Currently clearing is in process for 126 homesites. As of June 30, 2019, we had 33 homesites under contract with a builder.
The Park Place community is a proposed residential community located in the City of Callaway in east Bay County, Florida. This residential community is proposed to be developed in multiple phases. Planning and design are currently in process for Phase 1 of the Park Place community. As of June 30, 2019, we had 51 homesites under contract with a builder.
The Mexico Beach Village residential community is a proposed mixed use community located in the City of Mexico Beach in east Bay County, Florida. The residential component of this community is proposed to be developed in multiple phases. Planning and design are currently in process for this community.
The WaterColor community is a residential community located in South Walton County, Florida. Engineering is currently in process for a new residential phase of this community.
The Camp Creek community is a proposed residential community located in South Walton County, Florida. The community is adjacent to the Camp Creek Golf Club and is proposed to be developed in multiple phases. Engineering and permitting approvals are currently in process for Phase 1 of the Camp Creek residential community.
We have other residential communities, such as the SummerCamp Beach RiverCamps, and WaterColorRiverCamps communities that have homesites available for sale or future development. In addition, we have residential communities, such as WaterSound Beach, and WaterSound West Beach and Wild Heron that are substantially developed, and the remaining developed and availablewith homesites in these communities are available for sale. In addition, we own land in east Bay County, Florida, which we are evaluating for future residential communities.
The revenue resulting from our residential real estate operations may vary from period to period depending on the communities where lotshomesites are sold, as prices vary significantly by community. In addition, the majority of our sales are to homebuilders, who generally buy more homesites in a single transaction but tend to buy on a more sporadic basis. As a result, we may experience volatility in the consistency and pace of our residential real estate sales.
The Bay-Walton Sector Plan is a long term master plan that includes entitlements, or legal rights, to develop over 170,000 residential unitshomesites and over 22 million square feet of retail, commercial, and industrial space on approximately 110,500 acres of our land holdings. We anticipate a wide range of residential and commercial uses on these land holdings, including some portionholdings. Development of these entitlements serving the active adult retirement market. We believe that there are growing retirementBay-Walton Sector Plan is underway with the commencement of engineering for the Latitude Margaritaville Watersound community, engineering of the Camp Creek residential community and workforce housing demographics in our region and that ourongoing development experience andof the location, size and contiguous nature of our Florida land holdings provide us with strategic opportunities in these demographics.Watersound Origins community.
As of September 30, 2018, we had 447 residential lots under development. We had approximately 650914 residential lotshomesites under contract as of SeptemberJune 30, 2018,2019, which are expected to result in revenue of approximately $65.2$89.5 million at closing of the lots,homesites, which are expected over the next several years. As of SeptemberJune 30, 20172018 we had approximately 250644 residential lotshomesites under contract, which are expected to result in revenue of $9.4approximately
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$65.5 million ($8.15.6 million has been realized through SeptemberJune 30, 2018)2019). The increase is due to the development of additional homesites and increased builder contracts for residential lots. On August 28, 2018, we announced planshomesites. The number of homesites under contract are subject to create a new home development within the Watersound Origins community and entered into a definitive long-term contractual agreement with Kolter Homes, LLC that will consistchange based on final platting of approximately 466 single-family detached homes to be constructed by Kolter. Lot construction in this new development is expected to begin in 2019 with homes being available for sale in 2020.each community.
Resorts and LeisureHospitality
Our resorts and leisurehospitality segment features hotel operations, vacation rentals,lodging, restaurants, golf courses, a beach club,clubs, marinas and other resort amenities. assets. Our resorts and leisurehospitality segment operations are managed for us by a third party management company.
Resorts, Lodging and Other Management Services - We own and operate the award-winning WaterColor Inn, an award winning boutique hotel,which includes the Fish Out of Water (“FOOW”) restaurant and the WaterSound Inn, which provide guests with access to a beach club, spa, tennis center, an award-winning restaurant,Inn. We own and operate retail and commercial space.outlets near our hospitality facilities, including the WaterColor Store. We also operate the award-winning The Pearl Hotel and Havana Beach Bar & Grille restaurant.
Clubs – Our private membership club (“The Clubs by Joe”) provides members and guests in our hotels access to our resort facilities, which include the Camp Creek Golf Club, Shark’s Tooth Golf Club, and the WaterSound Beach Club. The Clubs by Joe (the “Club”) is our private membership club that provides members and guests access to our facilities, which include golf courses and a beach club located in the Panama City Beach area. The Club’s focus isfocused on creating a world class membership experience combined with the luxurious aspects of a four star/four diamond resort.Below is a description of some of our club properties, which are located in Northwest Florida. As is true with all of our projects, the parcels of real estate which will actually be developed will depend on our development strategy, the extent to which the anticipated returns of the project meet our investment return criteria, and the availability of capital resources to fund the development.
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We own additional properties that weand operate as short term vacation rental property. Our short term vacation rental management business previously rentedthe WaterSound Beach Club which includes two pools, private homes owned by third partiesbeach access, two restaurants, three bars, a kid’s room and a recreation area.
We currently own and operate three golf courses. The Shark’s Tooth Golf Club includes an 18-hole golf course, a full club house, featuring men’s and women’s locker rooms, a pro shop, two restaurants and a tennis center located in the WaterColor, WaterSound BeachWild Heron community. The Camp Creek Golf Club includes an 18-hole golf course, a pro shop and surrounding communities to individuals who were vacationinga snack bar. The Origins Golf Club includes a six-hole golf course and a café located in the area. As discussed in Note 7. Sale of Vacation Rental Management,Watersound Origins community.
During 2018, we sold the SouthWood Golf Club, as well as the SouthWood House and cottages. Prior to the sale these assets were owned and operated by our short term vacation rental management business in December 2017.hospitality segment.
The Camp Creek Lifestyle Village is a proposed club membership amenity center that is planned to feature a health and wellness facility, adult pool and spa, leisure family pool, casual restaurant, tennis and pickle ball center, teen room, kid’s playground and sport fields. The Camp Creek Lifestyle Village is also planned to feature a 75 room boutique inn, restaurant and bar, men’s and women’s locker room and outfitter shop.
Marinas - We also manage, but do not own, The Pearl Hotel in Rosemary Beach, Florida. In addition, we own and operate two marinas in Northwest Florida.Florida, Bay Point Marina and Port St. Joe Marina. Subsequent to the landfall of Hurricane Michael on October 10, 2018, the marinas remain closed due to significant damage requiring long-term restoration, which is currently underway. We maintain property and business interruption insurance on the impacted marina assets. See Note 6. Hurricane Michael for additional information.
From time to time, we may explore the sale of certain resort and leisurehospitality properties, as well as the development of new resort and leisurehospitality properties.
Commercial Leasing and Sales
Our commercial leasing and sales segment includes leasing multi-family, retail, office and commercial property, cell towers and other assets as well as planning, development, entitlement, management and sale of our commercial land holdings for a variety of uses. These uses includinginclude a broad range of retail, office, hotel, assisted-living, multi-family and industrial uses.properties. From time to time, our commercial leasing and sales segment also evaluates opportunities to sell some of our resorts and leisurehospitality properties.
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Below is a listing of some of our commercial leasing and sales properties. As is true with all of our projects, what commercialthe parcels of real estate which will actually be developed will depend on our development strategy, the extent to which the anticipated returns of the project meet our investment return criteria, and the availability of capital resources to fund the development.
Pier Park North. Our Pier Park North JV owns a retail center of approximately 330,000 square feet in Panama City Beach, Florida, of which approximately 10,000 square feet remains to be developed.constructed. As of June 30, 2019, Pier Park North JV had 320,310 net leasable square feet, of which 96.3% were under lease.
VentureCrossings. VentureCrossings is a commercial and industrial development adjacent to the Northwest Florida Beaches International Airport. We are soliciting global office, retail and industrial users for this prime development location. We built and own 243,605 square feet of manufacturing and office space, which are currently under long-term leasesleases. Additionally, we are constructing an approximately 60,000 square foot flex space building that commenced in 2012 and 2017.we plan to complete during the third quarter of 2019.
Beckrich Office Park. We acquiredBeckrich Office Park includes two office buildings in April 2017, located in Panama City Beach, Florida, with over 67,000 net leasable square feet, of which 53.6%91.2% were under lease as of SeptemberJune 30, 2018.2019. Additionally, we are constructing a third office building and a new Starbucks building at Beckrich Office Park.
Pier Park Crossings. In April 2017, we formed the Pier Park Crossings JV to develop, manage and lease apartments in Panama City Beach, Florida. The parties are working together to develop and construct a 240 unit multi-family apartment home community. Construction began in the second quartercommunity is currently under construction. As of 2018, with leasing to commence upon completionJune 30, 2019, we had completed 96 units, of the initial buildings.which 87 were under lease.
Origins Town Center. The Origins town centerTown Center is entitled for approximately 330,000 square feet of retail and entertainment space, as well as approximately 127,000 square feet of office.office space. In August 2018, we entered into a lease with Sacred Heart Health Systems to construct a 6,700an approximately 6,500 square foot healthcare facility in the Origins town center. This is planned to be the first commercial project at this location.Town Center. The projectfacility is currently under construction. Additionally, we are designing a new multi-tenant commercial building.
Origins Crossings. In May 2019, we formed the Origins Crossings JV to develop, manage and lease apartments in Watersound, Florida, which will be located adjacent to the permitting phase.Origins Town Center. The parties are working together to develop a 217 unit apartment community, which is currently under construction.
Pier Park Northwest. Pier Park Northwest is entitled for hospitality and commercial uses. In the fall of 2017, we announced a joint ventureJV with InterMountain Management, LLC, which is unconsolidated and accounted for under the equity method of accounting, to construct and manage a TownePlace Suites by Marriott. We expect to break groundConstruction began in the fourth quarter of 2018 on the 124 room TownePlace Suites inSuites. This JV is unconsolidated and is accounted for under the fourth quarterequity method of 2018. This is plannedaccounting. Additionally, we are designing a new multi-tenant commercial building to be constructed on a portion of this site.
Topsail West. Topsail West is entitled for approximately 61,000 square feet of retail and entertainment space in Santa Rosa Beach, Florida. In April 2019, we entered into a lease on a build-to-suit restaurant for First Watch: The Daytime Café. The restaurant is currently under construction.
Watercrest. In May 2019, we formed the first commercial projectWatercrest JV to develop and operate a new assisted living and memory care community in Santa Rosa Beach, Florida, which will be located near Topsail West. The JV parties are working together to develop the 107 unit community, which is currently under construction.
North Glades/Breakfast Point Bank Building. In April 2019, we entered into a lease with Capital City Bank to construct a full-service banking location in Panama City Beach, Florida. The bank building is currently under construction.
In addition to the properties listed above, a flex space building of approximately 20,000 square feet is under construction at PierCedar Grove Commerce Park Northwest.in Panama City, Florida and in July 2019 we formed a JV to develop and operate a Busy Bee branded fuel station and convenience store in Panama City Beach, Florida that is currently under
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construction. We also have a number of projects in various stages of planning, including additional industrial flex space buildings, apartments and assisted living/ memory care facilities.
Forestry
Our forestry segment focuses on the management of our timber holdings in Northwest Florida and generates revenue primarily from open market sales of timber on site without the associated delivery costs. We grow and sell pulpwood, sawtimber and other forest products.
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We may sell our timber holdings, undeveloped land or land with limited development and easements. Some parcels include the benefits of limited development activity including improved roads, ponds and fencing. We have traditionally sold parcels of varying sizes ranging from less than one acre to thousands of acres. The pricing of these parcels varies significantly based on size, location, terrain, timber quality and other local factors. Costs incurred as part of a sale of these lands may include the cost of timber, land, minimal development costs and selling costs. We also lease land within the forestry segment for hunting and other uses.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base these estimates on historical experience, available current market information and on various other assumptions that management believes are reasonable under the circumstances. Additionally, we evaluate the results of these estimates on an on-going basis. Management’s estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and our accounting estimates are subject to change.
Critical accounting policies that we believe reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements are set forth in Item 7 of our Annual Report on Form 10‑K for the year ended December 31, 2017.2018. There have been no significant changes in these policies during the first ninesix months of 2018,2019, however we cannot assure you that these policies will not change in the future.
Recently Adopted and Issued Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies to our condensed consolidated financial statements included in this report for recently issued or adopted accounting standards, including the date of adoption and effect on our condensed consolidated financial statements.
Seasonality
Our business may be affected by seasonal fluctuations. For example, revenue from our resorts and leisurehospitality operations are typically higher in the second and third quarters, but can vary depending on the timing of holidays and school breaks, including spring break.
In addition to the seasonality effect described above,of our hospitality operations, our residential real estate business is predominantly composed of sales to homebuilders, who tend to buy multiple lotshomesites in sporadic transactions, which impacts the variability in our results of operations. In addition, the revenue resulting from our residential real estate operations may vary from period to period depending on the communities where lotshomesites are sold, as prices vary significantly by community. Our commercial real estate projects are likewise subject to one-off sales and the development of specific projects depending on demand. These variables have caused, and may continue to cause, our operating results to vary significantly from period to period.
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Results of Operations
Consolidated Results
The following table sets forth a comparison of the results of our operations for the three and nine months ended September 30, 2018 and 2017.operations:
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| $ | 6.2 |
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| 45.6 |
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Hospitality revenue |
|
| 15.6 |
|
| 12.9 |
|
| 23.0 |
|
| 19.9 |
| |||||||||||||
Leasing revenue |
|
| 3.1 |
|
| 3.0 |
|
| 9.3 |
|
| 8.4 |
|
|
| 3.7 |
|
| 3.5 |
|
| 7.2 |
|
| 6.9 |
|
Timber revenue |
|
| 1.8 |
|
| 2.0 |
|
| 5.3 |
|
| 4.7 |
|
|
| 0.7 |
|
| 1.9 |
|
| 1.3 |
|
| 3.6 |
|
Total revenue |
|
| 23.7 |
|
| 33.9 |
|
| 94.0 |
|
| 78.1 |
|
|
| 35.5 |
|
| 50.4 |
|
| 51.6 |
|
| 70.3 |
|
Expenses: |
|
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|
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|
|
|
Cost of real estate revenue |
|
| 3.7 |
|
| 6.4 |
|
| 10.8 |
|
| 10.4 |
|
|
| 6.8 |
|
| 3.0 |
|
| 8.7 |
|
| 7.1 |
|
Cost of resorts and leisure revenue |
|
| 9.7 |
|
| 14.5 |
|
| 26.5 |
|
| 38.2 |
| |||||||||||||
Cost of hospitality revenue |
|
| 9.0 |
|
| 9.4 |
|
| 16.2 |
|
| 16.2 |
| |||||||||||||
Cost of leasing revenue |
|
| 0.8 |
|
| 0.8 |
|
| 2.5 |
|
| 2.3 |
|
|
| 1.1 |
|
| 1.2 |
|
| 2.1 |
|
| 2.3 |
|
Cost of timber revenue |
|
| 0.2 |
|
| 0.2 |
|
| 0.6 |
|
| 0.6 |
|
|
| 0.2 |
|
| 0.2 |
|
| 0.3 |
|
| 0.4 |
|
Other operating and corporate expenses |
|
| 5.1 |
|
| 5.0 |
|
| 16.1 |
|
| 15.3 |
|
|
| 5.1 |
|
| 5.0 |
|
| 11.1 |
|
| 11.0 |
|
Depreciation, depletion and amortization |
|
| 2.3 |
|
| 2.3 |
|
| 6.8 |
|
| 6.2 |
|
|
| 2.4 |
|
| 2.3 |
|
| 4.5 |
|
| 4.5 |
|
Total expenses |
|
| 21.8 |
|
| 29.2 |
|
| 63.3 |
|
| 73.0 |
|
|
| 24.6 |
|
| 21.1 |
|
| 42.9 |
|
| 41.5 |
|
Operating income |
|
| 1.9 |
|
| 4.7 |
|
| 30.7 |
|
| 5.1 |
|
|
| 10.9 |
|
| 29.3 |
|
| 8.7 |
|
| 28.8 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net |
|
| 2.6 |
|
| 6.4 |
|
| 12.2 |
|
| 31.1 |
|
|
| 2.5 |
|
| 6.0 |
|
| 8.6 |
|
| 9.6 |
|
Interest expense |
|
| (2.9) |
|
| (3.0) |
|
| (8.9) |
|
| (9.1) |
|
|
| (3.0) |
|
| (2.9) |
|
| (6.0) |
|
| (5.9) |
|
Other income, net |
|
| 0.3 |
|
| 0.6 |
|
| 0.8 |
|
| 4.6 |
|
|
| 3.3 |
|
| 0.2 |
|
| 5.0 |
|
| 0.5 |
|
Total other income, net |
|
| — |
|
| 4.0 |
|
| 4.1 |
|
| 26.6 |
|
|
| 2.8 |
|
| 3.3 |
|
| 7.6 |
|
| 4.2 |
|
Income before income taxes |
|
| 1.9 |
|
| 8.7 |
|
| 34.8 |
|
| 31.7 |
|
|
| 13.7 |
|
| 32.6 |
|
| 16.3 |
|
| 33.0 |
|
Income tax benefit (expense) |
|
| 3.5 |
|
| (2.6) |
|
| (2.8) |
|
| (10.8) |
| |||||||||||||
Income tax expense |
|
| (3.4) |
|
| (6.5) |
|
| (4.1) |
|
| (6.3) |
| |||||||||||||
Net income |
| $ | 5.4 |
| $ | 6.1 |
| $ | 32.0 |
| $ | 20.9 |
|
| $ | 10.3 |
| $ | 26.1 |
| $ | 12.2 |
| $ | 26.7 |
|
4145
Real Estate Revenue and Gross Profit
The following table sets forth a comparison of our total real estate revenue and gross profit:
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|
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| ||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| ||||||||||||||||||||||||||||||||
|
| 2018 |
| % (1) |
| 2017 |
| % (1) |
|
| 2018 |
| % (1) |
| 2017 |
| % (1) |
|
|
| 2019 |
| % (1) |
| 2018 |
| % (1) |
|
| 2019 |
| % (1) |
| 2018 |
| % (1) |
|
| ||||||||
|
| Dollars in millions |
| Dollars in millions |
|
| Dollars in millions |
| ||||||||||||||||||||||||||||||||||||||
Revenue: |
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| ||
Residential real estate revenue |
| $ | 1.9 |
| 30.7 | % | $ | 9.4 |
| 87.9 | % |
| $ | 14.6 |
| 31.7 | % | $ | 15.4 |
| 79.4 | % |
|
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|
|
|
|
| |
Real estate revenue |
| $ | 13.8 |
| 89.0 | % | $ | 5.6 |
| 17.4 | % |
| $ | 17.2 |
| 85.6 | % | $ | 12.6 |
| 31.6 | % |
| |||||||||||||||||||||||
RiverTown impact fees |
|
| — |
| — | % |
| — |
| — | % |
|
| 23.1 |
| 50.1 | % |
| — |
| — | % |
|
|
| — |
| — | % |
| 23.1 |
| 72.0 | % |
|
| — |
| — | % |
| 23.1 |
| 57.9 | % |
|
Total residential real estate revenue |
|
| 13.8 |
| 89.0 | % |
| 28.7 |
| 89.4 | % |
|
| 17.2 |
| 85.6 | % |
| 35.7 |
| 89.5 | % |
| |||||||||||||||||||||||
Commercial real estate revenue |
|
| 3.3 |
| 53.2 | % |
| 0.4 |
| 3.7 | % |
|
| 4.0 |
| 8.7 | % |
| 2.6 |
| 13.4 | % |
|
|
| 0.1 |
| 0.7 | % |
| 0.4 |
| 1.2 | % |
|
| 1.0 |
| 5.0 | % |
| 0.8 |
| 2.0 | % |
|
Rural land and other revenue |
|
| 1.0 |
| 16.1 | % |
| 0.9 |
| 8.4 | % |
|
| 4.4 |
| 9.5 | % |
| 1.4 |
| 7.2 | % |
|
|
| 1.6 |
| 10.3 | % |
| 3.0 |
| 9.4 | % |
|
| 1.9 |
| 9.4 | % |
| 3.4 |
| 8.5 | % |
|
Real estate revenue |
| $ | 6.2 |
| 100.0 | % | $ | 10.7 |
| 100.0 | % |
| $ | 46.1 |
| 100.0 | % | $ | 19.4 |
| 100.0 | % |
|
| $ | 15.5 |
| 100.0 | % | $ | 32.1 |
| 100.0 | % |
| $ | 20.1 |
| 100.0 | % | $ | 39.9 |
| 100.0 | % |
|
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|
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|
|
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|
|
| ||
Gross profit: |
|
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|
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|
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|
|
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| ||
Residential real estate |
| $ | 0.9 |
| 47.4 | % | $ | 3.3 |
| 35.1 | % |
| $ | 7.0 |
| 47.9 | % | $ | 7.1 |
| 46.1 | % |
|
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|
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|
|
|
|
|
|
|
|
|
| |
Real estate |
| $ | 7.1 |
| 51.4 | % | $ | 3.2 |
| 57.1 | % |
| $ | 8.7 |
| 50.6 | % | $ | 6.1 |
| 48.4 | % |
| |||||||||||||||||||||||
RiverTown impact fees |
|
| — |
| — | % |
| — |
| — | % |
|
| 23.1 |
| 100.0 | % |
| — |
| — | % |
|
|
| — |
| — | % |
| 23.1 |
| 100.0 | % |
|
| — |
| — | % |
| 23.1 |
| 100.0 | % |
|
Total residential real estate |
|
| 7.1 |
| 51.4 | % |
| 26.3 |
| 91.6 | % |
|
| 8.7 |
| 50.6 | % |
| 29.2 |
| 81.8 | % |
| |||||||||||||||||||||||
Commercial real estate |
|
| 0.9 |
| 27.3 | % |
| 0.1 |
| 25.0 | % |
|
| 1.4 |
| 35.0 | % |
| 0.7 |
| 26.9 | % |
|
|
| 0.1 |
| 100.0 | % |
| 0.2 |
| 50.0 | % |
|
| 1.0 |
| 100.0 | % |
| 0.5 |
| 62.5 | % |
|
Rural land and other |
|
| 0.7 |
| 70.0 | % |
| 0.9 |
| 100.0 | % |
|
| 3.8 |
| 86.4 | % |
| 1.2 |
| 85.7 | % |
|
|
| 1.5 |
| 93.8 | % |
| 2.6 |
| 86.7 | % |
|
| 1.7 |
| 89.5 | % |
| 3.1 |
| 91.2 | % |
|
Gross profit |
| $ | 2.5 |
| 40.3 | % | $ | 4.3 |
| 40.2 | % |
| $ | 35.3 |
| 76.6 | % | $ | 9.0 |
| 46.4 | % |
|
| $ | 8.7 |
| 56.1 | % | $ | 29.1 |
| 90.7 | % |
| $ | 11.4 |
| 56.7 | % | $ | 32.8 |
| 82.2 | % |
|
(1) | Calculated percentage of total real estate revenue and the respective gross margin percentage. |
Residential Real Estate Revenue and Gross Profit. During the three months ended SeptemberJune 30, 2018,2019, total residential real estate revenue decreased $7.5$14.9 million, or 79.8%,51.9% to $1.9$13.8 million, as compared to $9.4$28.7 million during the same period in 2017,2018, and total residential real estate gross profit decreased $2.4$19.2 million, or 72.7%, to $0.9 million (or gross margin of 47.4%), as compared to $3.3 million (or gross margin of 35.1%), during the same period in 2017. The three months ended September 30, 2017 included $4.6 million for the sale of 64 lots in the WindMark Beach community to a homebuilder, with no comparable sales during the same period in 2018. During the nine months ended September 30, 2018, residential real estate revenue decreased $0.8 million, or 5.2%, to $14.6 million as compared to $15.4 million during the same period in 2017, and residential real estate gross profit decreased $0.1 million, or 1.4%, to $7.0 million (or gross margin of 47.9%), as compared to $7.1 million (or gross margin of 46.1%51.4%), as compared to $26.3 million, (or gross margin of 91.6%) during the same period in 2018. Included in total residential real estate revenue for the three months ended June 30, 2018 is $23.1 million for a one-time receipt of RiverTown impact fees related to the 2014 RiverTown transaction, resulting in a gross profit margin of 100.0%. During the three months ended June 30, 2019, excluding the one-time receipt of the RiverTown impact fees, residential real estate revenue increased $8.2 million, or 146.4% to $13.8 million, as compared to $5.6 million during the same period in 2018, and residential real estate gross profit increased $3.9 million, or 121.9%, to $7.1 million, (or gross margin of 51.4%), as compared to $3.2 million, (or gross margin of 57.1%), during the same period in 2017. 2018. During the three months ended SeptemberJune 30, 2018,2019, we sold 14 lots151 homesites compared to 88 lots37 homesites during the same period in 2017.2018.
During the ninesix months ended SeptemberJune 30, 2018, we sold 157 lots2019, total residential real estate revenue decreased $18.5 million, or 51.8% to $17.2 million, as compared to 122 lots$35.7 million during the same period in 2017.2018 and total residential real estate gross profit decreased $20.5 million, to $8.7 million (or gross margin of 50.6%), as compared to $29.2 million, (or gross margin of 81.8%) during the same period in 2018. Included in total residential real estate revenue for the six months ended June 30, 2018 is $23.1 million for a one-time receipt of RiverTown impact fees related to the 2014 RiverTown transaction, resulting in a gross profit margin of 100.0%. During the six months ended June 30, 2019, excluding the one-time receipt of the RiverTown impact fees, residential real estate revenue increased $4.6 million, or 36.5% to $17.2 million, as compared to $12.6 million during the same period in 2018, and residential real estate gross profit increased $2.6 million, or 42.6%, to $8.7 million, (or gross margin of 50.6%), as compared to $6.1 million, (or gross margin of 48.4%), during the same period in 2018. During the six months ended June 30, 2019, we sold 182 homesites compared to 143 homesites during the same period in 2018.
The number of lotshomesites sold varied each period due to the timing of builder contractual closing obligations and the timing of development of finished lotscompleted homesites in our primary residential communities. The revenue and gross profit for each
46
period was impacted by the volume of sales within each of the communities, and the difference in pricing among the communities.
Includedcommunities and the difference in real estate revenue for the nine months ended September 30, 2018 is revenuecost of $23.1 million for a one-time payment of RiverTown impact fees related to the 2014 RiverTown real estate sale, resulting in a gross profit margin of 100.0%. homesite development.
Commercial Real Estate Revenue and Gross Profit. During the three months ended June 30, 2019, there were no commercial land real estate sales. During the three months ended June 30, 2018, we had three commercial real estate sales totaling approximately 2 acres for $0.4 million, resulting in a gross profit margin of approximately 50.0%. During the six months ended June 30, 2019, we had two commercial real estate sales totaling approximately 51 acres for $1.0 million, with de minimis cost of revenue resulting in a gross profit margin of approximately 100.0%. During the six months ended June 30, 2018, we had four commercial real estate sale totaling approximately 5 acres for $0.8 million, resulting in a gross profit margin of approximately 62.5%. Revenue from commercial real estate can vary drasticallysignificantly from period to period depending on the proximity to developed areas and mix of commercial real estate sold in each period, with varying compositions of retail, office, industrial and other commercial uses. During the three months ended September 30, 2018, we had five commercial real estate sales totaling 314 acres for $3.3 million. During the nine months ended September 30, 2018, we had nine commercial real estate sales totaling 318 acres for $4.0 million. Commercial real estate revenue for the three and nine months ended September 30, 2018 included $2.6 million related to the sale of two resorts and leisure properties located in the SouthWood community, including the golf course. During the three months ended September 30, 2017, we had three commercial real estate sales totaling 11 acres for $0.4 million. During the nine months ended September 30, 2017, we had five commercial real estate sales totaling 36 acres for $2.6 million.
Rural Land and Other Revenue and Gross Profit. During the three months ended SeptemberJune 30, 2019, we sold approximately 34 acres of rural and timber land for $1.2 million and mitigation bank credits for $0.4 million, resulting in a gross profit margin of approximately 93.8%. During the three months ended June 30, 2018, we sold approximately 5077 acres of rural and timber land for $0.7 million and mitigation bank credits for $0.3$2.3 million, resulting in
42
a gross profit margin of approximately 70.0%86.7%. During the ninesix months ended SeptemberJune 30, 2018,2019, we sold approximately 14454 acres of rural and timber land for $1.6$1.3 million and mitigation bank credits for $2.8$0.6 million, resulting in a gross profit margin of approximately 86.4%89.5%. During the threesix months ended SeptemberJune 30, 2017,2018, we sold approximately 66 acres of rural and timber land for $0.7 million and mitigation bank credits for $0.2 million, with de minimis cost of revenue resulting in a gross profit margin of approximately 100.0%. During the nine months ended September 30, 2017, we sold approximately 15594 acres of rural and timber land for $0.9 million and mitigation bank credits for $0.5$2.5 million, resulting in a gross profit margin of approximately 85.7%91.2%. Revenue from rural land can vary drasticallysignificantly from period to period.
Our gross margin can vary significantly from period to period depending on the characteristics of property sold. Sales of rural and timber land typically have a lower cost basis than residential and commercial real estate sales. In addition, our cost basis in residential and commercial real estate can vary depending on the amount of development or other costs spent on the property.
For additional information see the Segment Results sections for Residential Real Estate, Commercial Leasing and Sales and Forestry.
Resorts and LeisureHospitality Revenue and Gross Profit
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|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
|
| 2019 |
| 2018 |
|
| 2019 |
| 2018 |
| ||||||||
|
| In millions |
|
| In millions |
| ||||||||||||||||||||||
Resorts and leisure revenue |
| $ | 12.6 |
| $ | 18.2 |
| $ | 33.3 |
| $ | 45.6 |
|
| ||||||||||||||
Hospitality revenue |
| $ | 15.6 |
| $ | 12.9 |
|
| $ | 23.0 |
| $ | 19.9 |
| ||||||||||||||
Gross profit |
| $ | 2.9 |
| $ | 3.7 |
| $ | 6.8 |
| $ | 7.4 |
|
|
| $ | 6.6 |
| $ | 3.5 |
|
| $ | 6.8 |
| $ | 3.7 |
|
Gross margin |
|
| 23.0 | % |
| 20.3 | % |
| 20.4 | % |
| 16.2 |
| % |
|
| 42.3 | % |
| 27.1 | % |
|
| 29.6 | % |
| 18.6 | % |
Resorts and leisureHospitality revenue decreased $5.6increased $2.7 million, or 30.8%20.9%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. In December 2017, we sold our short term vacation rental management business, which reduced our 2018 revenue. ForDuring the three months ended SeptemberJune 30, 2017,2019 the increase in hospitality revenue was due to the re-opening of the FOOW restaurant in late June 2018, the opening of the WaterColor Store in January 2019 and an increase in club membership revenue. These increases were partially offset by decreases related to the WaterColor Beach Club being closed during the current period for renovations, golf revenue primarily related to the short term vacation rental business was $7.0 million. Excludingsale of the SouthWood Golf Club in the third quarter of 2018 and the impact of Hurricane Michael on the prior year short term vacation rental management business, the resorts and leisure revenue increased $1.4 million. The increase in revenue is primarily due to an increase of $0.9 million in room revenue for the WaterColor Inn and WaterSound Inn and an increase of $0.4 million in club revenue related to an increase in membership revenue and number of members. Resorts and leisuremarinas. Hospitality had a gross margin during the three months ended SeptemberJune 30, 20182019 of 23.0%42.3% compared to 20.3%27.1% during the same period in 2017.2018. The increase is primarily related to the increase in membership revenue and business interruption insurance proceeds received for the marinas related to Hurricane Michael. Excluding the business interruption proceeds received for the marinas during the current period, our hospitality gross margin was 34.0% during the three months ended June 30, 2019, as compared to 27.1% during the same period in 2018. The increase is primarily duerelated to increasedthe increase in membership revenue, room revenue and controlled expenses.revenue.
Resorts and leisureHospitality revenue decreased $12.3increased $3.1 million, or 27.0%15.6%, during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. ForDuring the ninesix months ended SeptemberJune 30, 2017,2019 the revenue for the short term vacation rental business was $16.4 million. Excluding the impact of the prior year short term vacation rental management business, the resorts and leisure revenue increased $4.1 million. The increase in hospitality revenue is primarilywas due to an increase of $2.1 million in club revenue related to an increase in membership revenue and number of members and $1.9 million in room revenue for the WaterColor Inn and WaterSound Inn. Resorts and leisure had a gross margin during the nine months ended September 30, 2018 of 20.4% compared to 16.2% during the same period in 2017. The increase is primarily due to increased membership revenue, room revenue and controlled expenses.
Leasing Revenue and Gross Profit
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|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| ||||||||
|
| 2018 |
| 2017 |
|
| 2018 |
| 2017 |
|
| ||||
|
| In millions |
| ||||||||||||
Leasing revenue |
| $ | 3.1 |
| $ | 3.0 |
|
| $ | 9.3 |
| $ | 8.4 |
|
|
Gross profit |
| $ | 2.3 |
| $ | 2.2 |
|
| $ | 6.8 |
| $ | 6.1 |
|
|
Gross margin |
|
| 74.2 | % |
| 73.3 | % |
|
| 73.1 | % |
| 72.6 | % |
|
4347
re-opening of the FOOW restaurant in late June 2018, the opening of the WaterColor Store in January 2019 and an increase in club membership revenue. These increases were partially offset by decreases in room revenue for the WaterColor Inn from lower occupancy related to the WaterColor Beach Club being closed during the current period for renovations, golf revenue primarily related to the sale of the SouthWood Golf Club in the third quarter of 2018 and the impact of Hurricane Michael on the marinas. As of June 30, 2019 The Clubs by Joe had 1,198 members, compared with 1,078 members as of June 30, 2018. Hospitality had a gross margin during the six months ended June 30, 2019 of 29.6% compared to 18.6% during the same period in 2018. The increase is primarily related to the increase in membership revenue and business interruption insurance proceeds received for the marinas related to Hurricane Michael. Excluding the business interruption proceeds received for the marinas during the current period, our hospitality gross margin was 23.9% during the six months ended June 30, 2019, as compared to 18.6% during the same period in 2018. The increase is primarily related to the increase in membership revenue.
Leasing Revenue and Gross Profit
|
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| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| ||||||||
|
| 2019 |
| 2018 |
|
| 2019 |
| 2018 |
|
| ||||
|
| In millions |
|
| |||||||||||
Leasing revenue |
| $ | 3.7 |
| $ | 3.5 |
|
| $ | 7.2 |
| $ | 6.9 |
|
|
Gross profit |
| $ | 2.6 |
| $ | 2.3 |
|
| $ | 5.1 |
| $ | 4.6 |
|
|
Gross margin |
|
| 70.3 | % |
| 65.7 | % |
|
| 70.8 | % |
| 66.7 | % |
|
Leasing revenue increased $0.1$0.2 million, or 3.3%5.7%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. Leasing revenue increased $0.9$0.3 million, or 10.7%4.3%, during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. This increase is primarily due to the completed construction of a 138,605 square foot manufacturing facility, for which a long term lease commenced in December 2017, as well as increased rental revenue and new leases at other properties while costsuch as Beckrich Office Park, Pier Park Crossings and WaterColor Crossings. The increase is partially offset by a decrease in leasing revenue related to the marinas which, subsequent to the landfall of Hurricane Michael on October 10, 2018, remain closed. Cost of leasing revenue remained essentially flat for each of the three and nine month periodssix months ended SeptemberJune 30, 2019 and 2018, and 2017.which resulted in an increase to gross margin for the period.
Timber Revenue and Gross Profit
|
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| ||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
|
| ||||||||||||||||||
|
| 2018 |
| 2017 |
|
| 2018 |
| 2017 |
|
|
| 2019 |
| 2018 |
|
| 2019 |
| 2018 |
|
| ||||||||
|
| In millions |
|
| In millions |
|
| |||||||||||||||||||||||
Timber revenue |
| $ | 1.8 |
| $ | 2.0 |
| $ | 5.3 |
| $ | 4.7 |
|
|
| $ | 0.7 |
| $ | 1.9 |
| $ | 1.3 |
| $ | 3.6 |
|
| ||
Gross profit |
| $ | 1.6 |
| $ | 1.8 |
| $ | 4.7 |
| $ | 4.1 |
|
|
| $ | 0.5 |
| $ | 1.7 |
| $ | 1.0 |
| $ | 3.2 |
|
| ||
Gross margin |
|
| 88.9 | % |
| 90.0 | % |
|
| 88.7 | % |
| 87.2 | % |
|
|
| 71.4 | % |
| 89.5 | % |
|
| 76.9 | % |
| 88.9 | % |
|
Timber revenue decreased $0.2$1.2 million, or 10.0%63.2%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017,2018, due to a decrease in the amount of tons sold and product mix changes caused by Hurricane Michael’s significant market impact since landfall in October 2018. There were 31,000 tons sold during the three months ended June 30, 2019, as compared to 112,000 tons sold during the same period in 2018. Gross margin decreased during the three months ended June 30, 2019 to 71.4%, as compared to 89.5% during the same period in 2018, primarily due to decreases in volume and changes in product mix.
Timber revenue decreased $2.3 million, or 63.9%, during the six months ended June 30, 2019, as compared to the same period in 2018, due to a decrease in the amount of tons sold, along with price decreases and product and price mix changes.changes caused by Hurricane Michael’s significant market impact since landfall in October 2018. There were 97,00061,000 tons sold during the threesix months ended SeptemberJune 30, 2018,2019, as compared to 119,000214,000 tons sold during the same period in 2017.
Timber revenue increased $0.6 million, or 12.8%,2018. Gross margin decreased during the ninesix months ended SeptemberJune 30, 2018,2019 to 76.9%, as compared to the same period in 2017, due to an increase in the amount of tons sold, along with product and price mix changes. There were 310,000 tons sold during the nine months ended September 30, 2018, as compared to 278,000 tons sold88.9% during the same period in 2017. Gross margin increased during the nine months ended September 30, 2018, to 88.7%, as compared to 87.2% during the same period in 2017,primarily due to the increasedecreases in timber revenue. The cost of timber revenue is primarily fixed, which resulted in an increase to gross margin for the period.
Other Operatingsales price and Corporate Expenses
|
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|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
|
| In millions |
| ||||||||||
Employee costs |
| $ | 2.2 |
| $ | 1.7 |
| $ | 5.7 |
| $ | 5.3 |
|
401(k) contribution |
|
| — |
|
| — |
|
| 1.1 |
|
| 1.2 |
|
Non-cash stock compensation costs |
|
| — |
|
| — |
|
| 0.1 |
|
| — |
|
Property taxes and insurance |
|
| 1.1 |
|
| 1.3 |
|
| 3.6 |
|
| 4.1 |
|
Professional fees |
|
| 1.0 |
|
| 0.8 |
|
| 2.7 |
|
| 2.2 |
|
Marketing and owner association costs |
|
| 0.3 |
|
| 0.4 |
|
| 0.9 |
|
| 1.0 |
|
Occupancy, repairs and maintenance |
|
| 0.2 |
|
| 0.2 |
|
| 0.7 |
|
| 0.4 |
|
Other miscellaneous |
|
| 0.3 |
|
| 0.6 |
|
| 1.3 |
|
| 1.1 |
|
Total other operating and corporate expenses |
| $ | 5.1 |
| $ | 5.0 |
| $ | 16.1 |
| $ | 15.3 |
|
Other operating and corporate expenses increased by $0.1 million, or 2.0%, during the three months ended September 30, 2018, as compared to the same period in 2017. Other operating and corporate expenses included an increase in employee costs primarily related to severance costs, offset by a decrease in other miscellaneous related to the timing of the 2018 and 2017 non-employee director grants.
Other operating and corporate expenses increased by $0.8 million, or 5.2%, during the nine months ended September 30, 2018, as compared to the same period in 2017. Other operating and corporate expenses for the nine months ended September 30, 2018 included an increase in employee costs primarily related to severance costs, an increase in occupancy, repairs and maintenance related to repairs at one of our residential communities and an increase in professional fees, partially due to a litigation settlement that resulted in the reimbursement of legal expenses of $0.7 million included within professional fees for the nine months ended September 30, 2017.volume.
4448
Other Operating and Corporate Expenses
|
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|
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|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
| In millions |
| ||||||||||
Employee costs |
| $ | 2.0 |
| $ | 1.7 |
| $ | 3.8 |
| $ | 3.5 |
|
401(k) contribution |
|
| — |
|
| — |
|
| 1.1 |
|
| 1.1 |
|
Property taxes and insurance |
|
| 1.2 |
|
| 1.2 |
|
| 2.4 |
|
| 2.5 |
|
Professional fees |
|
| 1.0 |
|
| 0.8 |
|
| 2.0 |
|
| 1.7 |
|
Marketing and owner association costs |
|
| 0.4 |
|
| 0.3 |
|
| 0.7 |
|
| 0.6 |
|
Occupancy, repairs and maintenance |
|
| 0.2 |
|
| 0.4 |
|
| 0.5 |
|
| 0.5 |
|
Other miscellaneous |
|
| 0.3 |
|
| 0.6 |
|
| 0.6 |
|
| 1.1 |
|
Total other operating and corporate expenses |
| $ | 5.1 |
| $ | 5.0 |
| $ | 11.1 |
| $ | 11.0 |
|
Other operating and corporate expenses for the three and six months ended June 30, 2019 and 2018 were comparable.
Depreciation, Depletion and Amortization
The increase of $0.6 million in depreciation,Depreciation, depletion and amortization expense duringfor the ninethree and six months ended SeptemberJune 30, 2019 and 2018 as compared to the same period in 2017, was primarily due to properties acquired or constructed during 2017.were comparable.
Investment Income, Net
Investment income, net primarily includes (i) interest and dividends earned, (ii) accretion of the net discount, (iii) net realized gain or loss from the sale of our available for-sale-investments, less other-than-temporary impairment loss, (iv) net unrealized gain or loss related to investments - equity securities, (v) interest income earned on the time deposit held by an SPE and (vi) interest earned on mortgage notes receivable and other receivables as detailed in the table below:
|
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|
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|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
| In millions |
|
| In millions |
| ||||||||||||||||||||
Interest and dividend income |
| $ | 1.8 |
| $ | 4.4 |
| $ | 7.0 |
| $ | 13.0 |
|
| $ | 2.3 |
| $ | 2.3 |
| $ | 4.1 |
| $ | 5.2 |
|
Accretion income |
|
| 0.2 |
|
| 0.3 |
|
| 0.6 |
|
| 1.7 |
|
|
| — |
|
| 0.2 |
|
| 0.1 |
|
| 0.4 |
|
Net realized gain (loss) on the sale of investments |
|
| 0.1 |
|
| (0.1) |
|
| (1.0) |
|
| 10.8 |
| |||||||||||||
Net realized loss on the sale of investments |
|
| — |
|
| — |
|
| — |
|
| (1.1) |
| |||||||||||||
Other-than-temporary impairment loss |
|
| (1.7) |
|
| (0.4) |
|
| (1.7) |
|
| (0.8) |
|
|
| — |
|
| — |
|
| — |
|
| (0.1) |
|
Unrealized (loss) gain on investments, net |
|
| (0.1) |
|
| — |
|
| 0.6 |
|
| — |
|
|
| (1.9) |
|
| 1.3 |
|
| 0.1 |
|
| 0.7 |
|
Interest income from investments in SPEs |
|
| 2.1 |
|
| 2.1 |
|
| 6.2 |
|
| 6.2 |
|
|
| 2.0 |
|
| 2.0 |
|
| 4.1 |
|
| 4.1 |
|
Interest accrued on notes receivable and other interest |
|
| 0.2 |
|
| 0.1 |
|
| 0.5 |
|
| 0.2 |
|
|
| 0.1 |
|
| 0.2 |
|
| 0.2 |
|
| 0.4 |
|
Total investment income, net |
| $ | 2.6 |
| $ | 6.4 |
| $ | 12.2 |
| $ | 31.1 |
|
| $ | 2.5 |
| $ | 6.0 |
| $ | 8.6 |
| $ | 9.6 |
|
Investment income, net decreased $3.8$3.5 million to $2.6$2.5 million for the three months ended SeptemberJune 30, 2018,2019, as compared to $6.4$6.0 million for the three months ended SeptemberJune 30, 2017.2018. Investment income, net decreased $18.9$1.0 million to $12.2$8.6 million for the ninesix months ended SeptemberJune 30, 2018,2019, as compared to $31.1$9.6 million for the ninesix months ended SeptemberJune 30, 2017. 2018. Investment income, net for the three months ended June 30, 2019 includes unrealized losses related to preferred stock of $1.9 million. Investment income, net for the three months ended June 30, 2018 includes unrealized gains related to preferred stock of $1.3 million. The six months ended June 30, 2019 includes unrealized gains related to preferred stock of $0.1 million. The six months ended June 30, 2018 includes unrealized gains related to preferred stock of $0.7 million, offset by a realized loss on the sale of certain corporate debt securities and preferred stock of $1.1 million and an other-than-temporary impairment loss of $0.1 million related to corporate debt securities.
The decrease in interest and dividend income and accretion income for the three and ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017, was2018, is primarily due primarily to thea reduction in investments held during the period. The decrease in investments during these periodsthe period is primarily related to the repurchase of common stock during 2017 and 2018 under the Stock Repurchase Program.Program and
49
increased capital expenditures. See Note 14. Stockholders’ Equity and Part II – Other Information of this quarterly report for additional information regarding common stock repurchases related to the Stock Repurchase Program.
Investment income, net for the three months ended September 30, 2018 includes the sale of certain preferred stock at a realized gain of $0.1 million, offset by an other-than-temporary impairment loss of $1.7 million related to corporate debt securities and an unrealized loss of $0.1 million related to preferred stock. Investment income, net for the three months ended September 30, 2017 includes the sale of certain corporate debt securities, preferred stock, common stock and U.S. Treasury securities at a realized loss of $0.1 million and an other-than-temporary impairment loss of $0.4 million related to corporate debt securities.
Investment income, net for the nine months ended September 30, 2018 includes unrealized gains of $0.6 million related to preferred stock, offset by the sale of certain corporate debt securities and preferred stock at a realized loss of $1.0 million and an other-than-temporary impairment loss of $1.7 million related to corporate debt securities. Investment income, net for the nine months ended September 30, 2017 includes the sale of certain corporate debt securities, preferred stock, common stock and U.S. Treasury securities at a realized gain of $10.8 million, partially offset by an other-than-temporary impairment loss of $0.8 million related to corporate debt securities and preferred stock.
45
Interest Expense
Interest expense primarily includes interest expenseincurred on the CDD debt, the Senior Notes issued by Northwest Florida Timber Finance, LLC, the PPN JV Loanproject financing and Pier Park Outparcel Construction Loanfinance leases as detailed in the table below:
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|
|
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|
|
|
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|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
| In millions |
|
| In millions |
| ||||||||||||||||||||
Interest expense and amortization of discount and issuance costs for Senior Notes issued by SPE |
| $ | 2.2 |
| $ | 2.2 |
| $ | 6.6 |
| $ | 6.6 |
|
| $ | 2.2 |
| $ | 2.2 |
| $ | 4.4 |
| $ | 4.4 |
|
Other interest expense |
|
| 0.7 |
|
| 0.8 |
|
| 2.3 |
|
| 2.5 |
|
|
| 0.8 |
|
| 0.7 |
|
| 1.6 |
|
| 1.5 |
|
Total interest expense |
| $ | 2.9 |
| $ | 3.0 |
| $ | 8.9 |
| $ | 9.1 |
|
| $ | 3.0 |
| $ | 2.9 |
| $ | 6.0 |
| $ | 5.9 |
|
Other Income, Net
Other income, net primarily includes gain on land contribution, income from our retained interest investments, insurance settlement proceeds, hurricane expenses and other income and expense items as detailed in the table below:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
| In millions |
|
| In millions |
| ||||||||||||||||||||
Gain on land contribution |
| $ | — |
| $ | — |
| $ | 1.5 |
| $ | — |
| |||||||||||||
Accretion income from retained interest investments |
| $ | 0.3 |
| $ | 0.3 |
| $ | 0.9 |
| $ | 0.8 |
|
|
| 0.3 |
|
| 0.3 |
|
| 0.6 |
|
| 0.6 |
|
Miscellaneous income (expense), net |
|
| — |
|
| 0.3 |
|
| (0.1) |
|
| 3.8 |
| |||||||||||||
Insurance proceeds |
|
| 3.8 |
|
| — |
|
| 4.1 |
|
| — |
| |||||||||||||
Hurricane expense |
|
| (0.8) |
|
| — |
|
| (1.1) |
|
| — |
| |||||||||||||
Miscellaneous expense, net |
|
| — |
|
| (0.1) |
|
| (0.1) |
|
| (0.1) |
| |||||||||||||
Other income, net |
| $ | 0.3 |
| $ | 0.6 |
| $ | 0.8 |
| $ | 4.6 |
|
| $ | 3.3 |
| $ | 0.2 |
| $ | 5.0 |
| $ | 0.5 |
|
Other income, net decreased $0.3increased $3.1 million and $3.8$4.5 million during the three and ninesix months ended SeptemberJune 30, 2018,2019, respectively, as compared to the same periodperiods in 2017. During2018. The increase is primarily due to $3.8 million and $4.1 million of insurance proceeds received related to Hurricane Michael during the ninethree and six months ended SeptemberJune 30, 2017, we negotiated an2019, respectively. The insurance settlement that resulted in proceeds were partially offset by hurricane expenses of $3.5$0.8 million included within miscellaneous income (expense), net, for reimbursement of certain attorney fees and related costs.
Income Tax Benefit (Expense)
The Tax Act was enacted on December 22, 2017, changing many aspects of U.S. corporate income taxation including reducing the U.S. federal corporate tax rate from 35.0% to 21.0% for tax years beginning after December 31, 2017. We recognized the tax effects of the Tax Act during the year ended December 31, 2017, which included a $33.5 million benefit from the reassessment of net deferred tax balances to reflect the newly enacted tax rate.
We recorded income tax benefit of $3.5$1.1 million during the three and six months ended SeptemberJune 30, 2018, as compared to income tax expense of $2.6 million during the same period in 2017. Our effective tax rate was (174.1%)2019, respectively. See Note 6. Hurricane Michael for the threeadditional information. The six months ended SeptemberJune 30, 2018, as compared2019 also includes a gain of $1.5 million on land contributed to 30.8% during the same period in 2017.our unconsolidated Pier Park TPS JV. See Note 9, Real Estate Joint Ventures for additional information.
Income Tax Expense
We recorded income tax expense of $2.8$3.4 million during the ninethree months ended SeptemberJune 30, 2018,2019, as compared to $10.8$6.5 million during the same period in 2017.2018. Our effective tax rate was 8.0%24.9% for the ninethree months ended SeptemberJune 30, 2018,2019, as compared to 33.9%20.0% during the same period in 2017.2018.
We recorded income tax expense of $4.1 million during the six months ended June 30, 2019, as compared to $6.3 million during the same period in 2018. Our effective tax rate was 25.0% for the six months ended June 30, 2019, as compared to 18.9% during the same period in 2018.
Our effective rate for 20182019 differed from the federal statutory rate of 21.0% primarily due to the impact of state taxes changes inand other permanent book to tax difference, changes in the valuation allowance and changes in the federal AMT credit carryforward.differences. The effective tax rate for 20172018 differed from the federal statutory rate of 35.0%21.0% primarily due to the 2018 renewal of the Qualified Timber Gain preferential rate retroactively applied to our tax year 2017, the impact of state taxes and changes in the valuation allowance and changes in permanent book to tax differences.allowance. In future periods, we expect that our effective rate will be closer to the statutory rate.rate adjusted for state taxes and other permanent differences.
4650
Segment Results
Residential Real Estate
The table below sets forth the results of operations of our residential real estate segment for the three and nine months ended September 30, 2018 and 2017:segment:
|
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|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
| In millions |
|
| In millions |
| ||||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue |
| $ | 1.8 |
| $ | 9.0 |
| $ | 13.3 |
| $ | 14.0 |
|
| $ | 12.6 |
| $ | 5.1 |
| $ | 15.7 |
| $ | 11.5 |
|
Other revenue |
|
| 0.1 |
|
| 0.4 |
|
| 24.4 |
|
| 1.4 |
|
|
| 1.2 |
|
| 23.6 |
|
| 1.5 |
|
| 24.3 |
|
Total revenue |
|
| 1.9 |
|
| 9.4 |
|
| 37.7 |
|
| 15.4 |
|
|
| 13.8 |
|
| 28.7 |
|
| 17.2 |
|
| 35.8 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate and other revenue |
|
| 1.1 |
|
| 6.1 |
|
| 7.6 |
|
| 8.3 |
|
|
| 6.7 |
|
| 2.4 |
|
| 8.5 |
|
| 6.5 |
|
Other operating expenses |
|
| 1.1 |
|
| 1.3 |
|
| 3.5 |
|
| 3.3 |
|
|
| 1.4 |
|
| 1.2 |
|
| 2.5 |
|
| 2.4 |
|
Depreciation and amortization |
|
| — |
|
| — |
|
| 0.1 |
|
| 0.1 |
|
|
| — |
|
| — |
|
| 0.1 |
|
| 0.1 |
|
Total expenses |
|
| 2.2 |
|
| 7.4 |
|
| 11.2 |
|
| 11.7 |
|
|
| 8.1 |
|
| 3.6 |
|
| 11.1 |
|
| 9.0 |
|
Operating (loss) income |
|
| (0.3) |
|
| 2.0 |
|
| 26.5 |
|
| 3.7 |
| |||||||||||||
Other (expense) income: |
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|
|
|
|
|
|
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|
|
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| |||||||||||||
Operating income |
|
| 5.7 |
|
| 25.1 |
|
| 6.1 |
|
| 26.8 |
| |||||||||||||
Other income (expense): |
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|
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|
|
|
|
|
|
|
|
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| |||||||||||||
Investment income, net |
|
| — |
|
| 0.1 |
|
| — |
|
| 0.1 |
| |||||||||||||
Interest expense |
|
| (0.2) |
|
| (0.3) |
|
| (0.7) |
|
| (0.9) |
|
|
| (0.2) |
|
| (0.2) |
|
| (0.4) |
|
| (0.5) |
|
Other income, net |
|
| 0.1 |
|
| 0.1 |
|
| 0.3 |
|
| 0.2 |
|
|
| — |
|
| — |
|
| 0.1 |
|
| 0.1 |
|
Total other expense, net |
|
| (0.1) |
|
| (0.2) |
|
| (0.4) |
|
| (0.7) |
|
|
| (0.2) |
|
| (0.1) |
|
| (0.3) |
|
| (0.3) |
|
(Loss) income before income taxes |
| $ | (0.4) |
| $ | 1.8 |
| $ | 26.1 |
| $ | 3.0 |
| |||||||||||||
Income before income taxes |
| $ | 5.5 |
| $ | 25.0 |
| $ | 5.8 |
| $ | 26.5 |
|
Real estate revenue includes sales of homes, homesites, and other residential land and certain lothomesite residuals from homebuilder sales that provide us a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold. Other revenue includes tap and impact fee credits sold and marketing feesfees. Certain homesite residuals and brokerage fees. other revenue related to homebuilder homesite sales are recognized in revenue at the point in time of the closing of the sale. Other revenue for the ninethree and six months ended SeptemberJune 30, 2018 includes $23.1 million for a one-time paymentreceipt of RiverTown impact fees related to the 2014 RiverTown real estate sale. See Note 17. Segment Information for additional information. transaction. For the three and nine months ended SeptemberJune 30, 2019 and 2018, real estate revenue includes less than $0.1estimated homesite residuals of $1.0 million and $0.6$0.2 million, respectively, of estimated lot residualsrespectively. For the three months ended June 30, 2019 and 2018, other revenue includes less than $0.1 million and $0.6 million, respectively, of certain estimated fees related to homebuilder homesite sales that were recognized asof $0.9 million and $0.2 million, respectively. For the six months ended June 30, 2019 and 2018, real estate revenue atincludes estimated homesite residuals of $1.1 million and $0.6 million, respectively. For the point in timesix months ended June 30, 2019 and 2018, other revenue includes certain estimated fees related to homebuilder homesite sales of the sale. See Note 17. Segment Information for additional information regarding the impact of the adoption of Topic 606 on lot residuals$0.9 million and certain fees.$0.5 million, respectively. Cost of real estate revenue includes direct costs (e.g., development and construction costs), selling costs and other indirect costs (e.g., development overhead, capitalized interest and project administration costs).
Three Months Ended Septembermonths ended June 30, 20182019 Compared to the Three Months Ended Septembermonths ended June 30, 20172018
The following table sets forth our residential real estate revenue and cost of revenue activity:
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| Three Months Ended September 30, 2018 |
| Three Months Ended September 30, 2017 |
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| Unit |
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| Cost of |
| Gross |
| Gross |
| Units |
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| Cost of |
| Gross |
| Gross |
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| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
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| Dollars in millions |
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Homesites |
| 14 |
| $ | 1.8 |
| $ | 0.9 |
| $ | 0.9 |
| 50.0 | % | 88 |
| $ | 9.0 |
| $ | 5.8 |
| $ | 3.2 |
| 35.6 | % |
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| Three Months Ended June 30, 2019 |
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| Three Months Ended June 30, 2018 |
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| Unit |
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| Cost of |
| Gross |
| Gross |
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| Units |
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| Cost of |
| Gross |
| Gross |
| ||||
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| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
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| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
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| Dollars in millions |
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Homesites |
| 151 |
| $ | 12.6 |
| $ | 6.3 |
| $ | 6.3 |
| 50.0 | % |
| 37 |
| $ | 5.1 |
| $ | 2.1 |
| $ | 3.0 |
| 58.8 | % |
Homesites. Revenue from homesite sales decreased $7.2increased $7.5 million, or 80.0%147.1%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017,2018, primarily due to the mix and number of homesites sold which included $4.6 million forper community, the saletiming of 64 lotsbuilder contractual closing obligations and the timing of development of completed homesites in the WindMark Beach community to a homebuilder during the three months ended September 30, 2017, with no comparable sales during the same period in 2018.our residential communities such as Watersound Origins, Breakfast Point and SouthWood. During the three months
51
ended SeptemberJune 30, 20182019 and 2017,2018, the average revenue per homesite sold was approximately $110,000$73,000 and $96,000,$125,000, respectively, due to the mix of sales from different communities.communities, which included the sale of 49 undeveloped homesites within the SouthWood community during the three months ended June 30, 2019, with no comparable undeveloped homesite sales during the same period in 2018. Gross margin increaseddecreased to 50.0% during the three
47
months ended SeptemberJune 30, 2018,2019, as compared to 35.6%58.8% during the same period in 2017,2018, primarily due to the mix and number of homesites sold during each respective period.
Other operating expenses include salaries and benefits, property taxes, marketing, professional fees, project administration, support personnel, owner association and CDD assessments and other administrative expenses.
Investment income, net primarily consists of interest earned on our mortgage notes receivable. Interest expense consists of interest expenseincurred on our portion of the total outstanding CDD debt. Other income primarily consists of interest earned on our mortgage notes receivable and other miscellaneous income.
Nine Months Ended SeptemberSix months ended June 30, 20182019 Compared to the Nine Months Ended SeptemberSix months ended June 30, 20172018
The following table sets forth our residential real estate revenue and cost of revenue activity:
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| Nine Months Ended September 30, 2018 |
| Nine Months Ended September 30, 2017 |
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| Units |
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| Cost of |
| Gross |
| Gross |
| Units |
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| Cost of |
| Gross |
| Gross |
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| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
| ||||||
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| Dollars in millions |
| ||||||||||||||||||||||||
Homesites |
| 157 |
| $ | 13.3 |
| $ | 7.0 |
| $ | 6.3 |
| 47.4 | % | 122 |
| $ | 14.0 |
| $ | 7.8 |
| $ | 6.2 |
| 44.3 | % |
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| Six Months Ended June 30, 2019 |
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| Six Months Ended June 30, 2018 |
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| Units |
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| Cost of |
| Gross |
| Gross |
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| Units |
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| Cost of |
| Gross |
| Gross |
| ||||
|
| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
|
| Sold |
| Revenue |
| Revenue |
| Profit |
| Margin |
| ||||||
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| Dollars in millions |
| |||||||||||||||||||||||||
Homesites |
| 182 |
| $ | 15.7 |
| $ | 7.9 |
| $ | 7.8 |
| 49.7 | % |
| 143 |
| $ | 11.5 |
| $ | 6.1 |
| $ | 5.4 |
| 47.0 | % |
Homesites. Revenue from homesite sales decreased $0.7increased $4.2 million, or 5.0%36.5%, during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017,2018, primarily due to the mix and number of homesites sold andper community, the timing of builder contractual closing obligations and the timing of development of finished lotscompleted homesites in our primary residential communities such as Watersound Origins, Breakfast Point and SouthWood, along withSouthWood. During the sale of 64 lots in the WindMark Beach community to a homebuilder for $4.6 million during the ninesix months ended SeptemberJune 30, 2017. During the nine months ended September 30,2019 and 2018, and 2017, the average revenue per homesite sold was approximately $77,000$75,000 and $103,000 respectively, due$74,000, respectively. Gross margin increased to the mix of sales from different communities, which includes the sale of 46 undeveloped lots within the SouthWood community49.7% during the ninesix months ended SeptemberJune 30, 2018, with no comparable undeveloped lot sales2019, as compared to 47.0% during the same period in 2017. Gross margin increased to 47.4% during the nine months ended September 30, 2018, as compared to 44.3% during the same period in 2017, primarily due to the mix and number of homesites sold during each respective period.
Other operating expenses include salaries and benefits, property taxes, marketing, professional fees, project administration, support personnel, owner association and CDD assessments and other administrative expenses. In the second quarter
Investment income, net primarily consists of 2017, a litigation settlement resulted in the reimbursement of legal expenses of $0.7 million, which is reflected in other operating expenses for the nine months ended September 30, 2017. Other operating expenses increased $0.2 million during the nine months ended September 30, 2018, as compared to the same period in 2017, primarily due to the legal expense reimbursement noted above along with decreases in professional fees, property taxes and other administrative expenses.
interest earned on our mortgage notes receivable. Interest expense consists of interest expenseincurred on our portion of the total outstanding CDD debt. Other income primarily consists of interest earned on our mortgage notes receivable and other miscellaneous income.
4852
Resorts and LeisureHospitality
The table below sets forth the results of operations of our resorts and leisure segment for the three and nine months ended September 30, 2018 and 2017:hospitality segment:
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| Three Months Ended September 30, |
| Nine Months Ended September 30, |
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| Three Months Ended June 30, |
| Six Months Ended June 30, |
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|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
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| In millions |
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| In millions |
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Revenue: |
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Resorts and leisure revenue |
| $ | 12.6 |
| $ | 18.2 |
| $ | 33.3 |
| $ | 45.6 |
| |||||||||||||
Hospitality revenue |
| $ | 15.6 |
| $ | 12.9 |
| $ | 23.0 |
| $ | 19.9 |
| |||||||||||||
Leasing revenue |
|
| — |
|
| 0.4 |
|
| 0.1 |
|
| 0.8 |
| |||||||||||||
Total revenue |
|
| 15.6 |
|
| 13.3 |
|
| 23.1 |
|
| 20.7 |
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Expenses: |
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Cost of resorts and leisure revenue |
|
| 9.7 |
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| 14.5 |
|
| 26.5 |
|
| 38.2 |
| |||||||||||||
Cost of hospitality revenue |
|
| 9.0 |
|
| 9.4 |
|
| 16.2 |
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| 16.2 |
| |||||||||||||
Cost of leasing revenue |
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| — |
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| 0.4 |
|
| — |
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| 0.6 |
| |||||||||||||
Other operating expenses |
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| 0.1 |
|
| 0.1 |
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| 0.4 |
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| 0.4 |
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|
| 0.2 |
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| 0.1 |
|
| 0.4 |
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| 0.3 |
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Depreciation |
|
| 1.0 |
|
| 1.0 |
|
| 2.8 |
|
| 2.9 |
|
|
| 1.1 |
|
| 0.9 |
|
| 2.0 |
|
| 1.8 |
|
Total expenses |
|
| 10.8 |
|
| 15.6 |
|
| 29.7 |
|
| 41.5 |
|
|
| 10.3 |
|
| 10.8 |
|
| 18.6 |
|
| 18.9 |
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Operating income |
|
| 1.8 |
|
| 2.6 |
|
| 3.6 |
|
| 4.1 |
|
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| 5.3 |
|
| 2.5 |
|
| 4.5 |
|
| 1.8 |
|
Other (expense) income, net |
|
| (0.1) |
|
| 0.3 |
|
| — |
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| 0.4 |
| |||||||||||||
Other income, net |
|
| — |
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| — |
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| — |
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| 0.1 |
| |||||||||||||
Income before income taxes |
| $ | 1.7 |
| $ | 2.9 |
| $ | 3.6 |
| $ | 4.5 |
|
| $ | 5.3 |
| $ | 2.5 |
| $ | 4.5 |
| $ | 1.9 |
|
Three Months Ended Septembermonths ended June 30, 20182019 Compared to the Three Months Ended Septembermonths ended June 30, 20172018
The following table sets forth details of our resorts and leisurehospitality segment revenue and cost of revenue:
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| Three Months Ended September 30, 2018 |
| Three Months Ended September 30, 2017 |
|
| Three Months Ended June 30, 2019 |
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| Three Months Ended June 30, 2018 |
| ||||||||||||||||||||||||
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| Gross |
| Gross |
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| Gross |
| Gross |
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| Gross |
| Gross |
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|
| Gross |
| Gross |
| ||||||
|
| Revenue |
| Profit |
| Margin |
| Revenue |
| Profit |
| Margin |
|
| Revenue |
| Profit |
| Margin |
|
| Revenue |
| Profit |
| Margin |
| ||||||||
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| In millions |
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| In millions |
| |||||||||||||||||||||||||||||
Resorts, vacation rentals and other management services |
| $ | 7.1 |
| $ | 1.5 |
| 21.1 | % | $ | 13.2 |
| $ | 2.8 |
| 21.2 | % | ||||||||||||||||||
Resorts, lodging and other management services |
| $ | 8.8 |
| $ | 2.4 |
| 27.3 | % |
| $ | 7.2 |
| $ | 2.1 |
| 29.2 | % | |||||||||||||||||
Clubs |
|
| 4.5 |
|
| 1.2 |
| 26.7 | % |
| 4.1 |
|
| 0.7 |
| 17.1 | % |
|
| 6.8 |
|
| 3.0 |
| 44.1 | % |
|
| 5.2 |
|
| 1.2 |
| 23.1 | % |
Marinas |
|
| 1.0 |
|
| 0.2 |
| 20.0 | % |
| 0.9 |
|
| 0.2 |
| 22.2 | % |
|
| — |
|
| 1.2 |
| — | % |
|
| 0.9 |
|
| 0.2 |
| 22.2 | % |
Total |
| $ | 12.6 |
| $ | 2.9 |
| 23.0 | % | $ | 18.2 |
| $ | 3.7 |
| 20.3 | % |
| $ | 15.6 |
| $ | 6.6 |
| 42.3 | % |
| $ | 13.3 |
| $ | 3.5 |
| 26.3 | % |
Revenue from resorts, vacation rentalslodging and other management services decreased $6.1increased $1.6 million, or 46.2%22.2%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. The increase in revenue is In December 2017, we sold our short term vacation rental management business, which reduced ourprimarily due to the re-opening of the FOOW restaurant in late June 2018 revenue. Forand the opening of the WaterColor Store in January 2019. The increase in revenue was partially offset by a decrease related to the WaterColor Beach Club being closed during the three months ended SeptemberJune 30, 2017,2019. Our gross margin decreased by 1.9% to 27.3% during the revenue forthree months ended June 30, 2019, as compared to 29.2% during the short term vacation rental businesssame period in 2018. The decrease in gross margin was $7.0 million. Excluding the impact of the prior year short term vacation rental management business, the revenue from resorts, vacation rentals and other management services increased $0.9 million, primarily due to an increasea decrease in room revenuethe average daily rate and lower occupancy at the WaterColor Inn and WaterSound Inn. in the current period.
Revenue from our clubs increased $0.4$1.6 million or 9.8%30.8%, during the three months ended SeptemberJune 30, 2018,2019 as compared to the same period in 2017, primarily2018, which included an increase related to an increase in the number of members and membership revenue. revenue, partially offset by a decrease in golf revenue primarily related to the sale of the SouthWood Golf Club in the third quarter of 2018.Our gross margin also increased to 26.7%44.1% during the three months ended SeptemberJune 30, 20182019 compared to a gross margin of 17.1%23.1% during the same period in 2017.2018. The increase in gross margin was primarily due to the increase in membership revenuerevenue.
Revenue from our marinas decreased $0.9 million, or 100.0% during the three months ended June 30, 2019, as compared to the same period in 2018, due to the impact of Hurricane Michael on the marinas. Gross profit during the three months ended June 30, 2019 includes $1.3 million related to business interruption insurance proceeds received during the period. Subsequent to the landfall of Hurricane Michael on October 10, 2018, the marinas remain closed. We
53
maintain property and business interruption insurance on the impacted marina assets. See Note 6. .Hurricane Michael for additional information.
Our hospitality segment gross margin was 42.3% during the three months ended June 30, 2019, as compared to 26.3% during the same period in 2018. The increase is primarily related to the increase in membership revenue and business interruption insurance proceeds received related to Hurricane Michael. Excluding the $1.3 million of business interruption proceeds received for the marinas during the current period, our hospitality segment gross margin was 34.0% during the three months ended June 30, 2019, as compared to 26.3% during the same period in 2018. The increase is primarily related to the increase in membership revenue.
Other operating expenses include salaries and benefits, occupancy fees, professional fees and other administrative expenses.
49
NineSix Months Ended SeptemberJune 30, 20182019 Compared to the NineSix Months Ended SeptemberJune 30, 20172018
The following table sets forth details of our resorts and leisurehospitality segment revenue and cost of revenue:
|
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| Nine Months Ended September 30, 2018 |
| Nine Months Ended September 30, 2017 |
|
| Six Months Ended June 30, 2019 |
|
| Six Months Ended June 30, 2018 |
| ||||||||||||||||||||||||
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| Gross |
| Gross |
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
| ||||
|
| Revenue |
| Profit |
| Margin |
| Revenue |
| Profit |
| Margin |
|
| Revenue |
| Profit |
| Margin |
|
| Revenue |
| Profit |
| Margin |
| ||||||||
|
| In millions |
|
| In millions |
| |||||||||||||||||||||||||||||
Resorts, vacation rentals and other management services |
| $ | 17.7 |
| $ | 3.2 |
| 18.1 | % | $ | 32.2 |
| $ | 5.4 |
| 16.8 | % | ||||||||||||||||||
Resorts, lodging and other management services |
| $ | 12.6 |
| $ | 1.9 |
| 15.1 | % |
| $ | 10.6 |
| $ | 1.7 |
| 16.0 | % | |||||||||||||||||
Clubs |
|
| 13.2 |
|
| 3.1 |
| 23.5 | % |
| 11.1 |
|
| 1.4 |
| 12.6 | % |
|
| 10.5 |
|
| 4.0 |
| 38.1 | % |
|
| 8.7 |
|
| 1.9 |
| 21.8 | % |
Marinas |
|
| 2.4 |
|
| 0.5 |
| 20.8 | % |
| 2.3 |
|
| 0.6 |
| 26.1 | % |
|
| — |
|
| 1.0 |
| — | % |
|
| 1.4 |
|
| 0.3 |
| 21.4 | % |
Total |
| $ | 33.3 |
| $ | 6.8 |
| 20.4 | % | $ | 45.6 |
| $ | 7.4 |
| 16.2 | % |
| $ | 23.1 |
| $ | 6.9 |
| 29.9 | % |
| $ | 20.7 |
| $ | 3.9 |
| 18.8 | % |
Revenue from resorts, vacation rentalslodging and other management services decreased $14.5increased $2.0 million, or 45.0%18.9%, during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. The increase in revenue is Forprimarily due to the nine months ended September 30, 2017,re-opening of the FOOW restaurant in late June 2018 and the opening of the WaterColor Store in January 2019. The increase in revenue was partially offset by a decrease in room revenue for the short term vacation rental businessWaterColor Inn from lower occupancy related to the WaterColor Beach Club being closed during the period. Our gross margin decreased by 0.9% to 15.1% during the six months ended June 30, 2019, as compared to 16.0% during the same period in 2018. The decrease in gross margin was $16.4 million. Excluding the impact of the prior year short term vacation rental management business, the revenue from resorts, vacation rentals and other management services increased $1.9 million, primarily due to an increase in room revenue andlower occupancy at the WaterColor Inn and WaterSound Inn. Our gross margin improved by 1.3% to a gross margin of 18.1%the WaterColor Beach Club being closed during the ninesix months ended SeptemberJune 30, 2018, as compared to 16.8% during the same period in 2017.2019 for renovations.
Revenue from our clubs increased $2.1$1.8 million, or 18.9%20.7%, during the ninesix months ended SeptemberJune 30, 2018, as2019 compared to the same period in 2017, primarily2018, which included an increase related to an increase in the number of members and membership revenue. revenue, partially offset by a decrease in golf revenue primarily related to the sale of the SouthWood Golf Club in the third quarter of 2018. As of June 30, 2019 we had 1,198 members, compared with 1,078 members as of June 30, 2018. Our gross margin also increased to 23.5%38.1% during the ninesix months ended SeptemberJune 30, 20182019 compared to 12.6%21.8% during the same period in 2017.2018. The increase in gross margin was primarily due to the increase in membership revenue.
Revenue from our marinas decreased $1.4 million, or 100.0% during the six months ended June 30, 2019, as compared to the same period in 2018, due to the impact of Hurricane Michael on the marinas. Gross profit during the six months ended June 30, 2019 includes $1.3 million related to business interruption insurance proceeds received during the period. Subsequent to the landfall of Hurricane Michael on October 10, 2018, the marinas remain closed. We maintain property and business interruption insurance on the impacted marina assets. See Note 6. Hurricane Michael for additional information.
Our hospitality segment gross margin was 29.9% during the six months ended June 30, 2019, as compared to 18.8% during the same period in 2018. The increase is primarily related to the increase in membership revenue and business interruption insurance proceeds received related to Hurricane Michael. Excluding the $1.3 million of business interruption proceeds received for the marinas during the current period, our hospitality segment gross margin was
54
24.2% during the six months ended June 30, 2019, as compared to 18.8% during the same period in 2018. The increase is primarily related to the increase in membership revenue.
Other operating expenses include salaries and benefits, occupancy fees, professional fees and other administrative expenses.
Commercial Leasing and Sales
The table below sets forth the results of operations of our commercial leasing and sales segment for the three and nine months ended September 30, 2018 and 2017:segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
|
| In millions |
| ||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenue |
| $ | 3.0 |
| $ | 2.8 |
| $ | 8.7 |
| $ | 7.9 |
|
Commercial real estate revenue |
|
| 3.3 |
|
| 0.4 |
|
| 4.0 |
|
| 2.6 |
|
Total revenue |
|
| 6.3 |
|
| 3.2 |
|
| 12.7 |
|
| 10.5 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of leasing revenue |
|
| 0.8 |
|
| 0.8 |
|
| 2.5 |
|
| 2.3 |
|
Cost of commercial real estate revenue |
|
| 2.4 |
|
| 0.3 |
|
| 2.6 |
|
| 1.9 |
|
Other operating expenses |
|
| 0.8 |
|
| 0.8 |
|
| 2.4 |
|
| 2.2 |
|
Depreciation and amortization |
|
| 1.1 |
|
| 1.0 |
|
| 3.3 |
|
| 2.7 |
|
Total expenses |
|
| 5.1 |
|
| 2.9 |
|
| 10.8 |
|
| 9.1 |
|
Operating income |
|
| 1.2 |
|
| 0.3 |
|
| 1.9 |
|
| 1.4 |
|
Interest expense |
|
| (0.6) |
|
| (0.5) |
|
| (1.6) |
|
| (1.7) |
|
Income (loss) before income taxes |
| $ | 0.6 |
| $ | (0.2) |
| $ | 0.3 |
| $ | (0.3) |
|
50
The total net rentable square feet and percentage leased of leasing properties by location at September 30, 2018 and December 31, 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 |
| December 31, 2017 |
|
| ||||
|
|
|
| Net |
|
|
| Net |
|
|
|
|
|
|
|
| Rentable |
|
|
| Rentable |
|
|
|
|
|
|
|
| Square |
| Percentage |
| Square |
| Percentage |
|
|
|
| Location |
| Feet |
| Leased |
| Feet |
| Leased |
|
|
Pier Park North JV |
| Bay County, FL |
| 320,310 |
| 96 | % | 320,310 |
| 96 | % |
|
Venture Crossings (1) |
| Bay County, FL |
| 243,605 |
| 100 | % | 243,605 |
| 100 | % |
|
Beckrich Office Park |
| Bay County, FL |
| 67,108 |
| 54 | % | 67,108 |
| 52 | % |
|
WindMark Beach Commercial (2) |
| Gulf County, FL |
| 48,035 |
| 50 | % | 48,035 |
| 27 | % |
|
SouthWood Town Center (3) |
| Leon County, FL |
| 34,230 |
| 85 | % | 34,412 |
| 85 | % |
|
WaterColor Town Center (3) |
| Walton County, FL |
| 22,532 |
| 100 | % | 22,532 |
| 100 | % |
|
Port St. Joe Commercial |
| Gulf County, FL |
| 18,107 |
| 100 | % | 18,107 |
| 100 | % |
|
Beach Commerce Park |
| Bay County, FL |
| 14,700 |
| 78 | % | 14,700 |
| 63 | % |
|
SummerCamp Commercial |
| Franklin County, FL |
| 13,000 |
| 0 | % | 13,000 |
| 0 | % |
|
WaterSound Gatehouse |
| Walton County, FL |
| 12,624 |
| 94 | % | 12,624 |
| 100 | % |
|
395 Office building |
| Walton County, FL |
| 6,700 |
| 100 | % | 6,700 |
| 100 | % |
|
Pier Park outparcel |
| Bay County, FL |
| 5,565 |
| 100 | % | 5,565 |
| 100 | % |
|
Wetappo |
| Gulf County, FL |
| N/A |
| N/A | % | 4,900 |
| 100 | % |
|
WaterColor HOA Office (4) |
| Walton County, FL |
| 1,244 |
| 100 | % | 1,244 |
| 100 | % |
|
WaterSound Origins (5) |
| Walton County, FL |
| N/A |
| N/A | % | 760 |
| 100 | % |
|
|
|
|
| 807,760 |
| 89 | % | 813,602 |
| 87 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
| In millions |
| ||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing revenue |
| $ | 3.4 |
| $ | 2.9 |
| $ | 6.7 |
| $ | 5.7 |
|
Commercial real estate revenue |
|
| 0.1 |
|
| 0.4 |
|
| 1.0 |
|
| 0.8 |
|
Total revenue |
|
| 3.5 |
|
| 3.3 |
|
| 7.7 |
|
| 6.5 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of leasing revenue |
|
| 1.1 |
|
| 0.8 |
|
| 2.1 |
|
| 1.7 |
|
Cost of commercial real estate revenue |
|
| — |
|
| 0.2 |
|
| — |
|
| 0.2 |
|
Other operating expenses |
|
| 0.8 |
|
| 0.9 |
|
| 1.5 |
|
| 1.6 |
|
Depreciation and amortization |
|
| 1.2 |
|
| 1.1 |
|
| 2.3 |
|
| 2.2 |
|
Total expenses |
|
| 3.1 |
|
| 3.0 |
|
| 5.9 |
|
| 5.7 |
|
Operating income |
|
| 0.4 |
|
| 0.3 |
|
| 1.8 |
|
| 0.8 |
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (0.6) |
|
| (0.5) |
|
| (1.2) |
|
| (1.1) |
|
Other income, net |
|
| — |
|
| — |
|
| 1.7 |
|
| — |
|
Total other (expense) income, net |
|
| (0.6) |
|
| (0.5) |
|
| 0.5 |
|
| (1.1) |
|
(Loss) income before income taxes |
| $ | (0.2) |
| $ | (0.2) |
| $ | 2.3 |
| $ | (0.3) |
|
Three and NineSix Months Ended SeptemberJune 30, 20182019 Compared to the Three and NineSix Months Ended SeptemberJune 30, 20172018
Leasing revenue increased $0.2$0.5 million, or 7.1%17.2%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. Leasing revenue increased $0.8$1.0 million, or 10.1%17.5%, during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017.2018. This increase is primarily due to the completed construction of a 138,605 square foot manufacturing facility, for which a long term lease commenced in December 2017, as well as increased rental revenue and new leases at other properties whilesuch as Pier Park North, Beckrich Office Park, Pier Park Crossings and WaterColor Crossings. Leasing gross margin decreased during the three months ended June 30, 2019 to 67.6%, as compared to 72.4% during the same period in 2018. Leasing gross margin decreased during the six months ended June 30, 2019 to 68.7%, as compared to 70.2% during the same period in 2018. The decrease in gross margin was primarily due to an increase in cost of leasing revenue remained essentially flat for each ofnew leases during the three and ninesix months ended SeptemberJune 30, 2018 and 2017.2019. As of SeptemberJune 30, 2019, we had net rentable square feet of approximately 823,000, of which approximately 758,000 square feet was under lease. As of June 30, 2018, we had net rentable square feet of approximately 808,000,809,000, of which approximately 717,000719,000 square feet was under lease. As of September 30, 2017, we had net rentable square feet of approximately 675,000, of which approximately 574,000 square feet was under lease.
Commercial real estate revenue can vary depending on the proximity to developed areas and the mix and characteristics of commercial real estate sold in each period, with varying compositions of retail, office, industrial and other commercial uses. During the three months ended SeptemberJune 30, 2018 we had five2019 there were no commercial land real estate sales totaling approximately 314 acres for $3.3 million. During the nine months ended September 30, 2018 we had nine commercial real estate sales totaling approximately 318 acres for $4.0 million. Commercial real estate revenue for the three and nine months ended September 30, 2018 included $2.6 million related to the sale of two resorts and leisure properties located in the SouthWood community, including the golf course.sales. During the three months ended SeptemberJune 30, 2017,2018, we had three commercial real estate sales totaling approximately 112 acres for $0.4 million.million, resulting in a gross profit margin of approximately 50.0%. During
51
the ninesix months ended SeptemberJune 30, 2017,2019 we had fivetwo commercial real estate sales totaling approximately 3651 acres for $2.6 million.$1.0 million, with di minimis cost of revenue resulting in a gross profit margin of approximately 100.0%. During the six months ended June 30, 2018, we had four commercial real estate sale totaling approximately 5 acres for $0.8 million, resulting in a gross profit margin of approximately 62.5%. As our focus continues to evolve more towards recurring revenue from leasing operations, we expect to have limited commercial real estate sales.
55
Other operating expenses include salaries and benefits, property taxes, CDD assessments, insurance, professional fees, marketing, project administration and other administrative expenses.
The increase of $0.6 million in depreciation and nine months ended September 30, 2018, as compared to the same period in 2017, was primarily due to properties acquired or constructed during 2017.
Interest expense primarily includes interest expenseincurred from our commercial leasing project financing and CDD debt.
Other income, net for the PPN JV Loan,six months ended June 30, 2019 includes a gain of $1.5 million on land contributed to our unconsolidated Pier Park Outparcel Construction LoanTPS JV. See Note 9, Real Estate Joint Ventures for additional information.
The total net rentable square feet and interest expense on the CDD debt.percentage leased of leasing properties by location are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 |
|
| December 31, 2018 |
| ||||
|
|
|
| Net |
|
|
|
| Net |
|
|
|
|
|
|
| Rentable |
|
|
|
| Rentable |
|
|
|
|
|
|
| Square |
| Percentage |
|
| Square |
| Percentage |
|
|
| Location |
| Feet |
| Leased |
|
| Feet |
| Leased |
|
Pier Park North JV |
| Bay County, FL |
| 320,310 |
| 96 | % |
| 320,310 |
| 96 | % |
VentureCrossings |
| Bay County, FL |
| 243,605 |
| 100 | % |
| 243,605 |
| 100 | % |
Beckrich Office Park |
| Bay County, FL |
| 67,108 |
| 91 | % |
| 67,108 |
| 96 | % |
WindMark Beach Commercial (1) |
| Gulf County, FL |
| 49,260 |
| 56 | % |
| 49,260 |
| 56 | % |
SouthWood Town Center (2) |
| Leon County, FL |
| 34,230 |
| 85 | % |
| 34,230 |
| 85 | % |
WaterColor Town Center (2) (3) |
| Walton County, FL |
| 21,200 |
| 100 | % |
| 21,200 |
| 100 | % |
Port St. Joe Commercial |
| Gulf County, FL |
| 15,524 |
| 100 | % |
| 15,524 |
| 100 | % |
Beach Commerce Park |
| Bay County, FL |
| 14,700 |
| 100 | % |
| 14,700 |
| 100 | % |
SummerCamp Commercial |
| Franklin County, FL |
| 13,000 |
| 0 | % |
| 13,000 |
| 0 | % |
South Walton Commerce Park |
| Walton County, FL |
| 11,570 |
| 53 | % |
| — |
| — | % |
WaterSound Gatehouse (2) (4) |
| Walton County, FL |
| 11,515 |
| 88 | % |
| 13,049 |
| 100 | % |
WaterColor Crossings |
| Walton County, FL |
| 7,135 |
| 100 | % |
| 7,135 |
| 100 | % |
395 Office building |
| Walton County, FL |
| 6,700 |
| 100 | % |
| 6,700 |
| 100 | % |
Pier Park outparcel |
| Bay County, FL |
| 5,565 |
| 100 | % |
| 5,565 |
| 100 | % |
WaterColor HOA Office (5) |
| Walton County, FL |
| 1,244 |
| 100 | % |
| 1,244 |
| 100 | % |
|
|
|
| 822,666 |
| 92 | % |
| 812,630 |
| 93 | % |
(1) | Included in net rentable square feet as of June 30, 2019 and December 31, 2018, is 13,808 square feet of unfinished space. |
(2) | In addition to net rentable square feet, there is also space that we occupy or that serves as common area. |
(3) | In addition to net rentable square feet, there is an additional 1,332 square feet that was repurposed during the fourth quarter of 2018 into a new store operated by us. |
(4) | In addition to net rentable square feet, there is an additional 1,534 square feet that was repurposed in 2019 into a new store operated by us, as well as office space occupied by us. |
(5) | In addition to net rentable square feet, there is an additional 1,276 square feet that currently serves as common area, but is subject to an agreement whereby the current lessee is expected to expand their lease in the fourth quarter of2019 to include the entire building. |
Total units and percentage leased for apartments by location are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 | ||||||
|
|
|
|
|
|
|
|
|
| Percentage |
|
|
|
|
|
|
|
|
|
| Leased |
|
|
|
| Units |
| Units |
| Units |
| of Units |
|
| Location |
| Planned |
| Completed |
| Leased |
| Completed |
Pier Park Crossings (1) |
| Bay County, FL |
| 240 |
| 96 |
| 87 |
| 91% |
Origins Crossings (2) |
| Walton County, FL |
| 217 |
| — |
| — |
| N/A |
|
|
|
| 457 |
| 96 |
| 87 |
| 91% |
(1) | Construction began in the second quarter of 2018. |
(2) | Construction began in the second quarter of 2019. |
56
Forestry
The table below sets forth the results of operations of our forestry segment for the three and nine months ended September 30, 2018 and 2017:segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
|
| In millions |
|
| In millions |
| ||||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timber revenue |
| $ | 1.8 |
| $ | 2.0 |
| $ | 5.2 |
| $ | 4.7 |
|
| $ | 0.7 |
| $ | 1.9 |
| $ | 1.3 |
| $ | 3.5 |
|
Real estate revenue - other rural land revenue |
|
| 0.7 |
|
| 0.7 |
|
| 1.6 |
|
| 0.9 |
|
|
| 1.2 |
|
| 0.7 |
|
| 1.3 |
|
| 0.9 |
|
Leasing revenue |
|
| 0.1 |
|
| 0.2 |
|
| 0.6 |
|
| 0.5 |
|
|
| 0.2 |
|
| 0.2 |
|
| 0.4 |
|
| 0.4 |
|
Total revenue |
|
| 2.6 |
|
| 2.9 |
|
| 7.4 |
|
| 6.1 |
|
|
| 2.1 |
|
| 2.8 |
|
| 3.0 |
|
| 4.8 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of timber revenue |
|
| 0.2 |
|
| 0.2 |
|
| 0.6 |
|
| 0.6 |
|
|
| 0.2 |
|
| 0.2 |
|
| 0.3 |
|
| 0.4 |
|
Cost of real estate revenue - other rural land revenue |
|
| 0.2 |
|
| — |
|
| 0.4 |
|
| — |
|
|
| 0.1 |
|
| 0.1 |
|
| 0.1 |
|
| 0.2 |
|
Other operating expenses |
|
| 0.1 |
|
| 0.1 |
|
| 0.3 |
|
| 0.3 |
|
|
| 0.1 |
|
| 0.1 |
|
| 0.2 |
|
| 0.2 |
|
Depreciation and depletion |
|
| 0.1 |
|
| 0.2 |
|
| 0.4 |
|
| 0.4 |
|
|
| — |
|
| 0.2 |
|
| 0.1 |
|
| 0.3 |
|
Total expenses |
|
| 0.6 |
|
| 0.5 |
|
| 1.7 |
|
| 1.3 |
|
|
| 0.4 |
|
| 0.6 |
|
| 0.7 |
|
| 1.1 |
|
Operating income |
|
| 2.0 |
|
| 2.4 |
|
| 5.7 |
|
| 4.8 |
| |||||||||||||
Other income, net |
|
| 0.1 |
|
| — |
|
| 0.1 |
|
| — |
| |||||||||||||
Income before income taxes |
| $ | 2.1 |
| $ | 2.4 |
| $ | 5.8 |
| $ | 4.8 |
|
| $ | 1.7 |
| $ | 2.2 |
| $ | 2.3 |
| $ | 3.7 |
|
The total tons sold and relative percentage of total tons sold by major type of timber revenue for the three and nine months ended September 30, 2018 and 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
|
| ||||||||||||||||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
| ||||||||||||||||||
Pine pulpwood |
| 68,000 |
| 70.1 | % | 97,000 |
| 81.5 | % |
| 203,000 |
| 65.5 | % | 211,000 |
| 75.9 | % |
|
| 6,000 |
| 19.4 | % | 65,000 |
| 58.0 | % |
| 12,000 |
| 19.7 | % | 135,000 |
| 63.1 | % |
|
Pine sawtimber |
| 21,000 |
| 21.7 | % | 15,000 |
| 12.6 | % |
| 83,000 |
| 26.8 | % | 49,000 |
| 17.6 | % |
|
| 4,000 |
| 12.9 | % | 38,000 |
| 33.9 | % |
| 6,000 |
| 9.8 | % | 63,000 |
| 29.4 | % |
|
Pine grade logs |
| 8,000 |
| 8.2 | % | 6,000 |
| 5.1 | % |
| 23,000 |
| 7.4 | % | 16,000 |
| 5.8 | % |
|
| 8,000 |
| 25.8 | % | 9,000 |
| 8.1 | % |
| 13,000 |
| 21.3 | % | 15,000 |
| 7.0 | % |
|
Other |
| — |
| — | % | 1,000 |
| 0.8 | % |
| 1,000 |
| 0.3 | % | 2,000 |
| 0.7 | % |
|
| 13,000 |
| 41.9 | % | — |
| — | % |
| 30,000 |
| 49.2 | % | 1,000 |
| 0.5 | % |
|
Total |
| 97,000 |
| 100.0 | % | 119,000 |
| 100.0 | % |
| 310,000 |
| 100.0 | % | 278,000 |
| 100.0 | % |
|
| 31,000 |
| 100.0 | % | 112,000 |
| 100.0 | % |
| 61,000 |
| 100.0 | % | 214,000 |
| 100.0 | % |
|
Three Months Ended Septembermonths ended June 30, 20182019 Compared to the Three Months Ended Septembermonths ended June 30, 20172018
Timber revenue decreased by $0.2$1.2 million, or 10.0%63.2%, during the three months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017,2018. The decrease is primarily due to a decrease in the amount of tons sold along withand product and price mix changes.changes caused by Hurricane Michael’s significant market impact since landfall in October 2018. There were 97,00031,000 tons sold during the three months ended SeptemberJune 30, 2018,2019, as compared to 119,000112,000 tons sold during the same period in 2017.2018. The average price per ton sold increased to $16.10$16.06 during the three months ended SeptemberJune 30, 2018,2019, as compared to $15.89$15.64 during the same period in 2017.
52
2018. Gross margin decreased during the three months ended June 30, 2019, to 71.4%, as compared to 89.5% during the same period in 2018, primarily due to decreases in volume and changes in product mix.
During the three months ended SeptemberJune 30, 2019, we sold approximately 34 acres of rural and timber land for $1.2 million, resulting in a gross profit margin of approximately 91.7%. During the three months ended June 30, 2018, we sold approximately 5077 acres of rural and timber land for $0.7 million, resulting in a gross profit margin of 71.4%, as compared to approximately 66 acres of rural and timber land sold for $0.7 million during the three months ended September 30, 2017, with de minimis cost of revenue resulting in a gross profit margin of approximately 100.0%85.7%.
Leasing revenue consists primarily of hunting leases, which is recognized as income over the term of each lease.
Other operating expenses include salaries and benefits, property taxes, professional fees and other administrative expenses.
NineSix Months Ended SeptemberJune 30, 20182019 Compared to the NineSix Months Ended SeptemberJune 30, 20172018
Timber revenue increaseddecreased by $0.5$2.2 million, or 10.6%62.9%, during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to the same period in 2017,2018. The decrease is primarily due to an increasea decrease in the amount of tons sold, along with price decreases and product and price mix changes.changes caused by Hurricane Michael’s significant market impact since landfall in October
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2018. There were 310,00061,000 tons sold during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to 278,000214,000 tons sold during the same period in 2017.2018. The average price per ton sold increaseddecreased to $15.61$14.42 during the ninesix months ended SeptemberJune 30, 2018,2019, as compared to $15.51$15.44 during the same period in 2017.2018. Gross margin increaseddecreased during the ninesix months ended SeptemberJune 30, 2018,2019, to 88.5%76.9%, as compared to 87.2%88.6% during the same period in 2017. The cost of timber revenue is2018, primarily fixed, which resulteddue to decreases in an increase to gross margin for the period.sales price and volume.
During the ninesix months ended SeptemberJune 30, 2018,2019, we sold approximately 14454 acres of rural and timber land for $1.6$1.3 million, resulting in a gross profit margin of 75.0%, as compared to approximately 15592.3%. During the six months ended June 30, 2018, we sold approximately 94 acres of rural and timber land sold for $0.9 million, during the nine months ended September 30, 2017, with de minimis cost of revenue resulting in a gross profit margin of approximately 100.0%77.8%.
Leasing revenue consists primarily of hunting leases, which is recognized as income over the term of each lease.
Other operating expenses include salaries and benefits, property taxes, professional fees and other administrative expenses.
Liquidity and Capital Resources
As of SeptemberJune 30, 2018,2019, we had cash and cash equivalents of $200.9$195.6 million, compared to $192.1$195.2 million as of December 31, 2017.2018. Our cash and cash equivalents at SeptemberJune 30, 20182019 includes commercial paper of $175.2$154.2 million, short term U.S. Treasury securities of $7.0 million and $6.2$1.8 million of money market funds. In addition to cash and cash equivalents, we consider our investments classified as available-for-sale securities and equity securities (“Securities”), as being generally available to meet our liquidity needs. Securities classified as available-for-sale and equity securities are not as liquid as cash and cash equivalents, but they are generally convertible into cash within a relatively short period of time. As of SeptemberJune 30, 2019, we had investments - debt securities in corporate debt securities of $2.8 million and investments - equity securities in preferred stock investments of $36.3 million. As of December 31, 2018, we had investments - debt securities in U.S. Treasury securities of $10.0$6.9 million and corporate debt securities of $3.2$2.0 million and investments - equity securities in preferred stock investments of $35.1 million. As of December 31, 2017, we had investments - debt securities in U.S. Treasury securities of $9.9 million and corporate debt securities of $66.4 million and investments - equity securities in preferred stock investments of $35.0$36.1 million. See Note 4. Investments, for additional information regarding our investments.
We believe that our current cash position and our anticipated cash flows from cash equivalents, short term investments and cash generated from operations will provide us with sufficient liquidity to satisfy our anticipated working capital needs, expected capital expenditures, principal and interest payments on our long term debt and authorized stock repurchases for the next twelve months.
During the ninesix months ended SeptemberJune 30, 2018,2019, we incurred a total of $33.3$48.6 million for capital expenditures, which includes $10.7$12.9 million related to the acquisition and development ofin our residential real estate projects, $15.8communities, $23.7 million for our commercial leasing and sales segment, $5.6$10.8 million related to our resorts and leisurehospitality segment and $1.2 million related primarily to our forestry segment and corporate expenditures. As of SeptemberJune 30, 2018,2019, we had a total of $41.5$96.9 million in construction and development related contractual obligations.obligations, of which a portion will be funded through committed financing arrangements.
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In October 2015, the Pier Park North JV refinanced its construction loan and entered into a $48.2 million loan. As of SeptemberJune 30, 20182019 and December 31, 2017, $46.62018, $46.0 million and $47.3$46.4 million, respectively, was outstanding on the PPN JV Loan. The PPN JV Loan accrues interest at a rate of 4.1% per annum and matures in November 2025. In connection with the PPN JV Loan, we entered into a limited guarantee in favor of the lender, based on our percentage ownership of the joint venture.JV. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North JV; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary bankruptcy or insolvency proceedings and upon breach of covenants in the security instrument. See Note 10. Debt, Net.
In May 2018, the Pier Park Crossings JV entered into a $36.6 million loan, insured by HUD, to finance the construction of apartments in Panama City Beach, Florida. As of SeptemberJune 30, 2019 and December 31, 2018, $8.3$24.6 million and $15.4 million, respectively, was outstanding on the PPC JV Loan. The PPC JV Loan accrues interest at a rate of 4.0% per annum and matures in June 2060. The PPC JV Loan may not be prepaid prior to July 1, 2020. From July 1,
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2020 through June 30, 2030, a prepayment premium is due to the lender of 1.0% - 10.0% of theany principal prepaid. The PPC JV Loan is secured by the Pier Park Crossings JV’s real property and the assignment of rents and leases.
In May 2019, the Origins Crossings JV entered into a $37.9 million loan. As of June 30, 2019, there was no principal balance outstanding on the Origins Crossings JV Loan. The Origins Crossings JV Loan bears interest at a rate of 5.0% and matures in May 2024. The Origins Crossings JV Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the Origins Crossings JV Loan, we executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Origins Crossings JV Loan. We are the sole guarantor and will receive a fee related to the guarantee from our JV partner based on the JV partner’s ownership percentage.
In June 2019, the Watercrest JV entered into a $22.5 million loan. As of June 30, 2019, there was no principal balance outstanding on the Watercrest JV Loan. The Watercrest JV Loan bears interest at a rate of LIBOR plus 2.2% and matures in June 2047. The Watercrest JV Loan is secured by the real property, assignment of rents, leases and deposits and the security interest in the rents and personal property. In connection with the Watercrest JV Loan, we executed a guarantee in favor of the lender to guarantee the payment and performance of the borrower under the Watercrest JV Loan. We are the sole guarantor and will receive a fee related to the guarantee from our JV partner based on the JV partner’s ownership percentage. We entered into an interest rate swap to hedge cash flows tied to changes in the underlying floating interest rate tied to LIBOR. The interest rate swap is effective June 1, 2021 and matures on June 1, 2024 and fixed the variable rate debt on the notional amount of related debt of $20.0 million to a rate of 4.37%. See Note 10.Item 3. Debt, NetQuantitative and Qualitative Disclosures about Market Risk. for additional information regarding LIBOR related risks.
CDD bonds financed the construction of infrastructure improvements in some of our projects.communities. The principal and interest payments on the bonds are paid by assessments on the properties benefited by the improvements financed by the bonds. We have recorded a liability for CDD debt that is associated with platted property, which is the point at which it becomes fixed or determinable. Additionally, we have recorded a liability for the balance of the CDD debt that is associated with unplatted property if it is probable and reasonably estimable that we will ultimately be responsible for repayment. We have recorded CDD related debt of $6.4$7.0 million as of SeptemberJune 30, 2018.2019. Total outstanding CDD debt related to our land holdings was $20.0$18.9 million at SeptemberJune 30, 2018,2019, which was comprised of $16.7$15.8 million at SouthWood, $2.8$2.6 million at the existing Pier Park retail center and $0.5 million at Wild Heron, a community where we own residential lots for resale.Heron. We pay interest on this total outstanding CDD debt. During the second quarter of 2018, the CDD at SouthWood completed a refinance of its 2008 and 2011 bonds into 2018 bonds, reducing the interest rates.
During the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, we repurchased a total of 5,238,566471,500 and 7,811,9374,065,160 shares, respectively, of our common stock outstanding for an aggregate purchase price of $93.4$7.1 million and $136.0$72.5 million, respectively, including costs. See Note 14. Stockholders’ Equity and Part II – Other Information – Item 2 of this quarterly report for additional information regarding common stock repurchases related to the Stock Repurchase Program and treasury stock retirement during 2018.Program.
Summary of Cash Flows
A summary of our cash flows from operating, investing and financing activities for the nine months ended September 30, 2018 and 2017 are as follows:
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Net cash provided by operating activities |
| $ | 46.0 |
| $ | 49.4 |
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| $ | 12.3 |
| $ | 37.7 |
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Net cash provided by investing activities |
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| 51.2 |
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| 12.6 |
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Net cash used in financing activities |
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| (136.7) |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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| 11.4 |
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Net cash (used in) provided by investing activities |
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| 56.0 |
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| 3.0 |
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| 192.4 |
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Cash, cash equivalents and restricted cash at end of the period |
| $ | 203.8 |
| $ | 168.4 |
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| $ | 198.7 |
| $ | 218.3 |
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Cash Flows from Operating Activities
Cash flows fromprovided by operating activities include costs related to assets ultimately planned to be sold, including residential real estate development and related amenities, sales of timberlands or undeveloped and developed land and land developed by the commercial leasing and sales segment. Net cash provided by operations was $46.0$12.3 million during
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the ninesix months ended SeptemberJune 30, 2018,2019, as compared to $49.4net cash provided by operations of $37.7 million during the same period in 2017.2018. Net cash provided by operations included $23.1 million of a one-time payment of RiverTown impact fees received during the ninesix months ended SeptemberJune 30, 2018. Net cash provided by operations included $26.7 million of federal income tax refunds received during the nine months ended September 30, 2017.
Cash Flows from Investing Activities
Cash flows (used in) provided by investing activities primarily includes sales of investments, maturities of assets held by special purpose entities and proceeds from the disposition of assets, partially offset by purchases of investments and capital expenditures for operating property and property and equipment used in our operations.operations and purchases of investments, partially offset by maturities of investments, proceeds from insurance claims, proceeds from the disposition of assets, sales of investments and maturities of assets held by SPEs. During the ninesix months ended SeptemberJune 30, 2019, net cash used in investing activities was $14.7 million, which included capital expenditures for operating property and equipment and purchases of investments of less than $0.1 million, partially offset by proceeds from insurance claims of $10.8 million, maturities of investments – debt securities of $7.0 million, sales of restricted investments of $1.2 million and maturities of assets held by SPEs of $0.4 million. During the six months ended June 30, 2018, net cash provided by investing activities was $51.2$56.0 million, which includesincluded sales of investments - debt securities of $64.6$63.5 million, sales of investments – equity securities of $11.0$7.3 million, proceeds from the disposition of assets of $5.0 million, and maturities of assets held by SPEs of $0.8 million, offset by purchases of investments – debt securities of $0.1 million and purchases of investments - equity securities of $10.4 million. During the nine months ended September 30, 2017, net cash provided by investing activities was $12.6 million, which includes sales of restricted investments - debt securities of $122.7 million, sales of investments - equity securities of $21.5$1.1 million and maturities of assets held by SPEs of $0.8$0.4 million, partially offset by purchases of investments - debt securities of $84.9 million and purchases of investments - equity securities of $19.1 million.$10.4 million and capital expenditures for operating property and equipment.
Capital expenditures for operating property and property and equipment were $19.7$34.0 million and $28.4$10.9 million, during the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, respectively, which were primarily for our and commercial leasing and sales and resorts and leisurehospitality segments. Capital expenditures for operating property during the nine months ended September 30, 2017 included the purchase of two office buildings and construction of a manufacturing facility for lease in VentureCrossings.
Cash Flows from Financing Activities
Net cash provided by financing activities during the six months ended June 30, 2019 was $3.0 million compared to net cash used in financing activities was $85.8 million during the ninesix months ended SeptemberJune 30, 2018 compared to $136.7 million forof $67.9 million. Net cash provided by financing activities during the ninesix months ended SeptemberJune 30, 2017.2019 included borrowings on debt of $10.6 million and capital contribution from non-controlling interest of $1.8 million, partially offset by the repurchase of common stock of $7.1 million, principal payments on debt of $1.0 million, debt issuance costs of $0.8 million, capital contribution to unconsolidated affiliate of $0.3 million and capital distribution to non-controlling interest of $0.2 million. Net cash used in financing activities during the ninesix months ended SeptemberJune 30, 2018 included the repurchase of our common stock of $93.4$72.5 million, debt issuance costs of $1.2$1.1 million and principal payments on debt of $1.1 million, capital distribution to non-controlling interest of $0.2 million and capital contribution to unconsolidated affiliate of $0.1$0.9 million, partially offset by borrowings on debt of $9.3$5.7 million and capital contribution from non-controlling interest of $0.9 million. Net cash used in financing activities during the nine months ended September 30, 2017 included the repurchase of our common stock of $136.0 million, capital distribution to non-controlling interest of $1.5 million and principal payments on debt of $1.0 million, partially offset by borrowings on debt of $1.6 million and capital contribution from non-controlling interest of $0.2 million.
Off-Balance Sheet Arrangements
In October 2015, the Pier Park North JV refinanced its construction loanAs of June 30, 2019 and December 31, 2018, we had various loans outstanding for which we have entered into a $48.2 million loan. As of September 30, 2018 the PPN JV Loan was secured by a first lien on,guarantees and security interest in, a majority of Pier Park North JV’s property. In connection with the PPN JV Loan, we are required to comply with a financial covenant and entered into a limited guarantee as described incovenants. See Note 10. Debt, Net.
In January 2019, our unconsolidated Pier Park TPS JV, entered into a $14.4 million loan, maturing in January 2026. The Pier Park TPS JV Loan is secured by the real property, assignment of rents and the security interest in the rents and personal property. In connection with the Pier Park TPS JV Loan, as guarantor we and a wholly owned subsidiary of ours entered into a joint and several guarantee in favor of the lender, to guarantee the payment and performance of the borrower. See Note 18. Commitments and Contingencies for additional information.
As part of a timberland sale in 2007 and 2008, we have recorded a retained interest with respect to notes contributed to bankruptcy-remote qualified SPEs of $11.4$11.9 million for all installment notes monetized through SeptemberJune 30, 2018.2019. This balance represents the present value of future cash flows to be received over the life of the installment notes, using
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management’s best estimates of underlying assumptions, including credit risk and interest rates as of the date of the monetization, plus the accretion of investment income based on an effective yield, which is recognized over the term of the notes, less actual cash receipts.
At Septemberboth June 30, 20182019 and December 31, 2017,2018, we were required to provide surety bonds that guarantee completion of certain infrastructure in certain development projects and mitigation banks of $8.1$9.4 million, and $8.6
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million, respectively, and standby letters of credit of less than $0.1 million at December 31, 2017, which may potentially result in a liability to us if certain obligations are not met.
In conducting our operations, we routinely hold customers’ assets in escrow pending completion of real estate transactions, and are responsible for the proper disposition of these balances for our customers. These amounts are maintained in segregated bank accounts and have not been included in the accompanying condensed consolidated balance sheets, consistent with GAAP and industry practice. The cash deposit accounts and offsetting liability balances for escrow deposits in connection with our title agency real estate transactions were $1.3$2.2 million and $0.1$1.6 million as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively, these escrow funds are not available for regular operations.
Contractual Obligations
There were no material changes outside the ordinary course of our business in our contractual obligations during the thirdsecond quarter of 2018.2019.
Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements concern expectations, beliefs, projections,include, among other things, information about possible or assumed future results of the business and our financial condition, liquidity, results of operations, plans, strategies, prospects and strategies, anticipated eventsobjectives. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue" or trends andother similar expressions concerning matters that are not historical facts. Specifically, this quarterly report contains forward-looking statements regarding:
· | our expectations concerning our future business strategy, including exploring the sale of our real estate assets opportunistically or when we believe that we or others can better deploy those resources; |
· | our intention to use our land holdings, |
· | our expectations regarding investments that we believe will contribute towards increasing our future growth, particularly in real estate projects that provide recurring revenue; |
· | our |
· | our assessment and expectations regarding the demographics and corresponding market demand and growth of Northwest Florida; |
· | our assessment and expectations regarding the impact of Hurricane Michael, including the amount and timing of insurance proceeds and ability to recover any losses; |
· | our expectations regarding |
· | our expectations regarding |
· | our beliefs regarding opportunities to develop, improve or acquire a broad range of asset types that will generate recurring revenue; |
· | our plan to focus on investing in residential communities that have the potential for long term, scalable and repeatable revenue; |
· | our expectation to continue to be a developer of |
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· | our |
· | our plan to expand the scope and scale of our |
· | our intention to continue to work collaboratively with public and private partners on strategic infrastructure and economic development initiatives that will help to attract quality job creators and help to diversify the Northwest Florida economy; |
· | our expectations regarding opportunities |
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· | our belief that by entering into partnerships, |
· | our expectation to continue a cost and investment discipline to ensure low fixed expenses and bottom line performance; |
· | our plan to continue to maintain a high degree of liquidity while seeking opportunities to invest our cash in ways that we believe will increase shareholder value, including investments in |
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· | our expectation regarding our liquidity or ability to satisfy our working capital needs, expected capital expenditures and principal and interest payments on our long term debt; |
· | our estimates and assumptions regarding the installment notes and the Timber Note; |
· | our estimated impact of new accounting pronouncements; and |
· | our expectation regarding the impact of pending litigation, claims, other disputes or governmental proceedings, on our cash flows, financial condition or results of |
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, those risk factors and disclosures set forth in our Form 10‑K for the year ended December 31, 2017,2018, subsequent Form 10‑Qs, other current reports, and the following:
· | any changes in our strategic objectives or our ability to successfully implement such strategic objectives; |
· | any potential negative impact of our longer-term property development strategy, including losses and negative cash flows for an extended period of time if we continue with the self-development of our entitlements; |
· | our ability and the ability of our investment advisor to identify and acquire suitable investments for our investment portfolio that meet our risk and return criteria; |
· | significant decreases in the market value of our investments in |
· | our ability to capitalize on strategic opportunities presented by a growing retirement demographic; |
· | our ability to accurately predict market demand for the range of potential residential and commercial uses of our real estate, including our Northwest Florida holdings; |
· | volatility in the consistency and pace of our residential real estate revenue; |
· | economic or other conditions that affect the future prospects for the Southeastern region of the |
· | any downturns in real estate markets in Florida or across the nation; |
· | any reduction in the supply of mortgage loans or tightening of credit markets; |
· | our dependence on the real estate industry and the cyclical nature of our real estate operations; |
· | the impact of natural or man-made disasters or weather conditions, including hurricanes, fires and other severe weather conditions, on our business, including the recent impact of Hurricane Michael; |
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· | our ability to fully recover under claims for losses related to Hurricane Michael; |
· | our ability to successfully and timely obtain land use entitlements and construction financing, maintain compliance with state law requirements and address issues that arise in connection with the use and development of our land, including the permits |
· | changes in laws, regulations or the regulatory environment affecting the development of real estate; |
· | our ability to effectively deploy and invest our assets, including our |
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· | our ability to effectively manage our real estate assets, as well as the ability of our |
· | our ability to close and realize the expected revenue of the residential |
· | our ability to successfully and timely complete |
· | our ability to attract and work effectively with strategic partners; |
· | our ability to successfully enter into previously announced potential JVs; |
· | our ability to realize the anticipated benefits of our acquisitions, |
· | our ability to carry out the Stock Repurchase Program in accordance with applicable securities laws; |
· | the impact of the Tax Act on our business and financial condition; |
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· | increases in operating costs, including costs related to real estate taxes, owner association fees, construction materials, labor and insurance and our ability to manage our cost structure; |
· | the sufficiency of our current cash position, anticipated cash flows from cash equivalents and short term investments and cash generated from operations to satisfy our anticipated working capital needs, capital expenditures and principal and interest payments; |
· | our ability to anticipate the impact of pending environmental litigation matters or governmental proceedings on our financial condition or results of operations; |
· | the expense, management distraction and possible liability associated with litigation, claims, other disputes or governmental proceedings; |
· | Fairholme’s ability to influence major corporate decisions affecting the Company; |
· | potential liability under environmental or construction laws, or other laws or regulations; |
· | the impact if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting; |
· | the impact if the SEC were to disagree with our Investment Company Act determinations; |
· | our ability to retain key personnel and recruit staff effectively; |
· | our ability to receive payments of settlement amounts due under our claims settlement receivable; and |
· | our ability to successfully estimate the impact of certain accounting and tax matters that arise from the installment notes and the Timber Note. |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks primarily from interest rate risk fluctuations. We have investments in U.S. Treasury securities and corporate debt securities that have fixed interest rates for which changes in interest rates generally affect the fair value of the investment, but not the earnings or cash flows. A hypothetical 100 basis point increase in interest rates would result in a decrease of less than $0.1 million in the market value of these investments as of SeptemberJune 30, 2018.2019. Any realized gain or loss resulting from such interest rate changes would only occur if we sold the investments prior to maturity or if a decline in their value is determined to be other-than-temporary. In addition, our investments in corporate debt securities are non-investment grade, which could affect their fair value.
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We also have investments in certain preferred stock that have fixed interest rates for which changes in interest rates generally affect the fair value of the investment and are recorded in the condensed consolidated statements of income. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $1.4$0.9 million in the market value of these investments as of SeptemberJune 30, 2018.2019. In addition, our investments in certain preferred stock are non-investment grade, which could affect their fair value.
Our cash and cash equivalents are invested in commercial paper and money market instruments. Changes in interest rates related to these investments would not significantly impact our results of operations. The amount of interest earned on one of our retained interest investments is based on LIBOR. A 100 basis point change in the interest rate may result in an insignificant change in interest earned on the investment.
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The amount of interest expense on some of our construction loans are based on LIBOR. A 100 basis point change in the interest rate may result in an insignificant change in interest expense.
LIBOR is set to be phased out at the end of 2021. If LIBOR ceases to exist, we may need to renegotiate our loan documents and we cannot predict what alternative index would be negotiated with our lenders. As a result, our interest expense could increase.
Increases in interest rates, reductions in mortgage availability or the tax benefits of mortgage financing or residential ownership could negatively impact our real estate business and would also increase the costs of our development projects. Similarly, a downturn in economic conditions in Northwest Florida would reduce discretionary income and decrease demand for our hospitality segment operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting. During the quarter ended SeptemberJune 30, 2018,2019, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
We are subject to a variety of litigation, claims, other disputes and governmental proceedings that arise from time to time in the ordinary course of our business, none of which we believe will have a material adverse effect on our consolidated financial position, results of operations or liquidity.
In addition, we are subject to environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. Refer to Note 18. Commitments and Contingencies, for further discussion.
A description of the risk factors associated with our business is contained in the “Risk Factors” section of our annual report on Form 10‑K for the fiscal year ended December 31, 2017.2018. There have been no material changes to our Risk Factors as previously reported.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company’s Board has approved the Stock Repurchase Program pursuant to which the Company iswe are authorized to repurchase shares of its common stock. The Stock Repurchase Program has no expiration date.
As of SeptemberJune 30, 2018, the Company2019, we had a total authority of $42.9$35.8 million available for purchase of shares of itsour common stock pursuant to the Stock Repurchase Program. The CompanyWe may repurchase itsour common stock in open market purchases from time to time, in privately negotiated transactions or otherwise, pursuant to Rule 10b-18 under the Exchange Act. The timing and amount of any additional shares to be repurchased will depend upon a variety of factors, including market and business conditions. Repurchases may be commenced or suspended at any time or from time to time without prior notice. The Stock Repurchase Program will continue until otherwise modified or terminated by the Company’sour Board at any time in its sole discretion.
Execution of the Stock Repurchase Program will reduce the Company’sour “public float”, and the beneficial ownership of common stock by its directors, executive officers and affiliates will proportionately increase as a percentage of the Company’sour outstanding common stock as a result of the execution of the Stock Repurchase Program. However, the Company doeswe do not believe that the execution of the Stock Repurchase Program will cause the Company’sour common stock to be delisted from NYSE or cause the Companyus to stop being subject to the periodic reporting requirements of the Exchange Act.
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The following table provides information regardingThere were no stock repurchases of common stock during the three months ended September 30, 2018:second quarter of 2019.
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Period |
| Shares Purchased |
| Paid per Share |
| Plans or Programs |
| Plans or Programs | ||
|
|
|
|
|
|
|
|
| In Millions | |
July 1-31, 2018 |
| 596,241 |
| $ | 17.88 |
| 596,241 |
| $ | 53.1 |
August 1-31, 2018 |
| 577,165 |
|
| 17.73 |
| 577,165 |
|
| 42.9 |
September 1-30, 2018 |
| — |
|
| — |
| — |
|
| — |
Total |
| 1,173,406 |
| $ | 17.81 |
| 1,173,406 |
| $ | 42.9 |
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
65
Index to Exhibits
|
|
|
Exhibit |
|
|
Number |
| Description |
3.1 |
| |
3.2 |
| |
|
| |
| ||
*31.1 |
| Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
*31.2 |
| Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
**32.1 |
| |
**32.2 |
| |
*101.INS |
| XBRL Instance Document. |
*101.SCH |
| XBRL Taxonomy Extension Schema Document. |
*101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document. |
*101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
*101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document. |
*101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document. |
†Indicates management contract or compensation plan or arrangement.
* Filed herewith.
** Furnished herewith.
† Management contract or compensatory plan arrangement.
6066
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
| THE ST. JOE COMPANY |
|
| (Registrant) |
|
|
|
|
|
|
Date: |
| /s/ Jorge Gonzalez |
|
| Jorge Gonzalez |
|
| President, Chief Executive Officer and Director |
|
| (Principal Executive Officer) |
|
|
|
|
|
|
Date: |
| /s/ Marek Bakun |
|
| Marek Bakun |
|
| Executive Vice President and Chief Financial Officer |
|
| (Principal Financial Officer) |
6167