July 26, 2023 at 4:10 PM EDT
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Highlights for the second quarter of 2023 compared to the second quarter of 2022:
- Quarterly net income attributable to the Company increased by 104% to $34.7 million from $17.0 million.
- Quarterly revenue increased by 88% to $128.1 million from $68.2 million.
- Real estate revenue increased by 148% to $69.3 million from $28.0 million with average base revenue, excluding homesite residuals, per homesite sold of $153,000 as compared to $83,000.
- Hospitality revenue increased by 52% to a quarterly record of $45.1 million from $29.6 million.
- Leasing revenue increased by 33% to $12.4 million from $9.3 million. As of June 30, 2023, the 1,041,000 of net rentable square feet were 98% leased.
- Homesite closings volume increased 30% to 300 homesites from 231 homesites.
- Latitude Margaritaville Watersound unconsolidated joint venture home sale transaction completions increased by 152% to 164 homes as compared to 65 homes.
Jorge Gonzalez, the Company’s President and Chief Executive Officer, said, “We showed solid organic growth in the quarter across each of our segments without any unique one-time events. We grew revenue in the second quarter of 2023 by 88% and net income attributable to the Company by 104%. Our real estate revenue grew by 148% to $69.3 million. Our hospitality revenue grew by 52% to $45.1 million even with four of the new hotels not being open at the start of the quarter. Our leasing revenue grew by 33% to $12.4 million.”
Mr. Gonzalez continued, “We sold 300 homesites in the second quarter of 2023 as compared to 231 homesites in the second quarter of 2022. The 300 homesite sales were across 10 different communities, sold to 10 separate homebuilders and various retail customers, with the average base revenue per homesite increasing to $153,000 when compared to $83,000 for the second quarter of 2022.
“In addition to our homesite sales, the Latitude Margaritaville Watersound unconsolidated joint venture had 150 new contracts and 164 completed home sales in the quarter. The 665 homes under contract at quarter end are expected to result in a sales value of $333.2 million to the joint venture. Since the start of sales in the community in 2021, there have been 1,341 home sale contracts and 676 completed homes at Latitude, all of which occurred without a completed amenity. The amenity, located on the Intracoastal Waterway, opened in June and we anticipate will help to grow sales.”
Mr. Gonzalez concluded, “This quarter demonstrates what we have been saying all along, which is that housing demand in our region is solid and our quarter-to-quarter homesite sales and margin results depend more on the timing of completion of development and product mix. The biggest driver to housing demand in our region is the net migration that is occurring from a wider range of geographies where individuals and families are looking for a high quality of life, safety, security, natural beauty, and great schools. Walton County is ranked #3 out of 67 school districts in Florida. In addition to net migration, more vacationers are discovering our area as demonstrated by the 52% growth in our hospitality revenue. At the start of 2020, we had a total of only 71 hotel rooms for visitors as compared to the end of the second quarter of 2023, where we now have 1,177 hotel rooms in a wide range of locations at varying price points.
“We will continue to focus on long term value creation by executing on what we know to be true. We own nearly 170,000 acres in Florida. We have ‘as of right’ entitlements to develop over 170,000 residential units and tens of millions of square feet of commercial space, and we are only beginning, with the majority of the current revenue derived from less than 2% of our land holdings. We have proven that we can grow recurring profits by efficiently developing, leasing, and operating real estate assets rather than just selling land.”
Consolidated Second Quarter and First Half 2023 Results
Total consolidated revenue for the second quarter of 2023 increased by 88% to $128.1 million, as compared to $68.2 million for the second quarter of 2022. Real estate revenue increased by 148% to $69.3 million, hospitality revenue increased by 52% to $45.1 million and leasing revenue increased by 33% to $12.4 million. Homesite unit sales increased 30% to 300 for the second quarter of 2023, as compared to 231 units for the second quarter of 2022, while the average base unit sales price for the second quarter of 2023 was $153,000, excluding homesite residuals, as compared to $83,000 for the second quarter of 2022. The difference in the average price is driven by the mix of sales from different residential communities.
For the six months ended June 30, 2023, total consolidated revenue increased by 51% to $201.1 million, as compared to $133.1 million for the first six months of 2022. For the first six months of 2023, consolidated revenue growth included a 61% increase in real estate revenue, a 52% increase in hospitality revenue and a 34% increase in leasing revenue, as compared to the same period in 2022.
Over the past few years, the Company entered into eight joint ventures which are unconsolidated and accounted for using the equity method. For the three months ended June 30, 2023, these unconsolidated joint ventures had $88.9 million of revenue, as compared to $33.9 million for the same period in 2022. For the first six months of 2023, these unconsolidated joint ventures had $170.7 million of revenue, as compared to $47.3 million for the first six months of 2022. This activity is in addition to the Company’s reported consolidated revenue. The Company’s economic interests in its unconsolidated joint ventures resulted in $9.7 million in equity in income from unconsolidated joint ventures, for the first six months of 2023, as compared to $0.9 million for the first six months of 2022. Although these business ventures are not included as revenue in the Company’s financial statements, they are part of the core business strategy which is generating substantial financial returns for the Company.
Net income for the second quarter of 2023 increased by 104% to $34.7 million, or $0.60 per share, as compared to net income of $17.0 million, or $0.29 per share, for the same period in 2022. Net income for the first six months of 2023 increased by 48% to $45.1 million, or $0.77 per share, as compared to net income of $30.4 million, or $0.52 per share, for the same period in 2022.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, for the three months ended June 30, 2023, increased by 99% to $59.7 million, as compared to $30.0 million for the same period in 2022. EBITDA for the six months ended June 30, 2023, increased by 53% to $84.1 million, as compared to $54.8 million for the same period in 2022. Depreciation is a non-cash, GAAP expense which is amortized over an asset’s useful life, while maintenance and repair expenses are period costs and expensed as incurred. See Financial Data below for additional information, including a reconciliation of EBITDA to net income attributable to the Company.
On July 26, 2023, the Board of Directors declared a cash dividend of $0.12 per share on the Company’s common stock, a 20% increase from the June 2023 dividend payment, payable on September 8, 2023, to shareholders of record as of the close of business on August 11, 2023.
Real Estate
For the three months ended June 30, 2023, real estate revenue increased by 148% to $69.3 million, as compared to $28.0 million for the three months ended June 30, 2022. The homesite sales volume increased by 30% to 300 homesites as compared to 231 homesites for the three months ended June 30, 2022. Due to the mix of sales from different communities, the average base sales price for the second quarter of 2023 was $153,000 per homesite as compared to $83,000 per homesite for the second quarter of 2022.
For the six months ended June 30, 2023, real estate revenue increased by 61% to $104.3 million as compared to $64.8 million for the first six months of 2022. The homesite sales volume increased by 52% to 627 homesites as compared to 412 homesites sold in the first half of 2022. The average base sales price for the first six months of 2023 was $105,000 as compared to $113,000 for the same period in 2022.
As of June 30, 2023, the Company had 1,825 residential homesites under contract, which are expected to result in base revenue of approximately $87,000 per homesite, plus residuals over the next several years, as compared to 2,172 residential homesites under contract at approximately $77,000 per homesite, plus residuals as of June 30, 2022. The change in homesites under contract is due to increased homesite transactions in the first six months of 2023 and amount of remaining homesites in current phases of residential communities.
The Latitude Margaritaville Watersound unconsolidated joint venture, planned for 3,500 residential homes, had 150 net sales contracts executed in the second quarter of 2023. Since the start of sales in 2021, there have been 1,341 home contracts. For the second quarter of 2023, there were 164 completed home sales, bringing the community to 676 occupied homes. The 665 homes under contract as of June 30, 2023, are expected to result in a sales value of approximately $333.2 million at completion. The 665 homes under contract had an average sales price of approximately $501,000 as of June 30, 2023, as compared to the 605 homes under contract with an average sales price of approximately $484,000 as of June 30, 2022.
Hospitality
Hospitality revenue increased by 52% to a quarterly record of $45.1 million in the second quarter of 2023, as compared to $29.6 million in the second quarter of 2022. Hospitality revenue continues to benefit from the growth of the Watersound Club membership program and increased operational hotel rooms. As of June 30, 2023, the Company had 2,853 club members as compared to 2,488 club members as of June 30, 2022. As of June 30, 2023, the Company owned (individually by the Company or through consolidated and unconsolidated joint ventures) eleven hotels with 1,177 operational hotel rooms, as compared to 476 hotel rooms as of June 30, 2022.
Five hotels, totaling 646 rooms, opened for business in 2023. The Lodge 30A hotel opened to guests in February 2023. Embassy Suites by Hilton Panama City Beach Resort located in the Pier Park area of Panama City Beach opened for business in April 2023. Home2 Suites by Hilton Santa Rosa Beach hotel and Hotel Indigo Panama City Marina opened for business in June 2023. The Camp Creek Inn received the first guests in July 2023. Residence Inn by Marriott, in the Pier Park area of Panama City Beach, is also under construction, which when complete, increases operational hotel rooms to 1,298 rooms.
Point South Marina Bay Point, with 127 wet slips, opened for business in the third quarter of 2022. Point South Marina Port St. Joe, with 252 dry slips and 48 wet slips, opened for business in the fourth quarter of 2022. The Company is planning to build and/or operate additional marinas with potential for a total of 750 wet and dry slips.
Leasing
Leasing revenue from commercial, retail, multi-family, senior living, self-storage, marinas and other properties increased by 33% to $12.4 million in the second quarter of 2023, compared to the same period in 2022. As of June 30, 2023, the Company, through consolidated and unconsolidated joint ventures, had 1,024 completed multi-family and senior living units with an additional 359 units under construction.
Rentable space as of June 30, 2023, consisted of approximately 1,041,000 square feet, of which approximately 1,016,000, or 98%, was leased, as compared to approximately 981,000 square feet as of June 30, 2022, of which approximately 909,000, or 93%, was leased. The Company has an additional 124,000 square feet of rentable space under construction. The Company is focused on commercial lease space at the Watersound Town Center, Watersound West Bay Center and the FSU/TMH Medical Campus. These three centers have the potential for over 1.2 million square feet of leasable space. The Company, wholly or through joint ventures, owns or operates commercial and hospitality businesses on real estate that could otherwise be leased to others.
Corporate and Other Operating Expenses
The Company’s corporate and other operating expenses for the three months ended June 30, 2023, and 2022, were comparable at $5.5 million for both periods and increased $0.2 million for the first six months of 2023 to $11.3 million as compared to the first six months of 2022 of $11.1 million. Corporate and operating expenses were approximately 6% of revenue for the first six months of 2023, as compared to 8% for the first six months of 2022.
Investments, Liquidity and Debt
In the second quarter of 2023, the Company funded $60.9 million in capital expenditures. In addition, the Company paid $5.8 million in cash dividends. As of June 30, 2023, the Company had $88.6 million in cash, cash equivalents and other liquid investments as compared to $78.3 million as of December 31, 2022, an increase of $10.3 million. As of June 30, 2023, the Company had $300.7 million invested in development property, which, when complete, will be added to operating property or sold.
As of June 30, 2023, the weighted average effective interest rate of outstanding debt was 5.2% with the average remaining life of 17.7 years. 68% of the Company’s outstanding debt had a fixed or swapped interest rate. The remaining 32% of debt has interest rates that vary with LIBOR or SOFR. Effective July 1, 2023, the remainder of the Company’s debt agreements utilizing LIBOR will automatically transition to SOFR. Company debt as of June 30, 2023, is approximately 29% of the Company’s total assets.