CTO REALTY GROWTH, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

When we refer to "we," "us," "our," or "the Company," we mean CTO Realty Growth,
Inc. and its consolidated subsidiaries. References to "Notes to Financial
Statements" refer to the Notes to the Consolidated Financial Statements of CTO
Realty Growth, Inc. included in this Quarterly Report on Form 10-Q.

Forward Looking Statements


Statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Also, when the Company uses any of the words "anticipate," "assume,"
"believe," "estimate," "expect," "intend," or similar expressions, the Company
is making forward-looking statements. Management believes the expectations
reflected in such forward-looking statements are based upon present expectations
and reasonable assumptions. However, the Company's actual results could differ
materially from those set forth in the forward-looking statements. Further,
forward-looking statements speak only as of the date they are made, and the
Company undertakes no obligation to update or revise such forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time, unless required by law.

The risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements, include, but are not limited to, the following:

? we are subject to risks related to the ownership of commercial real estate that

could affect the performance and value of our properties;

our business is dependent upon our tenants successfully operating their

? businesses, and their failure to do so could materially and adversely affect

us;

competition that traditional retail tenants face from e-commerce retail sales,

? or the integration of brick and mortar stores with e-commerce retail operators,

could adversely affect our business;

we operate in a highly competitive market for the acquisition of income

? properties and more established entities or other investors may be able to

compete more effectively for acquisition opportunities than we can;

? the loss of revenues from our income property portfolio or certain tenants

would adversely impact our results of operations and cash flows;

our revenues include receipt of management fees and potentially incentive fees

? derived from our provision of management services to Alpine Income Property

Trust, Inc. (“PINE”) and the loss or failure, or decline in the business or

assets, or PINE could substantially reduce our revenues;

there are various potential conflicts of interest in our relationship with

? PINE, including our executive officers and/or directors who are also officers

and/or directors of PINE, which could result in decisions that are not in the

best interest of our stockholders;

a prolonged downturn in economic conditions could adversely impact our

? business, particularly with regard to our ability to maintain revenues from our

income-producing assets;

? a part of our investment strategy is focused on investing in commercial loan

and master lease investments which may involve credit risk;

? we may suffer losses when a borrower defaults on a loan and the value of the

underlying collateral is less than the amount due;

? the Company’s real estate investments are generally illiquid;

if we are not successful in utilizing the like-kind exchange structure in

? deploying the proceeds from dispositions of income properties, or our like-kind

exchange transactions are disqualified, we could incur significant taxes and

our results of operations and cash flows could be adversely impacted;

the Company may be unable to obtain debt or equity capital on favorable terms,

? if at all, or additional borrowings may impact our liquidity or ability to

monetize any assets securing such borrowings;

? servicing our debt requires a significant amount of cash, and we may not have

sufficient cash flow from our business to service or pay our debt;

? our operations and properties could be adversely affected in the event of

natural disasters, pandemics, or other significant disruptions;

we may encounter environmental problems which require remediation or the

? incurrence of significant costs to resolve, which could adversely impact our

   financial condition, results of operations, and cash flows;


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failure to remain qualified as real estate investment trust (“REIT”) for US

? federal income tax purposes would cause us to be taxed a regular corporation,

which would substantially reduce funds available for distribution to

stockholders;

? the risk that the REIT requirements could limit our financial flexibility;

? our limited experience operating as a REIT;

? our ability to pay dividends consistent with the REIT requirements, and

expectations as to timing and amounts of such dividends;

? the ability of our board of directors (the “Board”) to revoke our REIT status

without stockholder approval;

? our exposure to changes in US federal and state income tax laws, including

changes to the REIT requirements; and

an epidemic or pandemic (such as the outbreak and worldwide spread of the novel

coronavirus (the “COVID-19 Pandemic”)), and the measures that international,

federal, state and local governments, agencies, law enforcement and/or health

? authorities implement to address it, may precipitate or materially exacerbate

one or more of the above-mentioned and/or other risks and may significantly

disrupt or prevent us from operating our business in the ordinary course for an

extended period.



The Company describes the risks and uncertainties that could cause actual
results and events to differ materially in "Risk Factors" (Part II, Item 1A of
this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on
Form 10-K for the year ended December 31, 2021), "Quantitative and Qualitative
Disclosures about Market Risk" (Part I, Item 3 of this Quarterly Report on Form
10-Q), and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" (Part I, Item 2 of this Quarterly Report on Form 10-Q).

OVERVIEW


We are a publicly traded, primarily retail-focused, REIT that was founded in
1910. We own and manage, sometimes utilizing third-party property management
companies, 21 commercial real estate properties in nine states in the United
States. As of June 30, 2022, we owned seven single-tenant and 14 multi-tenant
income-producing properties comprising 2.8 million square feet of gross leasable
space.

In addition to our income property portfolio, as of June 30, 2022our business included the following:


Management Services:

? A fee-based management business that is engaged in managing PINE, see Note 5,

“Related Party Management Services Business”.

Commercial Loan and Master Lease Investments:

A portfolio of five commercial loan investments, one commercial property, which

? is included in the 21 commercial real estate properties above, whose lease is

classified as commercial loan investment, and one preferred equity investment

which is classified as a commercial loan investment.

Real Estate Operations:

A portfolio of subsurface mineral interests associated with approximately

? 356,000 surface acres in 19 counties in the State of Florida (“Subsurface

Interests”); and

An inventory of historically owned mitigation credits as well as mitigation

credits produced by the Company’s mitigation bank. The mitigation bank owns a

2,500 acre parcel of land in the western part of Daytona Beach, Florida and,

pursuant to a mitigation plan approved by the applicable state and federal

? authorities, produces mitigation credits that are sold to developers of land in

the Daytona Beach area for the purpose of enabling the developers to obtain

certain regulatory permits for property development (the “Mitigation Bank“).

Prior to the Interest Purchase (defined in Note 7, “Investment in Joint

Ventures”) completed on September 30, 2021the Company held a 30% retained

interest in the entity that owns the Mitigation Bank.

Our business also includes our investment in PINE. As of June 30, 2022, the fair
value of our investment totaled $38.5 million, or 15.8% of PINE's outstanding
equity, including the units of limited partnership interest ("OP Units") we hold
in Alpine Income Property OP, LP (the "PINE Operating Partnership"), which are
redeemable for cash, based upon the value of an equivalent number of shares of
PINE common stock at the time of the redemption, or shares of PINE

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common stock on a one-for-one basis, at PINE's election. Our investment in PINE
generates investment income through the dividends distributed by PINE. In
addition to the dividends we receive from PINE, our investment in PINE may
benefit from any appreciation in PINE's stock price, although no assurances can
be provided that such appreciation will occur, the amount by which our
investment will increase in value, or the timing thereof. Any dividends received
from PINE are included in investment and other income (loss) on the accompanying
consolidated statements of operations.

Our strategy for investing in income-producing properties is focused on factors
including, but not limited to, long-term real estate fundamentals and target
markets, including major markets or those markets we believe are experiencing
economic growth. We employ a methodology for evaluating targeted investments in
income-producing properties which includes an evaluation of: (i) the attributes
of the real estate (e.g. location, market demographics, comparable properties in
the market, etc.); (ii) an evaluation of the existing tenant(s) (e.g.
credit-worthiness, property level sales, tenant rent levels compared to the
market, etc.); (iii) other market-specific conditions (e.g. tenant industry, job
and population growth in the market, local economy, etc.); and (iv)
considerations relating to the Company's business and strategy (e.g., strategic
fit of the asset type, property management needs, ability to transact in a
tax-efficient manner for the benefit of our shareholders, etc.).

We believe investment in income-producing assets provides attractive
opportunities for generally stable cash flows and increased returns over the
long run through potential capital appreciation. Our focus on acquiring
income-producing investments includes a continual review of our existing income
property portfolio to identify opportunities to recycle our capital through the
sale of income properties based on, among other possible factors, the current or
expected performance of the property and favorable market conditions. We sold
two single-tenant income properties, one of which was classified as a commercial
loan investment due to tenant repurchase options, during the six months ended
June 30, 2022. As a result of entering into the Exclusivity and Right of First
Offer Agreement with PINE (the "ROFO Agreement") which generally prevents us
from investing in single-tenant net lease income properties, our income property
investment strategy is focused on multi-tenant, primarily retail-oriented,
properties. We may pursue this strategy by monetizing certain of our
single-tenant properties, and should we do so, we would seek to utilize the 1031
like-kind exchange structure to preserve the tax-deferred gain on the original
transaction(s) that pertains to the replacement asset.

Our current portfolio of seven single-tenant income properties generates $9.1
million of revenues from annualized straight-line base lease payments and had a
weighted average remaining lease term of 6.3 years as of June 30, 2022. Our
current portfolio of 14 multi-tenant properties generates $45.8 million of
revenue from annualized straight-line base lease payments and had a weighted
average remaining lease term of 6.7 years as of June 30, 2022.

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021

Revenue

Total revenue for the three months ended June 30, 2022 is presented in the following summary and indicates the changes as compared to the three months ended June 30, 2021 (in thousands):

                                              Three Months Ended
Operating Segment                     June 30, 2022        June 30, 2021     $ Variance    % Variance
Income Properties                    $        16,367      $        11,574   $      4,793        41.4%
Management Services                              948                  752            196        26.1%
Commercial Loans and Investments               1,290                  709  
         581        81.9%
Real Estate Operations                           858                1,248          (390)      (31.3)%
Total Revenue                        $        19,463      $        14,283   $      5,180        36.3%


Total revenue for the three months ended June 30, 2022 increased to $19.5
million, compared to $14.3 million during the three months ended June 30, 2021.
The increase in total revenue is primarily attributable to increased income
produced by the Company's recent income property acquisitions versus that of
properties disposed of by the Company during the comparative period, in addition
to the increased management fee income from PINE and increased income from

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commercial loans and investments. These increases were offset by decreased revenue from real estate operations due to fewer sales of Subsurface Interests, as further described below.


Income Properties

Revenue and operating income from our income property operations totaled $16.4
million and $11.6 million, respectively, during the three months ended June 30,
2022, compared to total revenue and operating income of $11.6 million and $8.8
million, respectively, for the three months ended June 30, 2021. The direct
costs of revenues for our income property operations totaled $4.8 million and
$2.8 million for the three months ended June 30, 2022 and 2021, respectively.
The increase in revenues of $4.8 million, or 41.4%, during the three months
ended June 30, 2022 is primarily related to the overall growth of the Company's
income property portfolio, as well as the timing of acquisitions versus
dispositions. The increase in operating income from our income property
operations reflects increased rent revenues, offset by an increase of $2.0
million in our direct costs of revenues which is also related to the overall
growth of the Company's income property portfolio.

Management Services

Revenue from our management services from PINE totaled $0.9 million during the
three months ended June 30, 2022. Revenue from our management services totaled
$0.8 million during the three months ended June 30, 2021, including $0.7 million
and $0.03 million earned from PINE and the Land JV, respectively.

Commercial Loans and Investments


Interest income from our commercial loans and investments totaled $1.3 million
and $0.7 million during the three months ended June 30, 2022 and 2021,
respectively. The increase is due to increased income from the investments made
during the three months ended June 30, 2022, including two construction loans
and the Watters Creek Investment, as defined in Note 4. "Commercial Loans and
Investments", which were partially offset by decreased income from one
commercial property which was sold during the first quarter of 2022 which was
accounted for as a commercial loan investment due to future repurchase rights.

Real Estate Operations


During the three months ended June 30, 2022, operating income from real estate
operations was $0.6 million on revenues totaling $0.9 million. During the three
months ended June 30, 2021, operating income from real estate operations was
$0.7 million on revenues totaling $1.2 million. The total decrease in operating
income was $0.1 million of which $0.2 million of the decrease was due to fewer
Subsurface Interest sales. This $0.2 million decrease was partially offset by
the Company's sale of 1.96 mitigation credits for an aggregate sales price of
$0.2 million and related cost of sales of $0.1 million during the three months
ended June 30, 2022, with no such mitigation credit sales during the three
months ended June 30, 2021.

General and Administrative Expenses


Total general and administrative expenses for the three months ended June 30,
2022 is presented in the following summary and indicates the changes as compared
to the three months ended June 30, 2021 (in thousands):

                                                           Three Months 

Ended

General and Administrative Expenses               June 30, 2022          June 30, 2021    $ Variance    % Variance
Recurring General and Administrative Expenses    $         1,971        $         1,861   $       110          5.9%
Non-Cash Stock Compensation                                  705                    742          (37)        (5.0)%
REIT Conversion and Other Non-Recurring Items                  -                     62          (62)      (100.0)%
Total General and Administrative Expenses        $         2,676        $  
      2,665   $        11          0.4%


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Depreciation and Amortization

Depreciation and amortization totaled $6.7 million and $5.0 million during the
three months ended June 30, 2022 and 2021, respectively. The increase of $1.7
million is primarily due to the overall growth in the Company's income property
portfolio.

Gains (Losses) and Impairment Charges

2022 Dispositions. No income properties were sold during the three months ended
June 30, 2022.

2021 Dispositions. During the three months ended June 30, 2021, the Company sold
eight income properties, including (i) Burlington, a single-tenant income
property located in North Richland Hills, Texas for $11.5 million resulting in a
$0.1 million gain, (ii) Staples, a single-tenant income property located in
Sarasota, Florida for $4.7 million resulting in a $0.7 million gain, and (iii)
the CMBS Portfolio, sold to PINE, consisting of six single-tenant income
properties for $44.5 million resulting in a $3.9 million gain. The sale of the
properties reflect a total disposition volume of $60.7 million, resulting in
aggregate gains of $4.7 million.

Impairment Charges. There were no impairment charges on the Company's
undeveloped land holdings, or its income property portfolio during the three
months ended June 30, 2022 and 2021. The $16.5 million impairment charge, net of
the $4.1 million related income tax benefit, recognized during the three months
ended June 30, 2021 was related to the Company's previously held retained
interest in the Land JV as a result of the estimated proceeds to be received in
connection with the contract entered into with Timberline Acquisition Partners,
an affiliate of Timberline Real Estate Partners ("Timberline"). The sale to
Timberline closed on December 10, 2021.

Investment and Other Income (Loss)


During the three months ended June 30, 2022, the closing stock price of PINE
decreased by $0.88 per share, with a closing price of $17.92 on June 30, 2022.
During the three months ended June 30, 2021, the closing stock price of PINE
increased by $1.66 per share, with a closing price of $19.02 on June 30, 2021.
The change in stock price resulted in an unrealized, non-cash gain (loss) on the
Company's investment in PINE of ($1.8) million and $3.4 million which is
included in investment and other income (loss) in the consolidated statements of
operations for the three months ended June 30, 2022 and 2021, respectively.

The Company earned dividend income from the investment in PINE of $0.6 million
and $0.5 million during the three months ended June 30, 2022 and 2021, respectively.

Interest Expense

Interest expense totaled $2.3 million and $2.4 million for the three months
ended June 30, 2022 and 2021, respectively.  The decrease of $0.1 million
resulted primarily from (i) the net decrease in long-term debt outstanding under
the Company's Credit Facility during the three months ended June 30, 2022 as
compared to the same period in 2021, which is primarily driven by the use of
proceeds received from the Series A Preferred Stock offering, (ii) the
disposition of the CMBS Portfolio under which the buyer assumed a $30.0 million
fixed-rate mortgage note, and (iii) the repurchase of $11.4 million aggregate
principal amount of 2025 Notes. These decreases in debt were partially offset by
increases in debt related to (i) the $17.8 million mortgage loan assumed in
connection with the acquisition of Price Plaza and (ii) the $100.0 million 2027
Term Loan.

Net Income (Loss) Attributable to the Company


Net income attributable to the Company totaled $1.2 million during the three
months ended June 30, 2022 as compared to a net loss of $3.7 million during the
three months ended June 30, 2021. The increase in net income is attributable to
the factors described above.

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COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

Revenue


Total revenue for the six months ended June 30, 2022 is presented in the
following summary and indicates the changes as compared to the six months ended
June 30, 2021 (in thousands):

                                             Six Months Ended
Operating Segment                     June 30, 2022     June 30, 2021     $ Variance    % Variance
Income Properties                    $        31,535   $        23,023   $      8,512        37.0%
Management Services                            1,884             1,421            463        32.6%
Commercial Loans and Investments               2,008             1,410     
      598        42.4%
Real Estate Operations                         1,246             3,141        (1,895)      (60.3)%
Total Revenue                        $        36,673   $        28,995   $      7,678        26.5%


Total revenue for the six months ended June 30, 2022 increased to $36.7 million,
compared to $29.0 million during the six months ended June 30, 2021. The
increase in total revenue is primarily attributable to increased income produced
by the Company's recent income property acquisitions versus that of properties
disposed of by the Company during the comparative period, in addition to the
increased management fee income from PINE and increased income from commercial
loans and investments. These increases were offset by decreased revenue from
real estate operations due to fewer sales of Subsurface Interests, as further
described below.

Income Properties

Revenue and operating income from our income property operations totaled $31.5
million and $22.7 million, respectively, during the six months ended June 30,
2022, compared to total revenue and operating income of $23.0 million and $17.3
million, respectively, for the six months ended June 30, 2021. The direct costs
of revenues for our income property operations totaled $8.8 million and $5.7
million for the six months ended June 30, 2022 and 2021, respectively. The
increase in revenues of $8.5 million, or 37.0%, during the six months ended June
30, 2022 is primarily related to the overall growth of the Company's income
property portfolio, as well as the timing of acquisitions versus dispositions.
The increase in operating income from our income property operations reflects
increased rent revenues, offset by an increase of $3.1 million in our direct
costs of revenues which is also related to the overall growth of the Company's
income property portfolio.

Management Services
Revenue from our management services from PINE totaled $1.9 million during the
six months ended June 30, 2022. Revenue from our management services totaled
$1.4 million during the six months ended June 30, 2021, including $1.4 million
and $0.06 million earned from PINE and the Land JV, respectively.

Commercial Loans and Investments


Interest income from our commercial loans and investments totaled $2.0 million
and $1.4 million during the six months ended June 30, 2022 and 2021,
respectively. The increase is due to increased income from the investments made
during the three and six months ended June 30, 2022, including three
construction loans and the Watters Creek Investment, as defined in Note 4.
"Commercial Loans and Investments", which were partially offset by decreased
income from one commercial property which was sold during the first quarter of
2022, which was accounted for as a commercial loan investment due to future
repurchase rights.

Real Estate Operations


During the six months ended June 30, 2022, operating income from real estate
operations was $0.9 million on revenues totaling $1.2 million. During the six
months ended June 30, 2021, operating income from real estate operations was
$2.5 million on revenues totaling $3.1 million. The total decrease in operating
income was $1.6 million, of which $1.7 million of the decrease was due to fewer
Subsurface Interest sales. This $1.7 million decrease was partially offset by
the Company's sale of 1.96 mitigation credits for an aggregate sales price of
$0.2 million and related cost of sales of $0.1

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million during the six months ended June 30, 2022with no such mitigation credit sales during the six months ended June 30, 2021.

General and Administrative Expenses

Total general and administrative expenses for the six months ended June 30, 2022
is presented in the following summary and indicates the changes as compared to
the six months ended June 30, 2021 (in thousands):

                                                           Six Months Ended
General and Administrative Expenses               June 30, 2022        June 30, 2021     $ Variance    % Variance
Recurring General and Administrative Expenses    $         4,108      $         3,942   $        166          4.2%
Non-Cash Stock Compensation                                1,611                1,700           (89)        (5.2)%
REIT Conversion and Other Non-Recurring Items                  -                  155          (155)      (100.0)%
Total General and Administrative Expenses        $         5,719      $    

5.797 $ (78) (1.3)%

Depreciation and Amortization

Depreciation and amortization totaled $13.1 million and $9.9 million during the
six months ended June 30, 2022 and 2021, respectively. The increase of $3.2
million is primarily due to the overall growth in the Company's income property
portfolio.

Gains (Losses) and Impairment Charges


2022 Dispositions. During the six months ended June 30, 2022, the Company sold
two income properties, including (i) Party City, a single-tenant income property
located in Oceanside, New York for $6.9 million resulting in a $0.06 million
loss and (ii) the Carpenter Hotel ground lease, a single-tenant income property
located in Austin, Texas for $17.1 million resulting in a $0.2 million loss.

2021 Dispositions. During the six months ended June 30, 2021, the Company
disposed of one multi-tenant income property and nine single-tenant income
properties, including (i) World of Beer/Fuzzy's Taco Shop, a multi-tenant income
property located in Brandon, Florida for $2.3 million resulting in a $0.6
million gain, (ii) Moe's Southwest Grill, a single-tenant income property
located in Jacksonville, Florida for $2.5 million resulting in a $0.1 million
gain, (iii) Burlington, a single-tenant income property located in North
Richland Hills, Texas for $11.5 million resulting in a $0.1 million gain, (iv)
Staples, a single-tenant income property located in Sarasota, Florida for $4.7
million resulting in a $0.7 million gain, and (v) the CMBS Portfolio, sold to
PINE, consisting of six single-tenant income properties for $44.5 million
resulting in a $3.9 million gain. The sale of the properties reflect a total
disposition volume of $65.5 million, resulting in aggregate gains of $5.3
million.

Impairment Charges. There were no impairment charges on the Company's
undeveloped land holdings, or its income property portfolio during the six
months ended June 30, 2022 and 2021. The $16.5 million impairment charge, net of
the $4.1 million related income tax benefit, recognized during the six months
ended June 30, 2021 was related to the Company's previously held retained
interest in the Land JV as a result of the estimated proceeds to be received in
connection with the contract entered into with Timberline Acquisition Partners,
an affiliate of Timberline Real Estate Partners ("Timberline"). The sale to
Timberline closed on December 10, 2021.

Investment and Other Income (Loss)

During the six months ended June 30, 2022, the closing stock price of PINE
decreased by $2.12 per share, with a closing price of $17.92 on June 30, 2022.
During the six months ended June 30, 2021, the closing stock price of PINE
increased by $4.03 per share, with a closing price of $19.02 on June 30, 2021.
The change in stock price resulted in an unrealized, non-cash gain (loss) on the
Company's investment in PINE of ($4.3) million and $8.2 million which is
included in investment and other income (loss) in the consolidated statements of
operations for the six months ended June 30, 2022 and 2021, respectively.

The Company earned dividend income from the investment in PINE of $1.1 million
and $1.0 million during the six months ended June 30, 2022 and 2021, respectively.


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Interest Expense

Interest expense totaled $4.2 million and $4.9 million for the six months ended
June 30, 2022 and 2021, respectively.  The decrease of $0.7 resulted primarily
from (i) the net decrease in long-term debt outstanding under the Company's
Credit Facility during the six months ended June 30, 2022 as compared to the
same period in 2021, which is primarily driven by the use of proceeds received
from the Series A Preferred Stock offering, (ii) the payoff of the Company's
$23.2 million variable-rate mortgage note, (iii) the disposition of the CMBS
Portfolio under which the buyer assumed a $30.0 million fixed-rate mortgage
note, and (iv) the repurchase of $11.4 million aggregate principal amount of
2025 Notes. These decreases in debt were partially offset by increases in debt
related to (i) the $17.8 million mortgage loan assumed in connection with the
acquisition of Price Plaza and (ii) the $100.0 million 2027 Term Loan.

Net Income (Loss) Attributable to the Company

Net income attributable to the Company totaled $1.4 million during the six
months ended June 30, 2022 as compared to net income of $4.1 million during the
six months ended June 30, 2021. The decrease in net income is attributable to
the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents total $7.1 million at June 30, 2022while restricted cash totaled $27.2 millionsee Note 2, “Summary of Significant Accounting Policies” under the heading Restricted Cash for the Company’s disclosure related to its restricted cash balance at June 30, 2022.


Our cash flows provided by operating activities totaled $22.4 million during the
six months ended June 30, 2022,  compared to cash flows provided by operating
activities totaling $18.3 million for the six months ended June 30, 2021, an
increase of $4.1 million. The increase of $4.1 million is primarily related to
the increase in the cash flows provided by income properties, which is the
result of the overall growth of the Company's income property portfolio. The
cash flows provided by operating activities was also impacted by more cash flows
from the Company's management fee income and interest income from commercial
loans and investments, offset by the decrease in the Company's cash flows from
real estate operations.

Our cash flows used in investing activities totaled $54.4 million for the six
months ended June 30, 2022, compared to cash flows used in investing activities
of $80.5 million for the six months ended June 30, 2021, a decrease in cash
outflows of $26.1 million. The decrease in cash used in investing activities is
primarily related to $56.9 million less cash utilized to fund income property
acquisitions, net of proceeds from income property dispositions, during the six
months ended June 30, 2022. The $56.9 million reduction in cash outflows related
to net income property acquisitions is largely offset by a $29.3 million
increase in cash utilized to fund commercial loan and investments including
three construction loans and the Watters Creek Investment, net of proceeds
received from the sale of the Carpenter Hotel ground lease located in Austin,
Texas, which was classified as a commercial loan investment due to future tenant
repurchase rights.

Our cash flows provided by financing activities totaled $34.9 million for the
six months ended June 30, 2022, compared to cash flows provided by financing
activities of $47.0 million for the six months ended June 30, 2021, a decrease
in cash inflows of $12.1 million. The decrease of $12.1 million is primarily
related to a $16.5 million decrease in cash flows provided by debt activity
comprised of (i) $44.0 million of cash inflows related to the Company's net
borrowings on long-term debt during the six months ended June 30, 2022 less (ii)
$60.5 million of cash inflows related to the Company's net borrowings on
long-term debt during the six months ended June 30, 2021. The $16.5 million
decrease in debt borrowings was offset by an increase in cash outflows of $3.8
million related to dividends paid during the six months ended June 30, 2022 as
compared to the same period in the prior year and an increase in cash outflows
of $1.1 million of repurchases of the Company's common stock. Cash flows from
financing activities also benefitted from cash inflows of $8.6 million of net
proceeds received from the sale of 131,858 shares of the Company's common stock
under the ATM Program during the six months ended June 30, 2022, with no such
activity during the same period in 2021.

Long Term Debt. Ash or June 30, 2022the Company had $99.0 million undrawn commitment under the Credit Facility. See Note 16, “Long-Term Debt” for the Company’s disclosure related to its long-term debt balance at June 30, 2022.


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Acquisitions and Investments. As noted previously, the Company acquired one multi-tenant income property during the six months ended June 30, 2022 for a purchase price of $39.1 millionas further described in Note 3,”Income Properties“.

The Company’s guidance for 2022 investments in income-producing properties totals between $250.0 million and $275.0 million. We expect to fund future acquisitions utilizing cash on hand, cash from operations, proceeds from the dispositions of income properties through 1031 like-kind exchanges, and potentially the sale of all or a portion of our Subsurface Interests, and borrowings on our Credit Facility, if available. We expect dispositions of income properties and subsurface interests will qualify under the like-kind exchange deferred-tax structure, and additional financing sources.


Dispositions. During the six months ended June 30, 2022, the Company sold two
single-tenant income properties for a total disposition volume of $24.0 million,
one of which was classified as a commercial loan investment due to two tenant
repurchase options, as further described in Note 3, "Income Properties".

ATM Program. During the six months ended June 30, 2022the Company sold 131,858 shares under the ATM Program for gross proceeds of $8.7 million at a weighted average price of $65.84 per share, generating net proceeds of $8.6 million after deducting transaction fees totaling $0.1 million.

Contractual Commitments – Expenditures.

The Company is committed to fund the following capital improvements. The improvements, which are related to several properties, are estimated to be generally completed within twelve months. These commitments, as of June 30, 2022are as follows (in thousands):


                       As of June 30, 2022
Total Commitment (1)  $              23,792
Less Amount Funded                  (6,042)
Remaining Commitment  $              17,750

(1) Commitment includes tenant improvements, leasing commissions, rebranding, facility expansion and other capital improvements.

In addition, the Company is committed to fund the three construction loans as
described in Note 4. Commercial Loans and Investments. The unfunded portion of
the construction loans totaled $12.1 million as of June 30, 2022.

Off-Balance Sheet Arrangements. none.


Other Matters. We believe we will have sufficient liquidity to fund our
operations, capital requirements, maintenance, and debt service requirements
over the next twelve months and into the foreseeable future, with cash on hand,
cash flow from our operations, $141.3 million of availability remaining under
the ATM Program, and $99.0 million undrawn commitment under the existing $210.0
million Credit Facility as of June 30, 2022.

Our Board and management consistently review the allocation of capital with the
goal of providing the best long-term return for our stockholders. These reviews
consider various alternatives, including increasing or decreasing regular
dividends, repurchasing the Company's securities, and retaining funds for
reinvestment. Annually, the Board reviews our business plan and corporate
strategies, and makes adjustments as circumstances warrant. Management's focus
is to continue our strategy to diversify our portfolio by redeploying proceeds
from like-kind exchange transactions and utilizing our Credit Facility to
increase our portfolio of income-producing properties, providing stabilized cash
flows with strong risk-adjusted returns primarily in larger metropolitan areas
and growth markets.

We believe that we currently have a reasonable level of leverage. Our strategy
is to utilize leverage, when appropriate and necessary, and proceeds from sales
of income properties, the disposition or payoffs on our commercial loan and
master lease investments, and certain transactions in our subsurface interests,
to acquire income properties. We may also acquire or originate commercial loan
and master lease investments, invest in securities of real estate companies, or
make other shorter-term investments. Our targeted investment classes may include
the following:

? Multi-tenant, primarily retail-oriented, properties in major metropolitan areas

and growth markets, typically stabilized;


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Single-tenant retail or other commercial, double or triple net leased,

? properties in major metropolitan areas and growth markets that are compliant

with our commitments under the PINE ROFO Agreement;

? Ground leases, whether purchased or originated by the Company, that are

compliant with our commitments under the ROFO Agreement;

? Self-developed retail or other commercial properties;

Commercial loan and master lease investments, whether purchased or originated

? by the Company, with loan terms of 1-10 years with strong risk-adjusted yields

secured by property types to include hotel, retail, residential, land and

industrial;

? Select regional area investments using Company market knowledge and expertise

to earn strong risk-adjusted yields; and

? Real estate-related investment securities, including commercial mortgage-backed

securities, preferred or common stock, and corporate bonds.



Our investments in income-producing properties are typically subject to
long-term leases. For multi-tenant properties, each tenant typically pays its
proportionate share of the aforementioned operating expenses of the property,
although for such properties we typically incur additional costs for property
management services. Single-tenant leases are typically in the form of triple or
double net leases and ground leases. Triple-net leases generally require the
tenant to pay property operating expenses such as real estate taxes, insurance,
assessments and other governmental fees, utilities, repairs and maintenance, and
capital expenditures.

                        Non-U.S. GAAP Financial Measures
Our reported results are presented in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP"). We also
disclose Funds From Operations ("FFO"), Core Funds From Operations ("Core FFO"),
and Adjusted Funds From Operations ("AFFO"), each of which are non-U.S. GAAP
financial measures. We believe these non-U.S. GAAP financial measures are useful
to investors because they are widely accepted industry measures used by analysts
and investors to compare the operating performance of REITs.

FFO, Core FFO, and AFFO do not represent cash generated from operating
activities and are not necessarily indicative of cash available to fund cash
requirements; accordingly, they should not be considered alternatives to net
income as a performance measure or cash flows from operating activities as
reported on our statement of cash flows as a liquidity measure and should be
considered in addition to, and not in lieu of, U.S. GAAP financial measures.

We compute FFO in accordance with the definition adopted by the Board of
Governors of the National Association of Real Estate Investment Trusts, or
NAREIT. NAREIT defines FFO as U.S. GAAP net income or loss adjusted to exclude
extraordinary items (as defined by U.S. GAAP), net gain or loss from sales of
depreciable real estate assets, impairment write-downs associated with
depreciable real estate assets and real estate related depreciation and
amortization, including the pro rata share of such adjustments of unconsolidated
subsidiaries. The Company also excludes the gains or losses from sales of assets
incidental to the primary business of the REIT which specifically include the
sales of mitigation credits, impact fee credits, subsurface sales, and land
sales, in addition to the mark-to-market of the Company's investment securities
and interest related to the 2025 Notes, if the effect is dilutive. To derive
Core FFO, we modify the NAREIT computation of FFO to include other adjustments
to U.S. GAAP net income related to gains and losses recognized on the
extinguishment of debt, amortization of above- and below-market lease related
intangibles, and other unforecastable market- or transaction-driven non-cash
items. To derive AFFO, we further modify the NAREIT computation of FFO and Core
FFO to include other adjustments to U.S. GAAP net income related to non-cash
revenues and expenses such as straight-line rental revenue, non-cash
compensation, and other non-cash amortization, as well as adding back the
interest related to the 2025 Notes, if the effect is dilutive. Such items may
cause short-term fluctuations in net income but have no impact on operating cash
flows or long-term operating performance. We use AFFO as one measure of our
performance when we formulate corporate goals.

FFO is used by management, investors and analysts to facilitate meaningful
comparisons of operating performance between periods and among our peers
primarily because it excludes the effect of real estate depreciation and
amortization and net gains or losses on sales, which are based on historical
costs and implicitly assume that the value of real estate diminishes predictably
over time, rather than fluctuating based on existing market conditions. We
believe that Core FFO and AFFO are additional useful supplemental measures for
investors to consider because they will help them to better assess our operating
performance without the distortions created by other non-cash revenues or
expenses. FFO, Core FFO, and AFFO may not be comparable to similarly titled
measures employed by other companies.

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Reconciliation of Non-U.S. GAAP Measures (in thousands, except share and
dividend data):

                                             Three Months Ended                   Six Months Ended
                                       June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021
Net Income (Loss) Attributable to
the Company                           $         1,218   $       (3,724)   $         1,420   $         4,061
Add Back: Effect of Dilutive
Interest Related to 2025 Notes (1)                  -                 -                 -                 -
Net Income (Loss) Attributable to
the Company, If-Converted             $         1,218   $       (3,724)             1,420             4,061
Depreciation and Amortization of
Real Estate                                     6,707             5,031            13,076             9,861
(Gains) Losses on Disposition of
Assets                                              -           (4,732)               245           (5,440)
Gains on Disposition of Other
Assets                                          (632)             (748)             (964)           (2,575)
Impairment Charges, Net                             -            12,474                 -            12,474
Unrealized Loss (Gain) on
Investment Securities                           1,891           (3,386)             4,348           (8,220)
Funds from Operations                 $         9,184   $         4,915   $        18,125   $        10,161
Distributions to Preferred
Stockholders                                  (1,196)                 -           (2,391)                 -
Funds From Operations Attributable
to Common Stockholders                $         7,988   $         4,915   $        15,734   $        10,161
Loss on Extinguishment of Debt                      -               641                 -               641
Amortization of Intangibles to
Lease Income                                      497             (338)               978             (734)
Less: Effect of Dilutive Interest
Related to 2025 Notes (1)                           -                 -                 -                 -
Core Funds From Operations
Attributable to Common Stockholders   $         8,485   $         5,218   $        16,712   $        10,068
Adjustments:
Straight-Line Rent Adjustment                   (507)             (490)           (1,045)           (1,175)
COVID-19 Rent Repayments                           26               434                53               654
Other Depreciation and Amortization              (31)             (150)             (170)             (374)
Amortization of Loan Costs and
Discount on Convertible Debt                      212               478    
          446               953
Non-Cash Compensation                             705               742             1,611             1,700
Non-Recurring G&A                                   -                62                 -               155
Adjusted Funds From Operations
Attributable to Common Stockholders   $         8,890   $         6,294   $

17,607 $11.981


Weighted Average Number of Common
Shares:
Basic and Diluted (2)                       6,004,178         5,898,280    

5,956,798 5,888,735


Dividends Declared and Paid -
Preferred Stock                       $          0.40   $             -   $          0.80   $             -
Dividends Declared and Paid -
Common Stock                          $          1.12   $          1.00   $

2.20 $2.00



(1)      As applicable, includes interest expense, amortization of discount,
amortization of fees, and other changes in net income or loss that would result
from the assumed conversion. For the three and six months ended June 30 2022, a
total of $0.5 million and $1.1 million, respectively, was not included, as the
impact of the 2025 Notes, if-converted, would be antidilutive to the net income
of under $0.1 million and the net loss of $1.0 million, for the respective
periods.

(2)      A total of 1.0 million shares representing the dilutive impact of the
Company's 2025 Notes, upon adoption of ASU 2020-06 effective January 1, 2022,
were not included in the computation of diluted net income (loss) attributable
to common stockholders for the three and six months ended June 30, 2022 because
they were antidilutive to the net income of under $0.1 million and the net loss
of $1.0 million, for the respective periods.

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Other Data (in thousands, except per share data):


                                                Three Months Ended                     Six Months Ended
                                       June 30, 2022          June 30, 2021     June 30, 2022     June 30, 2021
FFO Attributable to Common
Stockholders                          $         7,988        $         4,915   $        15,734   $        10,161
FFO Attributable to Common
Stockholders per Common Share -
Diluted                               $          1.33        $          

0.83 $2.64 $1.73


Core FFO Attributable to Common
Stockholders                          $         8,485        $         5,218   $        16,712   $        10,068
Core FFO Attributable to Common
Stockholders per Common Share -
Diluted (1)                           $          1.41        $          0.88   $          2.81   $          1.71

AFFO Attributable to Common
Stockholders                          $         8,890        $         6,294   $        17,607   $        11,981
AFFO Attributable to Common
Stockholders per Common Share -
Diluted (1)                           $          1.48        $          1.07   $          2.96   $          2.03


(1)      A total of 1.0 million shares representing the dilutive impact of the
2025 Notes, upon adoption of ASU 2020-06 effective January 1, 2022, were not
included in the computation of diluted net income (loss) attributable to common
stockholders for the three and six months ended June 30, 2022 because they were
antidilutive to the net income of under $0.1 million and the net loss of $1.0
million, for the respective periods.

CRITICAL ACCOUNTING ESTIMATES


Critical accounting estimates include those estimates made in accordance with
U.S. GAAP that involve a significant level of estimation uncertainty and have
had or are reasonably likely to have a material impact on the Company's
financial condition or results of operations. Our most significant estimate is
as follows:

Purchase Accounting for Acquisitions of Real Estate Subject to a Lease.  As
required by U.S. GAAP, the fair value of the real estate acquired with in-place
leases is allocated to the acquired tangible assets, consisting of land,
building and tenant improvements, and identified intangible assets and
liabilities, consisting of the value of above-market and below-market leases,
the value of in-place leases, and the value of leasing costs, based in each case
on their relative fair values. In allocating the fair value of the identified
intangible assets and liabilities of an acquired property, above-market and
below-market in-place lease values are recorded as other assets or liabilities
based on the present value. The assumptions underlying the allocation of
relative fair values are based on market information including, but not limited
to: (i) the estimate of replacement cost of improvements under the cost
approach, (ii) the estimate of land values based on comparable sales under the
sales comparison approach, and (iii) the estimate of future benefits determined
by either a reasonable rate of return over a single year's net cash flow, or a
forecast of net cash flows projected over a reasonable investment horizon under
the income capitalization approach. The underlying assumptions are subject to
uncertainty and thus any changes to the allocation of fair value to each of the
various line items within the Company's consolidated balance sheets could have
an impact on the Company's financial condition as well as results of operations
due to resulting changes in depreciation and amortization as a result of the
fair value allocation. The acquisitions of real estate subject to this estimate
totaled one multi-tenant income property for a purchase price of $39.1 million
for the six months ended June 30, 2022 and three multi-tenant income properties
for a combined purchase price of $111.0 million for the six months ended June
30, 2021.

See Note 2, “Summary of Significant Accounting Policies”, for further discussion of the Company’s accounting estimates and policies.

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