Thanks so much for your help!
I know it is highly unusual request, but using the "latest items" layout I am able to have under one menu list of continents and under each continent list of cities in alphabetical order.
I actually inserted this into my overridden template latest.php, at the Items List query and it worked.
<?php
usort($block->items, function($a, $b) {
return strcmp($a->title, $b->title);
});
foreach ($block->items as $item) {
K2HelperUtilities::setDefaultImage($item, 'latest', $this->params);
$this->item = $item;
echo $this->loadTemplate('item');
}
?>