Cto Realty Growth, Inc. ((CTO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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During the recent earnings call, Cto Realty Growth, Inc. expressed a generally positive sentiment, highlighting strong leasing momentum and strategic advancements in managing anchor spaces and potential acquisitions. Despite facing challenges such as temporary occupancy declines and impacts from debt settlements, the company remains optimistic about future earnings, thanks to its robust leasing activities and strategic planning.
Strong Leasing Momentum
Cto Realty Growth, Inc. reported impressive leasing activity, signing approximately 227,000 square feet of new leases, renewals, and extensions at an average cash base rent of $25.43 per square foot. This represents a 22% cash rent spread. Year-to-date, the company has achieved 339,000 square feet of leasing with a 27% cash rent spread, underscoring its strong leasing momentum.
Significant Progress in Anchor Spaces
The company has made notable progress in resolving anchor spaces, with 6 out of 10 spaces successfully leased to tenants like Burlington, Boot Barns, and Bob’s Discount Furniture. These efforts aim for a positive cash leasing spread of 40% to 60%, reflecting strategic advancements in optimizing property usage.
Investment Pipeline and Opportunities
Cto Realty Growth is actively exploring acquisition opportunities, targeting a shopping center in a core market with potential value-add attributes. This strategic move indicates the company’s focus on expanding its portfolio and enhancing its market presence.
Property Portfolio and Occupancy
The company’s property portfolio, consisting of 5.3 million square feet, was 93.9% leased and 90.2% occupied by the end of the quarter. This high occupancy rate demonstrates effective property management despite temporary declines.
Improved Balance Sheet Metrics
Cto Realty Growth has improved its net debt to EBITDA ratio to 6.9x from 7.5x a year ago, showing progress in strengthening its financial position, although there was a slight increase from the beginning of the year.
Core FFO Growth
The company reported a $4.3 million increase in Core FFO compared to the same quarter last year, reaching $14.7 million. This growth highlights the company’s ability to generate consistent financial performance.
Temporary Occupancy Decline
Cto Realty Growth experienced a temporary decline in physical occupancy due to transitions involving tenants like Party City and JOANN’s vacating, and Staples transitioning to Barnes & Noble. These changes are part of the company’s ongoing property management strategy.
Convertible Notes Settlement Impact
The settlement of 3.875% convertible notes resulted in a debt charge of approximately $20.4 million. This financial maneuver is part of the company’s strategy to manage its debt obligations effectively.
Fidelity Office Space Reduction
Fidelity’s reduction in office space at the Albuquerque property will be backfilled by the State of New Mexico, ensuring continued occupancy and rental income from this property.
Forward-Looking Guidance
Looking ahead, Cto Realty Growth reaffirmed its full-year 2025 guidance, projecting core FFO of $1.80 to $1.86 per share and AFFO of $1.93 to $1.98 per share. The company expects earnings from its leasing pipeline to become more noticeable by the fourth quarter, reflecting confidence in its strategic initiatives and financial outlook.
In summary, Cto Realty Growth, Inc.’s earnings call conveyed a positive outlook, driven by strong leasing momentum and strategic progress in managing anchor spaces. Despite temporary setbacks in occupancy and debt settlement impacts, the company’s forward-looking guidance and strategic initiatives suggest a promising future for its stakeholders.