CTO Realty Growth Lifts Guidance After Strong Quarter

Cto Realty Growth, Inc. ((CTO)) has held its Q1 earnings call. Read on for the main highlights of the call.

CTO Realty Growth’s latest earnings call struck an upbeat tone, with management emphasizing strong leasing gains, robust rent growth and accretive investments that are fueling higher cash flow. While a few property‑specific issues and timing delays will weigh on near‑term numbers, executives argued that the portfolio’s momentum and higher guidance leave the company on solid footing heading into 2026.

Leasing Momentum and Double-Digit Rent Growth

CTO highlighted a busy quarter for leasing, signing, renewing and extending 153,000 square feet of space, including 146,000 square feet of comparable leases. These deals came with an average cash rent increase of 14%, underscoring healthy demand for the company’s shopping centers and supporting future same-property NOI expansion.

High Occupancy and Signed-Not-Open Pipeline

The portfolio finished the quarter 95.4% leased, reflecting a largely full and stable asset base. On top of this, a Signed‑Not‑Open pipeline representing $6.2 million of annual cash base rent—about 5.5% of current in‑place cash rent—provides a visible runway for further revenue as these tenants commence over the next several years.

Same-Property NOI Growth with Some Noise

Shopping-center same-property NOI rose 6.8% year over year, but management noted that roughly 240 basis points came from nonrecurring tenant recovery items. Adjusted for these benefits, underlying shopping-center NOI growth was 4.2%, still solid but a reminder that quarterly figures can be volatile given the relatively small same-store base.

FFO and AFFO Trending Higher

Core funds from operations climbed to $16.9 million from $14.4 million, or $0.52 per diluted share versus $0.46 a year ago. Adjusted FFO was even stronger at $18.2 million, up from $15.5 million, translating to $0.56 per share and signaling that cash earnings are growing faster than headline revenue.

Accretive Palms Crossing Acquisition

The company closed the $81.6 million purchase of Palms Crossing in McAllen, Texas, a 399,000‑square‑foot center that is roughly 98% leased and anchored by major national retailers. With this deal, Texas becomes CTO’s third‑largest state by annual base rent and, together with Georgia, Florida and North Carolina, now accounts for 85% of portfolio ABR.

Structured Investments Delivering Double-Digit Yields

CTO leaned further into structured investment opportunities, receiving a $30 million repayment and deploying $75 million into a 12% preferred equity investment with a two‑year term. Post‑quarter, the structured investment book rose to $158 million with a weighted average yield of 11.6%, enhancing returns but also concentrating risk in a smaller pool of counterparties.

Stronger Guidance Signals Confidence

Management raised full‑year 2026 guidance for core FFO to $2.06–$2.11 per share and AFFO to $2.19–$2.24, implying about 12% growth at the midpoint. The outlook assumes $175 million to $250 million of additional investments, continued 3.5%–4.5% shopping-center NOI growth and disciplined overhead expenses, reflecting confidence in both operations and capital deployment.

Balance Sheet, Liquidity and Capital Recycling

Total debt stands at $651.8 million with a 4.6% weighted average interest rate, and liquidity is around $125 million, leaving leverage at roughly 6.4 times pro forma adjusted EBITDA. The near‑term sale of the 99%‑leased Madison Yards project and expected high‑teens returns on about $30 million of outparcel development, mainly in 2027–2028, should help recycle capital and modestly de‑risk the balance sheet.

Equity Issuance Supports Growth Plans

To help fund its active investment pipeline while keeping leverage in check, CTO tapped its at‑the‑market program to issue roughly 733,900 common shares at an average price of $19.59. The $14.2 million of net proceeds give the company additional flexibility to pursue acquisitions and structured deals without stretching the balance sheet.

Managing Notable Vacancies and Underperformers

A 98,000‑square‑foot anchor vacancy at an Albuquerque property weighed on same-property NOI growth this quarter and will remain a drag until a replacement tenant begins paying rent in late 2026. Carolina Pavilion is the only center below 90% leased at 83% occupancy, but management is actively negotiating leases to backfill the remaining space and lift performance.

Timing Shifts in the Signed-Not-Open Pipeline

The company cautioned that income from the Signed‑Not‑Open pipeline will be more heavily weighted to 2027 than previously expected. Annual base rent recognition for 2026 is now projected at about $1.8 million versus an earlier estimate near $2.9 million, meaning some of the growth that investors anticipated for 2026 will instead show up in later years.

Structured Allocation, Acquisition Yields and Volatility

Management reiterated its intent to cap structured investments under 20% of assets, likely around 15%, acknowledging the trade‑off between attractive 10%–13% yields and heightened credit and concentration risk. With shopping-center acquisition cap rates near 7.5%–8% and recent M&A coming at rich prices, the team warned that initial yields on new deals may compress, while even small dollar swings—about $200,000—can move quarterly same‑store growth by 100 basis points.

Guidance and Growth Outlook

The raised 2026 guidance is underpinned by current momentum: Q1 core FFO of $16.9 million, AFFO of $18.2 million, 95.4% leased occupancy and 6.8% shopping-center same-store NOI growth, or 4.2% excluding one‑time items. Management believes its combination of traditional shopping-center investments, high-yield structured finance and forthcoming outparcel returns can collectively support mid‑single‑digit NOI growth and double‑digit FFO expansion.

CTO Realty Growth’s call painted a picture of a landlord using strong leasing trends and disciplined capital allocation to grow earnings despite isolated vacancies and timing noise. For investors, the key takeaways are rising rents, higher FFO guidance and a more prominent structured investment platform that boosts returns but requires careful risk monitoring as the company pushes toward its 2026 growth targets.