Cto Realty Growth, Inc. ((CTO)) has held its Q1 earnings call. Read on for the main highlights of the call.
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CTO Realty Growth’s recent earnings call reflected a generally positive sentiment, highlighting robust investment and leasing activities. The company showcased significant progress in managing anchor space vacancies and strategic financial management. However, challenges such as tenant bankruptcies and a slight decline in FFO per share were noted as areas of concern.
Strong Investment Activity
CTO Realty Growth has made a notable acquisition of Ashley Park for $79.8 million, which presents a high cap rate and substantial lease-up potential. The property is characterized by below-market rents, indicating a promising opportunity for future revenue growth.
Positive Leasing Activity
The company reported signing over 112,000 square feet of new leases, renewals, and extensions. These agreements were at an average rent 25% higher than the existing portfolio, showcasing strong leasing performance and potential for increased income.
Anchor Space Re-leasing Progress
CTO Realty Growth has executed leases for two anchor spaces and anticipates a positive cash leasing spread of 40% to 60% on the remaining spaces. This progress is crucial in mitigating the impact of tenant bankruptcies on earnings.
Financial Stability
The company demonstrated financial stability with an increase in core FFO by $3.7 million compared to the previous year. Additionally, net debt to EBITDA improved to 6.6x, and the company maintains liquidity of nearly $140 million, underscoring its strong financial position.
Interest Rate Management
CTO Realty Growth successfully executed SOFR swaps, reducing its interest rate by nearly 100 basis points to 4.8%. This strategic move is expected to enhance the company’s financial efficiency.
Bankrupt Tenant Spaces
The company faced challenges with ten anchor spaces vacated due to tenant bankruptcies, impacting earnings. The re-leasing CapEx is expected to range from $9 million to $12 million, highlighting the financial implications of these vacancies.
Convertible Notes Settlement
The settlement of 3.875% convertible notes resulted in an extinguishment of debt charge of approximately $20.5 million. This financial maneuver reflects the company’s efforts to manage its debt effectively.
Core FFO Per Share Decline
CTO Realty Growth experienced a slight decline in core FFO per share by $0.02 compared to the previous year. This decrease is attributed to leverage reduction and downtime from re-leasing activities.
Forward-Looking Guidance
During the earnings call, CTO Realty Growth provided optimistic forward-looking guidance, driven by strong investment and leasing activities. The acquisition of Ashley Park and robust leasing activity were emphasized as key drivers. The company expects a positive cash leasing spread from re-leasing anchor spaces and reaffirmed its guidance for core FFO at $1.80 to $1.86 and AFFO at $1.93 to $1.98 for full-year 2025, despite macroeconomic uncertainties.
In conclusion, CTO Realty Growth’s earnings call painted a picture of a company with strong investment and leasing activities, despite facing challenges such as tenant bankruptcies and a slight decline in FFO per share. The company’s strategic financial management and forward-looking guidance indicate a positive outlook, making it an interesting prospect for investors in the financial markets.