Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CTO Realty Growth Inc (CTO, Financial) reported a strong quarter with significant accomplishments across all areas of their business.
- The company invested $191.3 million at a weighted average yield of 9.5%, including a $137.5 million acquisition of a three-property portfolio of shopping centers.
- CTO Realty Growth Inc (CTO) achieved a leased occupancy rate of 95.8%, an increase of 120 basis points from the previous quarter.
- The company raised its full-year 2024 guidance for core FFO and A FFO, reflecting strong investment activity and financial performance.
- CTO Realty Growth Inc (CTO) successfully issued approximately 6.9 million shares, generating net proceeds of $125.7 million, which improved leverage and liquidity.
Negative Points
- The company's investment in a $10 million hospitality project carries risk, with questions about collateral if the investment does not perform as expected.
- There is uncertainty regarding the future use and potential sale of the remaining office asset in Albuquerque, which is dependent on tenant decisions.
- The leasing of the former WeWork space is only partially completed, with significant portions still needing tenants.
- Some restaurant tenants are experiencing sales declines, indicating potential challenges in the retail sector.
- CTO Realty Growth Inc (CTO) has reduced its asset recycling activities, which may limit opportunities for portfolio optimization.
Q & A Highlights
Q: Other than the 14% dividend, what's attractive about the $10 million hospitality investment, and what's the collateral if they can't pay over the next five years?
A: John J Albright, President and CEO: The investment is with a publicly traded company that recently raised capital through a rights offering. The collateral details were not specified, but the investment is considered attractive due to the high dividend yield.
Q: How are you planning to fund the raised acquisition guidance? Will it be through ATM issuance or more dispositions?
A: John J Albright, President and CEO: With leverage at a comfortable level and ample liquidity, the company plans to use its line of credit. There are a few smaller deals expected to close this year, but there will be less recycling of assets compared to past years.
Q: What is the status of the remaining office asset, and how are you considering its future?
A: John J Albright, President and CEO: The company is monitoring the situation as the tenant evaluates future plans. The asset is in a strong market environment, and while there are no immediate plans to sell, it will be considered for exit when appropriate.
Q: When will the $6.5 million of signed but not open leasing start to impact FFO, and will it be evenly spread throughout 2025?
A: Philip R Mays, CFO: The impact will ramp up ratably over the next 9 to 12 months, providing a gradual increase in FFO as tenants take possession and commence paying rent.
Q: Are there any known move-outs of note in 2025 within the portfolio?
A: John J Albright, President and CEO: There are no problematic move-outs anticipated. Any potential move-outs are seen as opportunities to secure higher rents and better quality tenants.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
