CTO Realty Growth Announces 2023 Transaction and Leasing Activity and Provides Share Repurchase Update

Rhea-AI Summary

CTO Realty Growth, Inc. (NYSE: CTO) announced its 2023 investment, disposition, and leasing activities, including acquiring retail properties and land parcels, generating gains from property sales, and signing numerous leases. The company also provided a capital markets update, including share repurchases and preferred stock repurchases.

Insights

Real Estate Investment Analyst

The acquisition of four retail properties and one land parcel by CTO Realty Growth, Inc. for a total of $80.0 million at a 7.5% cash cap rate indicates a strategic move to strengthen their retail portfolio. The cap rate aligns with the industry average, suggesting that the acquisitions were made at market rates. The focus on submarkets in Atlanta and Dallas, which are known for their robust economies and growing populations, could signal a strategic positioning for long-term growth. The diversification into structured investments, with a first mortgage structured investment at an 8.8% initial yield, further exemplifies the company's approach to balance its portfolio and optimize returns.

The disposition of nine non-core properties for $87.1 million at a 7.5% exit cap rate, generating a gain of $6.6 million, reflects a disciplined approach to portfolio management and capital recycling. By divesting non-core assets, CTO is likely aiming to streamline its asset base and reinvest in higher-performing properties or reduce debt. The sale of subsurface oil, gas and mineral rights, along with mitigation credits, although minor in volume, indicates an effort to monetize non-core real estate-related assets.

The repurchase of common and preferred shares suggests management's confidence in the intrinsic value of the company's stock. The repurchase at prices yielding 8.6% to 8.7% for preferred shares indicates an attractive yield on cost, which could be appealing to income-focused investors. This action also serves to provide support to the share price and enhance shareholder value.

Market Research Analyst

The significant rent per square foot growth reported by CTO Realty Growth, Inc., with a 7.5% increase year-over-year and a notable 17.9% increase in the fourth quarter, suggests strong leasing momentum and effective asset management. This growth rate is considerably higher than the national average for retail space, which could indicate either a very favorable market condition in the submarkets where CTO operates or an aggressive leasing strategy that may include offering incentives to tenants. Investors should monitor whether this growth is sustainable and can be replicated in other parts of CTO's portfolio.

CTO's activity in the capital markets, including the repurchase of common and preferred shares, reflects a proactive approach to managing its equity structure. The repurchase program could be seen as a tool to potentially enhance earnings per share and return on equity by reducing the number of shares outstanding. However, investors should consider the opportunity cost of these repurchases, as funds used for this purpose are not available for other investments or debt reduction.

Financial Analyst

The financial performance of CTO Realty Growth, Inc. must be evaluated in the context of the broader real estate market conditions, including interest rates and economic growth. The structured investment with an 8.8% yield and the repurchase of shares at yields above 8.5% suggest that CTO is finding ways to deploy capital at rates that could potentially exceed the returns from their core real estate operations. This may be indicative of a strategic shift or a response to a competitive acquisition market.

Investors should also consider the liquidity position and debt levels of CTO, as these will influence the company's ability to sustain its investment and share repurchase programs. The repurchase of shares at a time when the stock market is volatile could be a sign of strong balance sheet management, assuming the company maintains sufficient liquidity to weather potential downturns.

Overall, the company's activities in 2023 reflect a proactive management strategy aimed at optimizing its portfolio and capital structure. The impact on the stock market will depend on investor perception of the effectiveness of these strategies and the company's ability to continue delivering strong financial performance.

WINTER PARK, Fla., Jan. 04, 2024 (GLOBE NEWSWIRE) -- CTO Realty Growth, Inc. (NYSE: CTO) (the “Company” or “CTO”) today announced its 2023 investment, disposition and leasing activities and provided a capital markets update.

2023 Investment Activity

• During the year ended December 31, 2023, the Company completed four retail property acquisitions and acquired one land parcel for total acquisition volume of $80.0 million, representing a weighted-average going-in cash cap rate of 7.5%.
• During the year ended December 31, 2023, the Company originated one first mortgage structured investment totaling $15.0 million at an initial yield of 8.8%.
• The Company’s total investment activity for the year ended December 31, 2023, which includes its acquisition and structured investment activities, was concentrated in well-located submarkets of Atlanta and Dallas and totaled $95.0 million at a weighted average initial investment yield of 7.7%.
• During the year ended December 31, 2023, the Company purchased 129,271 shares of common stock of Alpine Income Property Trust, Inc. (“PINE”) at a weighted average gross price of $16.21 per share (all purchases of PINE common stock were completed during Q1 2023). As of December 31, 2023, the Company owned 2,332,668 shares of PINE common stock and operating partnership units.

2023 Disposition Activity

• During the year ended December 31, 2023, the Company sold nine non-core income properties for total disposition volume of $87.1 million, at a weighted average exit cap rate of 7.5%. The sales of the properties generated aggregate gains of $6.6 million and included two of the Company’s three remaining single tenant office properties.
• During the same period, the Company sold 3,480 acres of subsurface oil, gas and mineral rights for $1.0 million and 20 mitigation credits for $2.3 million.
• During the fourth quarter of 2023, the Company sold six non-core income properties for a total disposition volume of $64.2 million, representing an exit cap rate of 7.8%.
  
  

2023 Leasing Update

• During the year ended December 31, 2023, the Company signed 92 leases totaling 496,643 square feet. On a comparable basis, which excludes vacancy existing at the time of acquisition, the Company generated comparable rent per square foot growth of 7.5%.
• During the fourth quarter of 2023, the Company signed 22 leases totaling 96,729 square feet. On a comparable basis, which excludes vacancy existing at the time of acquisition, the Company generated comparable rent per square foot growth of 17.9%.

2023 Capital Markets Highlights

• During the year ended December 31, 2023, the Company repurchased 369,300 common shares at a weighted average gross price of $16.35 per share, for a total cost of $6.0 million.
• During the fourth quarter of 2023, the Company repurchased 62,015 common shares at a weighted average gross price of $15.72 per share, for a total cost of $1.0 million.
• During the year ended December 31, 2023, the Company repurchased 21,192 shares of its Series A Preferred Stock at a weighted average gross price of $18.45 per share, for a total cost of $0.4 million. The price per share represents a yield on cost of 8.6%.
• During the fourth quarter of 2023, the Company repurchased 14,398 shares of its Series A Preferred Stock at a weighted average gross price of $18.40 per share, for a total cost of $0.3 million. The price per share represents a yield on cost of 8.7%.
• As of December 31, 2023, there were 22,643,034 shares of common stock outstanding.
  
  

About CTO Realty Growth, Inc. 

CTO Realty Growth, Inc. is a publicly traded real estate investment trust that owns and operates a portfolio of high-quality, retail-based properties located primarily in higher growth markets in the United States. CTO also externally manages and owns a meaningful interest in Alpine Income Property Trust, Inc. (NYSE: PINE), a publicly traded net lease REIT. 

We encourage you to review our most recent investor presentation and supplemental financial information, which is available on our website at www.ctoreit.com.  

Safe Harbor 

Certain statements contained in this press release (other than statements of historical fact) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by words such as “believe,” “estimate,” “expect,” “intend,” “anticipate,” “will,” “could,” “may,” “should,” “plan,” “potential,” “predict,” “forecast,” “project,” and similar expressions, as well as variations or negatives of these words.

Although forward-looking statements are made based upon management’s present expectations and reasonable beliefs concerning future developments and their potential effect upon the Company, a number of factors could cause the Company’s actual results to differ materially from those set forth in the forward-looking statements. Such factors may include, but are not limited to: the Company’s ability to remain qualified as a REIT; the Company’s exposure to U.S. federal and state income tax law changes, including changes to the REIT requirements; general adverse economic and real estate conditions; macroeconomic and geopolitical factors, including but not limited to inflationary pressures, interest rate volatility, distress in the banking sector, global supply chain disruptions, and ongoing geopolitical war; the ultimate geographic spread, severity and duration of pandemics such as the COVID-19 Pandemic and its variants, actions that may be taken by governmental authorities to contain or address the impact of such pandemics, and the potential negative impacts of such pandemics on the global economy and the Company’s financial condition and results of operations; the inability of major tenants to continue paying their rent or obligations due to bankruptcy, insolvency or a general downturn in their business; the loss or failure, or decline in the business or assets of PINE; the completion of 1031 exchange transactions; the availability of investment properties that meet the Company’s investment goals and criteria; the uncertainties associated with obtaining required governmental permits and satisfying other closing conditions for planned acquisitions and sales; and the uncertainties and risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and other risks and uncertainties discussed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission.

There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.

Contact:		Matthew M. Partridge
		Senior Vice President, Chief Financial Officer and Treasurer
		(407) 904-3324
		mpartridge@ctoreit.com

FAQ

What investment activities did CTO Realty Growth, Inc. undertake in 2023?

During 2023, CTO Realty Growth, Inc. completed retail property acquisitions, acquired land parcels, and originated first mortgage structured investments, totaling $95.0 million in Atlanta and Dallas.

How much common stock of Alpine Income Property Trust, Inc. did CTO Realty Growth, Inc. purchase in 2023?

CTO Realty Growth, Inc. purchased 129,271 shares of common stock of Alpine Income Property Trust, Inc. at a weighted average gross price of $16.21 per share, owning 2,332,668 shares as of December 31, 2023.

What were the disposition activities of CTO Realty Growth, Inc. in 2023?

In 2023, CTO Realty Growth, Inc. sold non-core income properties, subsurface oil, gas, and mineral rights, and mitigation credits, generating a total disposition volume of $152.4 million.

How many leases did CTO Realty Growth, Inc. sign in 2023?

During 2023, CTO Realty Growth, Inc. signed 92 leases totaling 496,643 square feet and 22 leases totaling 96,729 square feet in the fourth quarter, with comparable rent per square foot growth of 7.5% and 17.9% respectively.

What capital markets highlights did CTO Realty Growth, Inc. provide for 2023?

In 2023, CTO Realty Growth, Inc. repurchased common shares and Series A Preferred Stock, with a total cost of $7.4 million, and had 22,643,034 shares of common stock outstanding as of December 31, 2023.