CTO Realty Growth Announces Sale of Mixed-Use Property in Santa Fe, New Mexico for $20.0 Million
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Insights
The sale of a significant real estate asset by CTO Realty Growth, Inc., specifically a mixed-use property for $20.0 million, is notable for its impact on the company's portfolio diversification and capital allocation strategy. The exit cap rate aligns with the firm's current disposition cash yield guidance, which is a critical metric in real estate investment as it indicates the rate of return on the sale based on the income the property is expected to generate. The gain of approximately $4.6 million also contributes positively to the company's financial performance.
From a strategic perspective, the divestment of non-core assets allows for a more focused investment approach and is often used to enhance shareholder value. The anticipated reinvestment into a core power center in the Orlando MSA suggests a strategic shift towards retail-centric properties, which may be influenced by market research indicating growth potential in this segment. Additionally, the use of a Section 1031 like-kind exchange could offer tax deferral benefits, effectively allowing the company to reinvest the full amount of the sale into the new property without immediate tax liability.
However, the real estate market is subject to fluctuations and the success of the new acquisition will depend on various factors including location, tenant mix and consumer behavior trends. The decision to repay a portion of the outstanding balance on its revolving unsecured credit facility with the proceeds indicates prudent financial management, potentially improving the company's credit profile and reducing interest expense.
The utilization of a Section 1031 like-kind exchange is a strategic move for CTO Realty Growth, Inc., which allows for the deferral of capital gains taxes that would otherwise be incurred on the sale of the property. This tax provision is particularly relevant in the real estate sector as it enables investors to maintain equity and leverage in their property investments. By reinvesting the proceeds into similar 'like-kind' properties, CTO can continue to optimize its investment portfolio without the immediate tax burden.
However, it is important to note that the rules governing 1031 exchanges are complex and must be followed precisely to ensure compliance and avoid potential legal pitfalls. The mention of $30.7 million in proceeds held in 1031 restricted cash accounts suggests that CTO is planning further investments under this tax structure, which could significantly affect the company's investment strategy and liquidity management.
Furthermore, the decision to use available proceeds to repay a portion of the outstanding balance under its revolving unsecured credit facility indicates a strategic approach to balance sheet management. Reducing debt can lower financial risk and interest costs, which could be favorable for the company's long-term financial health and investor confidence.
The financial implications of CTO Realty Growth, Inc.'s property sale and subsequent actions are multifaceted. The reported gain on sale of $4.6 million positively affects the company's earnings, which could be reflected in the stock price if the market perceives this as a sign of effective asset management and profitability. The strategy to reinvest in a core power center is indicative of the company's growth orientation and could be a response to market demand dynamics.
Investors should also consider the impact of this transaction on the company's liquidity. With $30.7 million in proceeds held for future investments, CTO demonstrates a strong cash position, which provides flexibility for opportunistic acquisitions. However, investors should monitor how the company allocates this capital, as missteps in investment choices could affect future revenue streams and profitability.
The repayment of debt using the sale proceeds will likely improve the company's debt-to-equity ratio, an important indicator of financial health. This could potentially lead to a better credit rating and lower borrowing costs, which is beneficial for long-term growth and sustainability. Investors should also be aware of the interest rate environment, as it can influence both the cost of borrowing and the valuation of real estate assets.
WINTER PARK, Fla., March 19, 2024 (GLOBE NEWSWIRE) -- CTO Realty Growth, Inc. (NYSE: CTO) (the “Company” or “CTO”) today announced the closing of the sale of its mixed-use property totaling approximately 136,000 square feet in downtown Santa Fe, New Mexico (the “Property”). The Property was sold for approximately
“In recent months, we have successfully sold many of our smaller non-core properties and nearly all of our legacy office exposure,” said John P. Albright, President and Chief Executive Officer of CTO Realty Growth, Inc. “We anticipate using the proceeds from this sale to fund the acquisition of a core power center in the Orlando MSA, which we expect to close in the first quarter of 2024.”
The Company expects to utilize the sales proceeds as part of a Section 1031 like-kind exchange (the “1031 Exchange”). Following the completion of the 1031 Exchange, the Company intends to use available proceeds to repay a portion of the outstanding balance under its revolving unsecured credit facility or fund future acquisitions. With the closing of this transaction, the Company has approximately
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; credit risk associated with the Company investing in structured investments; 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, 2023 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
How much was the mixed-use property in Santa Fe sold for?
What was the gain on sale from the transaction?
What does CTO Realty Growth, Inc. plan to do with the proceeds from the sale?
What is the amount of proceeds held in 1031 restricted cash accounts after the transaction?
