CTO Realty Growth Announces Sale of Single Tenant Office Property in Tampa, FL For $22.0 Million
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Insights
The disposal of Sabal Pavilion by CTO Realty Growth, Inc. at a loss of $0.7 million is a strategic move that aligns with the company's ongoing asset optimization efforts. The sale price of $22.0 million, below the asset's carrying value, suggests a strategic decision to exit a non-core asset despite the immediate financial hit. The provision of a $15.4 million first mortgage at a 7.5% interest rate indicates a creative financing structure, potentially securing an income stream above current market rates for similar credit profiles.
CTO's year-to-date disposal of nine properties, resulting in a total volume of $87.1 million and generating $6.3 million in gains, reflects a tactical portfolio rebalancing. The weighted average exit cap rate of 7.5% is a critical metric, indicating the rate of return on the real estate investments. This rate seems consistent with current market conditions, suggesting that CTO is executing disposals in line with industry norms.
The use of proceeds for a Section 1031 like-kind exchange points to a tax-efficient strategy, allowing deferral of capital gains taxes and potentially enhancing investment capital. The planned repayment of debt using the proceeds will likely improve the company's leverage ratios and financial flexibility. The mention of $6.9 million in 1031 restricted cash indicates funds are already earmarked for reinvestment, aligning with the company's strategy to pivot towards higher growth sectors like retail and mixed-use properties.
CTO Realty Growth's strategic shift away from legacy office exposure towards retail and mixed-use properties is indicative of broader trends in the real estate market. Office properties, particularly single-tenant ones, may exhibit higher risk profiles in the current economic environment, characterized by evolving workplace dynamics and remote work trends.
The non-core property disposition program mentioned reflects a deliberate approach to capital allocation, focusing on assets with higher potential for growth and resilience. The transition towards larger format retail and mixed-use properties is consistent with industry trends favoring multi-use developments that cater to a blend of consumer needs, including shopping, dining and residential spaces.
CTO's management of its capital structure through the repayment of its revolving unsecured credit facility showcases a prudent financial strategy aimed at reducing interest expense and enhancing liquidity. This positions the company to take advantage of opportunistic investments, which could yield higher returns in the long-term.
The decision by CTO Realty Growth to engage in a Section 1031 like-kind exchange is a sophisticated tax strategy that allows real estate investors to defer capital gains taxes by reinvesting the proceeds from the sale of a property into similar types of property. This move not only defers tax liabilities but also enables the company to reallocate resources into potentially more profitable ventures without an immediate tax burden.
Understanding the implications of such exchanges is crucial for investors, as it reflects a company's ability to utilize tax codes to optimize financial outcomes. The strategic deployment of 1031 Exchange proceeds to pay down the company's revolving unsecured credit facility suggests a dual benefit of tax deferral and debt reduction, ultimately affecting the company's net debt position and cost of capital.
WINTER PARK, Fla., Dec. 20, 2023 (GLOBE NEWSWIRE) -- CTO Realty Growth, Inc. (NYSE: CTO) (the “Company” or “CTO”) today announced the closing of the sale of Sabal Pavilion, a 120,500 square foot single tenant office property located in Tampa, Florida (the “Property”). The Property was sold for
Year-to-date, the Company has sold nine properties for total disposition volume of
“We’ve made good progress with asset sales over the past few months, and with this most recent office sale, we’ve now accretively sold nearly all of our legacy office exposure,” said John P. Albright, President and Chief Executive Officer of CTO Realty Growth, Inc. “As we look forward to 2024, we are well-positioned to complete our non-core property disposition program and opportunistically reinvest these proceeds into higher growth, larger format retail and mixed-use properties.”
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. 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; 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
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