8-K: CTO Realty Growth Reports Strong 2024 Results, Core FFO Reaches Record High

CTO Realty Growth announced its fourth quarter and full year 2024 operating results, highlighting significant investment activity and record Core FFO.

Summary

• CTO Realty Growth reported its operating results for the quarter and year ended December 31, 2024.
• The company closed investments of $330.8 million at a weighted average initial cash yield of 9.3% in 2024.
• Net proceeds of $165.2 million were raised under the common ATM program in 2024.
• The current signed-not-open pipeline stands at $5.2 million.
• Net loss per diluted share attributable to common stockholders was $(0.56) for the fourth quarter and $(0.35) for the full year.
• Core FFO was $0.46 per diluted share for the fourth quarter and $1.88 per diluted share for the full year.
• AFFO was $0.49 per diluted share for the fourth quarter and $2.00 per diluted share for the full year.
• Same-Property NOI totaled $60.4 million, an increase of 4.0% from the prior year.
• The company signed 70 leases totaling over 452,000 square feet with a weighted average lease term of 8.4 years.
• The company is guiding for Core FFO per share of $1.80 to $1.86 and AFFO per share of $1.93 to $1.98 for 2025.

Sentiment

Score: 7

Explanation: The document presents a mixed picture. While investment activity and Core FFO are positive, the net loss and upcoming convertible note maturity introduce some uncertainty. The guidance for 2025 is cautiously optimistic.

Positives

• The company closed investments of $330.8 million at a weighted average initial cash yield of 9.3% in 2024.
• Core FFO reached a record high of $1.88 per share for the year.
• The company raised $165.2 million in net proceeds under the common ATM program in 2024.
• Same-Property NOI increased by 4.0% to $60.4 million.
• The company signed 70 leases totaling over 452,000 square feet with a weighted average lease term of 8.4 years.
• The company's leased occupancy is at 93.4%.
• The company has $222 million of liquidity to support future growth.
• The Board of Directors has authorized a quarterly cash dividend of $0.38 per share of common stock for the first quarter of 2025, representing an annualized yield of approximately 7.5%.

Negatives

• The company reported a net loss per diluted share attributable to common stockholders of $(0.56) for the fourth quarter and $(0.35) for the full year.
• Net Income (Loss) Attributable to Common Stockholders per Common Share Diluted decreased from $0.25 to $(0.56) for the three months ended December 31, 2023 and 2024 respectively.
• Net Income (Loss) Attributable to Common Stockholders per Common Share Diluted decreased from $0.03 to $(0.35) for the years ended December 31, 2023 and 2024 respectively.

Risks

• The company's ability to remain qualified as a REIT is a risk.
• Exposure to U.S. federal and state income tax law changes, including changes to the REIT requirements, poses a risk.
• General adverse economic and real estate conditions could impact the company.
• Macroeconomic and geopolitical factors, including inflationary pressures, interest rate volatility, and global supply chain disruptions, present risks.
• Credit risk associated with the company investing in structured investments is a concern.
• The inability of major tenants to continue paying their rent or obligations due to bankruptcy, insolvency or a general downturn in their business is a risk.
• The loss or failure, or decline in the business or assets of PINE could negatively impact the company.
• The availability of investment properties that meet the company's investment goals and criteria is uncertain.
• Uncertainties associated with obtaining required governmental permits and satisfying other closing conditions for planned acquisitions and sales exist.

Future Outlook

The company expects Core FFO per share to be between $1.80 and $1.86 and AFFO per share to be between $1.93 and $1.98 for 2025. This includes assumptions for investments between $100 million and $200 million, Same-Property NOI growth of approximately 1%, and general and administrative expenses between $17.5 million and $18.0 million.

Management Comments

• 2024 was an outstanding year for the Company.
• We closed $331 million of investments at a weighted average yield of 9.3% and produced record high Core FFO of $1.88 per share.
• We also opportunistically raised capital ending the year with $222 million of liquidity to support future growth and our current signed-not-open leasing pipeline is over $5 million.

Industry Context

CTO Realty Growth's focus on open-air shopping centers in growing markets aligns with a broader trend in the retail REIT sector, where investors are favoring properties with strong tenant mixes and resilient consumer demand. The company's active asset management and focus on leasing up existing vacancy are also common strategies among successful retail REITs.

Comparison to Industry Standards

• CTO Realty Growth's net debt to pro forma adjusted EBITDA of 6.3x is comparable to peers such as Kite Realty Group (KRG) and Weingarten Realty Investors (WSR).
• The company's dividend yield of 7.5% is higher than the peer average of 3.9%.
• The company's 2025E Core FFO multiple of 10.8x is lower than the peer average of 14.3x.

Stakeholder Impact

• Shareholders will receive a quarterly cash dividend of $0.38 per share of common stock.
• Tenants may be impacted by store closings and repositioning efforts.
• Employees are subject to the company's code of business conduct and ethics policy.

Next Steps

• The company will host a conference call on February 21, 2025, to discuss the results.
• The company plans to continue investing in retail-based properties in higher growth markets.
• The company anticipates cash settlement of the 2025 Convertible Notes which mature in April 2025.

Key Dates