CTO - NYSE

Ladies and gentlemen, thank you for standing by. Welcome to the CTO Realty Growth, Inc. Fourth Quarter and Year End 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jenna McKinney, Director of Finance. Please go ahead. Good morning, everyone, and thank you.

Thank you for joining us today for the CTO Realty Growth, Inc. Fourth Quarter 2025 Operating Results Conference Call. Participating on the call this morning are John P. Albright, President and Chief Executive Officer, Philip R. Mays, Chief Financial Officer, and other members of the executive team that will be available to answer questions during the call. I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements. We undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are discussed from time to time in greater detail in the company's Form 10-Ks, Form 10-Qs, and other SEC filings. You can find our SEC reports, earnings release, supplemental, and most recent investor presentation on our website at ctoreit.com. With that, I will turn the call over to John.

Thanks, Jenna, and good morning, everyone. We are pleased to report a robust fourth quarter highlighted by record high lease occupancy of 95.9%, same property NOI growth for our shopping centers of 4.3%, and the previously announced acquisition of a shopping center in South Florida. Our strategic focus on shopping centers located in the higher growth Southeast and Southwest markets of the U.S. along with the proactive asset management leasing is producing strong results across all areas of our business. Nowhere is this better illustrated than in our retail leasing results. During the fourth quarter, we signed leases for 189,000 square feet, including 167,000 square feet of comparable leases and a cash rent increase of 31%. For the full year, we signed leases for a record 671,000 square feet, including 592,000 square feet of comparable leases at a cash rent increase of 24%. Further, we continue to make meaningful progress backfilling our 10 anchor spaces. As previously announced in the fourth quarter, we signed a lease with a national investment grade retailer at Marketplace Seminole Town Center for 48,000 square feet. This single lease consolidated the 34,000 square feet formerly occupied by Big Lots, 9,000 square feet of small shop space, and 5,000 square feet of new expansion space. Further, this lease brought us to seven resolved anchor spaces in 2025, totaling 177,000 square feet. Additionally, we are in active negotiations for the three remaining anchor spaces and the Value City, at Carolina Pavilion, which we expect to get back in early 2026. Notably, all combined, we expect to achieve a positive cash rent spread of approximately 60%, the high end of the targeted range previously disclosed. So while getting these boxes back did result in temporary downtime, it ultimately accelerated our ability to achieve higher rents and stronger tenant credits along with driving higher customer traffic to the respective center. More broadly, as of year end, our signed not open pipeline stands at $6,100,000.0 representing approximately 5.8% of annual cash-based rents. We believe this pipeline positions us for meaningful earnings growth as reflected in our outlook with almost half of the signed not open pipeline anticipated to be recognized in 2026 and 100% in 2027. Moving to investment activity. In December, we acquired Pompano City Center, an open-air retail center located on 35 acres in the Pompano Beach submarket of Fort Lauderdale, Florida, for $65,200,000.0. The property consists of 509,000 square feet of operating space that is currently 92% occupied, plus 62,000 square feet of unfinished shell space primarily on the second level presenting future leasing opportunity. Pompano City Center is anchored by Burlington, TJ Maxx, Nordstrom Rack, Ross Dress for Less, and JCPenney. Further, the property enjoys a prime location at a high-traffic intersection offering great visibility and access. This acquisition provides another attractive opportunity to create long-term value through both strategic mark-to-market rent opportunities and incremental leasing. Including the acquisition of Ashley Park, an open-air lifestyle center acquired early in 2025, and $21,000,000 of structured investments originated during 2025, we closed $166,000,000 of investments during 2025 at a weighted average initial cash yield of 9%. Moving to dispositions, last quarter I provided an update about the significant leasing we completed at The Shops at Legacy North located in Dallas, Texas. During this quarter, we capitalized on those leasing efforts and sold The Shops at Legacy North for $78,000,000 at a cash exit cap of low 5%. While the lease up of this shopping center took longer than anticipated, we are pleased with the ultimate outcome and the ability to accretively recycle the proceeds into higher yielding acquisitions. This transaction demonstrates our team's ability to execute value-add strategy at properties, retenanting, increasing occupancy, and bringing rents up to market. As we look ahead, I do want to note a near-term anticipated acquisition. We are under contract to acquire a 384,000 square foot shopping center located in Texas for approximately $83,000,000. We look forward to announcing the closing of this acquisition in 2026 and providing more details at that time. Additionally, while we have plenty of liquidity under our revolving credit facility to acquire this property, we may elect to fund this acquisition by selling a stabilized property, thus accretively recycling the proceeds to further drive earnings. Finally, while both leasing and capital recycling will add to earnings growth in 2026 and 2027, we never rest here at CTO Realty Growth, Inc. We have identified six outparcels for development and are in various stages of negotiation with tenants ranging from preliminary to detailed lease negotiations. Three of the six outparcels are for larger boxes and uses we expect to drive significant foot traffic to the respective centers. While each specific opportunity is unique, in general, they average about $5,000,000 of investment capital and low double-digit yield. If completed, we expect the capital to be invested over 2026 and 2027 with leases beginning to contribute to earnings in 2027. In summary, while we are pleased with our 2025 performance, we are even more excited about the future of CTO Realty Growth, Inc. We are beginning to reap the benefits of our strategic business plan focusing on the right assets in the right markets, along with proactive leasing and asset management. I am immensely proud of the team here at CTO Realty Growth, Inc. and what they have accomplished along with the performance and results they are driving for our shareholders. I will now turn the call over to Phil.

Thanks, John. On this call, I will highlight our earnings, provide an update on our balance sheet, and discuss our initial 2026 outlook. Starting with operating results. For the fourth quarter, Core FFO was $15,800,000, a $1,600,000 increase compared to the $14,200,000 reported in the comparable quarter of the prior year. On a per-share basis, Core FFO was $0.49 per diluted share compared to $0.46 per diluted share in the comparable quarter of the prior year. For the full year, Core FFO was $60,500,000, a $12,600,000 increase compared to $47,900,000 reported in the comparable prior year. On a per-share basis, Core FFO was $1.87 per diluted share compared to $1.88 per diluted share in the comparable prior year. The change in Core FFO per share for the full year reflects the reduction in leverage that took place late in 2024 when we reduced net debt to EBITDA by approximately a full turn. With regards to same property NOI, total same property NOI, including our four non-core properties, increased 1.1% for the fourth quarter. Same property NOI for our non-core properties was impacted by Fidelity vacating almost half of our 212,000 square foot office property located in Albuquerque, New Mexico, and lower percentage rent from our beachfront restaurants in Daytona Beach, Florida. As previously disclosed, we have already released the portion of the building vacated by Fidelity to the State of New Mexico for an initial lease term of ten years, making the property now 100% leased to two investment grade tenants. Further, we currently expect the State of New Mexico to begin paying cash rent in the latter half of 2026. Notably, same property NOI for our shopping centers increased 4.3% in the fourth quarter. This growth was driven by leasing activity across our portfolio and a reduction in maintenance costs through a sub-property enhancement project completed in 2024. For context, shopping center properties represent 93% of total same property NOI for the fourth quarter. However, given the relatively small nominal size of our same property NOI, just $200,000 impacts quarterly growth by approximately 100 basis points, and one tenant vacating together with the seasonal impact of percentage rent at a non-core property can obscure the same property NOI trend at our shopping centers. Accordingly, we have updated our supplemental financial information this quarter to more clearly highlight the metrics related to our shopping center properties. Moving to the balance sheet. We started the fourth quarter in a strong financial position, completing the previously announced $150,000,000 term loan financing at the end of the third quarter. The proceeds from these new term loans were used to retire a $65,000,000 term loan scheduled to mature March 2026 and reduce the balance on our revolving credit facility to provide enhanced liquidity. Notably, we now only have $17,800,000 of debt maturing in 2026. Also, as previously disclosed, early in the fourth quarter, we repurchased $5,000,000 of common stock at a weighted average purchase price of $16.26 per share, increasing our repurchases for the full year of 2025 to a total of $9,300,000 at a weighted average purchase price of $16.27 per share. Regarding liquidity, we ended the year with $167,000,000 of liquidity consisting of $149,000,000 available under our revolving credit facility and $18,000,000 in cash available for use. This provides more than adequate capacity to initially fund the $83,000,000 anticipated acquisition of a shopping center located in Texas that John discussed earlier. From a leverage perspective, we ended the fourth quarter with net debt to EBITDA of 6.4x, an improvement from 6.7x at the end of the third quarter. The anticipated acquisition in Texas will temporarily elevate our leverage to a level similar to that at the start of the quarter. However, we anticipate deleveraging from the sale of select assets as well as rent commencing from our signed not open pipeline. Now turning to our 2026 outlook. Our initial earnings guidance for the full year of 2026 is $1.98 to $2.03 for Core FFO per diluted share and $2.11 to $2.16 for AFFO per diluted share. Key assumptions reflected in our initial guidance include: investment volume, including structured investments, of $100,000,000 to $200,000,000 at a weighted average initial yield between 8%–8.5%; same property NOI growth for shopping centers of 3.5% to 4.5%; and general and administrative expenses of $19,500,000 to $20,000,000. One last note, the cadence of our same property NOI growth will improve over the year as tenants included in our signed not open pipeline take possession of their space and commence paying rent. Operator, please open the line for questions.

Thank you. To withdraw your question, please press 11 again. The first question comes from Jane Kornreich with Cantor Fitzgerald. Your line is open.

Hey. Good morning. Thank you. First, I just wanted to ask about backfilling the 10 vacant anchor centers, just give us, you know, the color as to the timing of how, you know, rent from those already signed leases to get paid in 2026. And then for the three leases that have yet to be signed, any thoughts as to timing for that, and if that can also, I guess, hit the upper end of that 40% to 60% increase in leasing spreads you forecasted?

Yeah. Thanks. I will kind of answer, sort of, you know, the ones that we are still working on. You know, we are in a fortunate situation with regards to, you know, the vacancies that are left where we have multiple tenants vying for the space, and we are trying to obviously optimize sort of the higher paying credit, what it does for the center, that sort of thing. So trying to move around the chess pieces. So, and that is more talking about Carolina Pavilion. And, you know, there are two boxes there. And so I would suspect that that is going to get resolved here in the next, you know, six months for sure. And then, as we talked about before, you know, these things, these tenants take, you know, a year at least to kind of get into operation. But I will let Phil talk about the others that we have signed up.

Yeah. Jane, on the ones that have already been completed, as far as contributing to the fourth quarter, it is really just the two Boot Barns. One at Rockwell and one at Price that got open really quick. We did get Slick City moved into Carolina, but it was very, very late in the year. Did not contribute much this year. Then just going forward, it will ramp up about half in 2026, and then they will all be online in 2027.

Okay. Appreciate that. And just one follow-up. I guess, you know, looking at the office property in New Mexico, which now has this new lease rigged out between the two tenants, I guess, how do you think about the value and opportunity to dispose of that asset now? Whenever that does happen, should it happen, what would your ideal use of the proceeds be?

Yeah. So, you know, we are definitely in a fortunate position now that we have, you know, the State of New Mexico taking half the building and Fidelity another half. We certainly have a marketable asset right now. So we are in early discussions with groups that have an interest in buying it. But as we get closer to State of New Mexico's rent commencement, it is kind of really we are going to have higher values to us. So we are being patient with it knowing that we have that opportunity. And alternatively, to your question, we would look to, you know, reinvest those proceeds into, you know, an open-air center or a larger open-air center. And if we, you know, find a great candidate acquisition opportunity, we may speed up the process of selling, you know, that building in New Mexico.

Okay. Thanks very much.

Sure.

Thank you. Our next question is going to come from Craig Kucera with Lucid. Your line is open.

Hey. Good morning, guys. I want to talk about Pompano City Center. There was a mention of you know, some potential mark-to-market lease-up opportunity there. Can you give us some color what you think that might be?

Well, it is really, I mean, look, JCPenney is the largest tenant and they literally pay nothing. And so if that company were ever to really, you know, go under or give back space or, you know, most likely is something where we buy out their space. You know, that is a huge opportunity at that property. But, really, the real opportunity is, Craig, the lease-up. There is a fair amount of vacancy, and we are very active right now with LOIs going out to prospective tenants. We are, it is really, you know, turning this around, creating the excitement of the activity, and we are doing that. So we are really very optimistic about Pompano. So, but it is more about lease-up than taking a tenant and bringing in a new tenant at higher rent. But, certainly, the largest one by far, JCPenney, is that opportunity down the road.

Right. That could be pretty significant if they are paying nothing.

You know, changing gears, you know, it was a very strong leasing quarter. You know, obviously, a lot going on at Seminole Town Center. But outside of that, were there, you know, just kind of a flavor of the market, are you seeing any particular categories that are, you know, really creating or are you finding demand in your shopping centers for?

It is really the, you know, the strong national brands that, you know, are still very in demand in spaces if you have them. You know, the TJ Maxxes of the world, you know, they are, the Ross and so forth. You know? So, I mean, you are actually seeing more development occur in different markets because those tenants, you know, are doing very well in this economy, as we read the national headlines. And so they are looking for store expansion. So if you have a big box in a good market and a good center, you really are in the driver's seat.

Great. I saw you extended and increased the Ravana loan and extended Founders. Have you gotten any indication from Waters that they will extend, or you expect that to be repaid in the second quarter?

Yeah. Unfortunately, we expect that to be repaid. We are hoping that it would not, but it looks like it will. So we will be on the hunt to replace that.

Got it. And I saw that Ravana paid down a portion of their balance. But you would anticipate them drawing down the remaining $25,000,000 or so available on that loan in 2026?

Yeah. They have some basically users for some of the site, and they need to do site work and, you know, put in the roads and all that kind of stuff, utilities. So it is really master development work. And so, yeah, we expect that to be used to improve that site.

Okay. Great. And just one more for me. Phil, this is on the ABR recognition timing on the signed not open. Can you give us any more granularity, you know, certainly relative to 2026? You know, is this like, you know, should we assume something ratable? And as far as 2027, is that also, you know, throughout 2027, I would imagine, or any additional granularity would be helpful for modeling purposes?

Yeah. Ratable is pretty close. You know, it may ramp up a little more towards the latter half of the year in 2026. But if you are doing it ratable or a little bit stacked towards the latter part of the year, you are going to be pretty close. And same for 2027. From what we can see now.

You would say the same for 2027 as well?

Yeah. From what we can see now. Yeah.

Okay.

Alright. Perfect. Thank you. Appreciate it.

Thank you. And our next question is going to come from John James Massocca with B. Riley. Your line is open.

Good morning. Good morning. So maybe thinking about the Texas acquisition that is in the pipeline, how does that property, you think, look compared to the portfolio today? And I guess, is it more kind of a value-add opportunity in that acquisition, as you see it today, or is that going to be something that is more stabilized or you are just getting it at a really solid yield and maybe there is some rent mark to market in the future that is attractive?

How about if I say all of the above? You know, we are lucky that it is a stabilized asset with upside opportunity. There is actually a land parcel that comes along with it that there is definitely possibilities for. And there is a little bit of lease-up. And there are some below-market leases, but nothing near term that you can get a hold of. So it hits all the boxes, so we are pretty excited about it.

Okay. And then maybe thinking about acquisition in the pipeline or in the guidance beyond that transaction, and with the, you know, likely repayment of the one structured investment in mind, how much of that is maybe structured investments as you see it today, and how much of that would be additional center purchases?

We are definitely on the hunt for the larger shopping center purchases. In the last week, I went to go see, you know, two larger ones that we are definitely interested in. I would say that the market, there is not a lot on the market right now. There is a lot of talk about, you know, brokers doing a lot of valuations for sellers. And so we will see whether that, you know, comes to fruition. But we are definitely, you know, looking to find some chunkier shopping centers this year. As we mentioned before, we still have some recycle opportunities in our portfolio where we have leased up properties and there is slower growth now. And if we can move them into, for instance, the Texas acquisition, where there is a ramp of, you know, cash flow increases and lease-up opportunity, that is kind of where we like to position ourselves.

And as you think about, I mean, if you bespoke based on whatever asset you decided to sell, but what is kind of the day one spread in yields between dispositions and acquisitions? I mean, you gave acquisition cap rates and guidance, but just kind of curious what the disposition side would be.

I mean at least 100 basis points, if not more. Most likely more.

To the positive. Yes.

Okay. And then last one for me. CapEx kind of came up a little bit in 4Q. Is that kind of a better run-rate level as we look at the portfolio today? Because I know you sold Legacy, which is a little bit more of a CapEx-intensive asset. Just kind of curious how we should think about that going forward.

Yes. The fourth quarter was elevated. It did include the large anchor lease at Marketplace at Seminole. That is the one John talked about where the anchor took the 34,000 square foot box and then also is absorbing 9,000 of small shop, plus 5,000 square feet of expansion. And there was also a restaurant in there, and the restaurants always carry a little heavier TI. So I would say the fourth quarter is probably a little higher than the run rate going forward. You know, those run rates are, you know, for a portfolio our size are better to look at, you know, on an annual, you know, basis. Because just one lease, like an anchor in any one quarter, can skew it up significantly. I would say just generally, fourth quarter is a little higher than a good run rate.

K. I appreciate that color.

That is it for me. Thanks. Great. Thank you.

Thank you.

And the next question is going to come from Gaurav Mehta with Alliance Global Partners. Your line is open.

Yes. Thank you. Good morning. I wanted to follow up on the SNO timing of 47% in 2026. It seems like it is different than 76% you had in last quarter. So is it like the new leases that came in? Or was there any changes in the timing?

Yeah. It is, you know, you look at it from quarter to quarter, there are a lot of moving parts. So there was a tenant that moved off of it and into this year. Right? And then you also had where we sold Legacy, so then that dropped off. And I think that is probably the biggest mover in your kind of reconciliation of the 76 that was previously there to 50% now. There was a lot of lease-up at Legacy, as John discussed, that we completed, and it was selling that that drops out of the pipeline. And the amount, you know, did not decrease because we signed a lot of new leases. Right? So the signed not open pipeline is still significantly large, even with Legacy falling off, but that is the change, the biggest driver of that change for 2026.

Okay. Understood. Second question I have is on your market allocation. As you look to acquire new properties, I see that Atlanta seems to be much higher at 36% than the rest of the market. And just wondering if you could maybe comment on how you think about allocating in any given market as far as exposure to cash ABR?

Yeah. I mean, look, we are not looking to add to Atlanta. So you will probably see Atlanta move down over time for sure. And so, given that our portfolio is 85% North Carolina, Florida, Texas, Georgia, we certainly have one of the strongest portfolios relative to the growth of markets where tenants want to be. And so you will see more of our investments in other markets kind of in that Southeast, Southwest, but, you know, less so in Atlanta.

Alright. Thank you. That is all I had.

Great. Thanks.

Thank you. And the next question will come from Jason Weaver with JonesTrading. Your line is open.

Good morning. Thanks for taking my question. Just first of all, when it comes to allocation, can you talk about the relative merits between grocery-anchored, lifestyle, and power centers and, of those, what you are most likely looking to target?

Yeah. I mean, look. You know, grocers are terrific. It is, but it is a lower-yielding kind of product and a little bit slower growth sort of product. And then lifestyle is fantastic. We have had some great success, but they are a little bit more expensive to operate. You know, you need more of that security element and everything because you have restaurants and entertainment and so forth. But, you know, they work really well in the right locations. And then power is just more stable but higher growth opportunities with lease-up and less sort of CapEx exposure. You know, the tenants that are going in those do not need really high TI sort of, you know, finish-outs like the lifestyle centers do, but that is sort of, you know, an easy sort of way to think about them. Yeah. And how are you thinking about the relative availability in the market for what you can deploy to today? Yeah. We are not right now on the grocer side. You know, we are not, you know, chasing those just because the yields are so low. However, we are looking at lifestyle and power for sure. And a lot of the opportunities we are looking at kind of have that grocer opportunity in the future where grocers would come into those centers. We are seeing that in our portfolio now where we may have a large power center, but a grocer, you know, is looking at one of the, and we have had that happen before where, unfortunately, we could not get one of the tenants out that it would have been a very, you know, national grocer that is very beloved in the nation. But, unfortunately, we could not get a bookstore out to accommodate them, if you can imagine. So we will not be chasing grocery just because the yields are way too low. We do not see a compelling return opportunity there. We do see it in areas where, you know, the lifestyle and power, where the yields are definitely higher and there is not as much capital chasing them. Great. That is helpful. Thank you. And then maybe it is a little bit early here, but, you know, with 20% of your base rent, the 2028 lease is coming off. Have you started any discussions on what types and opportunity that might present for FFO growth in the out years?

Yeah. I mean, look. You know, that is the great thing about this company setup right now is, you know, we have done so much work on the lease-up and kind of the ramp that in a lot of these tenants that we, or these properties that we bought, you know, their leases are below market. And these tenants, you know, are doing well, and so most likely, they are going to exercise renewal options. But if not, you know, there is definitely some mark-to-market opportunities. So we do not really have to do much here to grow our earnings. It is just really letting the portfolio, you know, play out. And so the setup is really great. We do not have to do anything special to, you know, have some really interesting growth here.

Great. Appreciate the color. Thanks, guys.

Sure.