CTO Realty's Growth Is About To Kick In

Core Viewpoint - CTO Realty Growth, Inc. experienced a 7% stock drop despite strong earnings due to a miss in AFFO/share guidance for 2025, which is expected to be between $1.93 and $1.98, falling short of consensus estimates of $2.01 [1][4][6] Financial Performance - The company reported a core FFO per diluted share guidance range of $1.80 to $1.86 and an AFFO per diluted share guidance of $1.93 to $1.98 for 2025 [5][6] - The 2025 guidance reflects a 6 cent miss at the midpoint, indicating negative growth [6] Leasing Activity - CTO has signed 70 new leases in 2024, covering 452,301 square feet, with new leases at 75% higher rent than expiring leases [14][16] - The company has $5.2 million in annual base rent from signed but not yet opened leases, contributing 16 cents per share in AFFO accretion expected to impact earnings primarily in 2026 [12][13] Tenant Bankruptcies - The company is proactively regaining spaces from bankrupt tenants, with potential re-leasing spreads estimated between 40% and 60% [21][23] - The former leases of bankrupt tenants represented about $2.8 million in annual base rent, equating to approximately 9 cents per share in lost revenue for 2025 [21][23] Market Dynamics - CTO's properties are located in high-growth Sunbelt markets, which have seen virtually no new net supply of shopping centers since 2009, leading to higher occupancy and rental rates [29][30] - The average catchment area for CTO's shopping centers has 203,000 people with an average household income of $143,000, making them attractive to retailers [30] Future Outlook - The stabilized run-rate AFFO/share is projected at $2.24, exceeding the 2026 consensus estimate of $2.11, driven by strong leasing activity and market conditions [25] - The market price of $18.85 is considered undervalued given the expected growth in AFFO as lease commencements occur [31]