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CTO Realty Growth(CTO) - 2025 Q4 - Earnings Call Transcript

2026-02-20 15:00

Financial Data and Key Metrics Changes - For Q4 2025, Core FFO was $15.8 million, an increase of $1.6 million from $14.2 million in the same quarter last year, with a per-share increase to $0.49 from $0.46 [12] - For the full year, Core FFO reached $60.5 million, up $12.6 million from $47.9 million in the previous year, with per-share Core FFO slightly decreasing to $1.87 from $1.88 [12][13] - Same-property NOI for shopping centers increased by 4.3% in Q4, driven by leasing activity and reduced maintenance costs [14] Business Line Data and Key Metrics Changes - The company signed leases for 189,000 sq ft in Q4, including 167,000 sq ft of comparable leases, with a cash rent increase of 31% [4] - For the full year, a record 671,000 sq ft was leased, with comparable leases at a cash rent increase of 24% [5] - Same-property NOI for non-core properties was impacted by a significant vacancy, but the overall growth was driven by shopping centers [14] Market Data and Key Metrics Changes - The company reported a record high leased occupancy of 95.9% [4] - The acquisition of Pompano Citi Centre for $65.2 million added 509,000 sq ft of operating space, currently 92% occupied, with future leasing opportunities [7] - The company expects to achieve a positive cash rent spread of approximately 60% from backfilling anchor spaces [6] Company Strategy and Development Direction - The strategic focus is on shopping centers in high-growth Southeast and Southwest U.S. markets, with proactive asset management and leasing [4] - The company is under contract to acquire a 384,000 sq ft shopping center in Texas for approximately $83 million, indicating ongoing expansion efforts [9] - Six outparcels for development have been identified, with expected capital investment over 2026 and 2027 [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future earnings growth, with almost half of the signed, not open pipeline expected to be recognized in 2026 [7] - The initial earnings guidance for 2026 is set at $1.98-$2.03 for Core FFO per diluted share, reflecting anticipated growth in same-property NOI and investment volume [18] - Management noted that the leasing environment remains strong, particularly for national brands, indicating a favorable market for expansion [32] Other Important Information - The company ended the year with $167 million in liquidity, providing ample capacity for future acquisitions [17] - The net debt to EBITDA ratio improved to 6.4 times, down from 6.7 times, indicating better leverage management [18] Q&A Session Summary Question: Timing for backfilling vacant anchor centers - Management indicated that they expect to resolve the remaining vacancies within the next six months, with rent from signed leases starting in 2026 [21][22] Question: Value and opportunity for the office property in New Mexico - Management confirmed that the property is now marketable and discussions for potential sale are ongoing, with proceeds likely reinvested into open-air centers [24][25] Question: Opportunities at Pompano Citi Centre - Management highlighted the potential for lease-up opportunities, particularly with JCPenney, which currently pays minimal rent [29][30] Question: Acquisition pipeline and market allocation - Management is actively seeking larger shopping center purchases and noted that the market is currently limited, but they are optimistic about finding suitable opportunities [43][44] Question: CapEx expectations moving forward - Management indicated that the elevated CapEx in Q4 was likely higher than the run rate going forward, primarily due to specific lease activities [48][50]