CTO Realty Growth(US:CTO)2022-10-28 17:53Financial Data and Key Metrics Changes - Total revenues for Q3 2022 increased nearly 40% to $23 million, with year-to-date total revenues up 31% to $60 million [25] - Year-over-year same property NOI growth for the quarter was 12% [26] - Core FFO for Q3 2022 was $0.47 per share, a 38% increase compared to Q3 2021, while AFFO was $0.49 per share, representing a 36% increase [27] - Year-to-date core FFO was $1.41 per share and AFFO was $1.47 per share, reflecting year-over-year growth of 55% and 41% respectively [28] - The company paid a Q3 regular cash dividend of $0.38 per share, a 14% year-over-year increase [32] Business Line Data and Key Metrics Changes - The company sold several legacy properties, including a multi-tenanted office property, and reinvested in grocery-anchored assets [6][8] - The portfolio now consists of 19 properties, comprising approximately 3.1 million square feet of rentable space across 15 markets [23] - Grocery-anchored asset exposure has more than doubled to nearly 30% of the portfolio [15] Market Data and Key Metrics Changes - The largest markets for the company are now Atlanta, Georgia, Dallas, Texas, Richmond, Virginia, and Raleigh, North Carolina, with strong tenant demand and population growth [23] - The portfolio was 92% occupied at quarter end, with leased occupancy exceeding 94% [25] Company Strategy and Development Direction - The company is focused on portfolio repositioning by selling office and single-tenant assets and investing in properties anchored by high-quality tenants [14] - The acquisition of West Broad Village is seen as a strategic move to enhance the portfolio's tenant quality and geographic exposure [12][10] - The company aims to maximize the value of its existing portfolio through active asset management and leasing initiatives [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong execution and balance sheet, anticipating continued earnings and cash flow growth [39] - There is an expectation of softening tenant demand, but current demand remains strong, particularly from national and regional tenants [44] - The company is prepared for potential challenges, including the WeWork location going dark, but believes it can find a suitable replacement tenant [19][20] Other Important Information - The company completed a 3-for-1 stock split effective July 1 and issued approximately 566,000 shares through its ATM program, raising $12.3 million [33] - The company refinanced its credit facility, extending the maturity date and increasing commitments [34] - Net debt to total enterprise value was approximately 43%, and net debt to EBITDA was 6.4 times at quarter end [36] Q&A Session Summary Question: What are the current trends in the transaction market regarding cap rates? - Management noted a standoff between buyers and sellers, with cap rates increasing by about 100 basis points or more depending on property quality [42] Question: Is there any sign of weakness in tenant demand? - Management indicated that while local tenants may show some softness, demand from national and regional tenants remains strong [44] Question: What is the status of the WeWork lease? - The lease has about eight to nine years left, with rent approximately $2 above market, and there is interest from other operators to take over the space [47] Question: How is AMC performing in the new Atlanta asset? - AMC has been consistent, especially during the release of major films, and the location benefits from a strong local audience [50] Question: Are there any delays in lease commencements? - There are about $2.3 million of signed rent that has not commenced, with some delays expected into the next year [51] Question: What opportunities are emerging in the structured investment portfolio? - Management sees good opportunities arising due to challenges in the debt markets, with potential for equity-like yields [59] Question: How does the company balance share repurchases with long-term growth? - The company focuses on driving NAV and value, taking advantage of market dislocations when appropriate [73]