CTO Realty Growth(US:CTO)2025-05-02 14:02Financial Data and Key Metrics Changes - The company reported a Core FFO of $14.4 million for Q1 2025, an increase of $3.7 million compared to $10.7 million in Q1 2024 [15] - On a per share basis, Core FFO was $0.46 in Q1 2025 compared to $0.48 in Q1 2024, primarily due to reduced leverage and downtime from re-leasing anchor spaces [16] - The net debt to EBITDA ratio was 6.6 times at the end of the quarter, slightly elevated from the previous quarter but a full turn lower than one year ago [15] Business Line Data and Key Metrics Changes - The company signed over 112,000 square feet of new leases, renewals, and extensions at an average rent of $24.14 per square foot, nearly 25% higher than the in-place portfolio average of $19.41 per square foot [7] - The portfolio was 93.8% leased and 91% occupied at quarter end [9] - The signed but not opened leasing pipeline stands at $4 million of annual base rent, representing 4% of cash rents at quarter end [10] Market Data and Key Metrics Changes - The company acquired Ashley Park for $79.8 million, with a cash cap rate near the high end of guidance, indicating strong market interest [5] - There is active tenant interest for nearly half of the 40,000 square feet of vacancy at Ashley Park, with 200,000 square feet of shop space paying below market rent [6] Company Strategy and Development Direction - The company continues to focus on acquiring properties in growth markets in the Southeast and Southwest, with a strong pipeline of potential acquisitions [6] - The management is optimistic about the leasing outlook for anchor spaces previously leased to tenants that filed for bankruptcy, expecting a positive cash leasing spread of 40% to 60% [9] - The company is also considering recycling assets into higher yielding properties as market conditions improve [32] Management's Comments on Operating Environment and Future Outlook - Management noted that despite tariff uncertainties, the company is well-positioned with high-quality properties and a diversified tenant base [10] - The management reaffirmed full-year 2025 guidance for Core FFO per share of $1.80 to $1.86 and AFFO of $1.93 to $1.98, with consistent underlying assumptions [18] Other Important Information - The company executed two SOFR swaps, fixing SOFR for $100 million of principal at a weighted average rate of 3.32% for five years, reducing the applicable interest rate significantly [12] - The company extinguished $51 million of convertible notes, resulting in a charge of approximately $20.5 million to be recorded in Q2 [14] Q&A Session Summary Question: Can you provide more detail on the anchor space negotiations? - Management indicated that leasing activity has been strong and consistent, with no pauses in discussions despite market volatility [21] Question: What drove the new lease spreads? - The increase in lease spreads was primarily due to two significant leases that accounted for a large portion of new leasing activity, driving spreads over 80% [23] Question: What is the expected CapEx for bankrupt tenant spaces? - The expected CapEx for re-leasing is in the range of $9 million to $12 million, with little spent so far as tenants need to complete their work before reimbursements [30][58] Question: How does the company plan to fund new investments? - The company plans to handle funding internally with liquidity and is considering selling remaining office properties to enhance capital [32] Question: Have cap rates changed since the tariff announcement? - Management noted that cap rates for core assets have remained stable or decreased, with strong demand in the shopping center market [49] Question: What is the timeline for marking to market on recent acquisitions? - Management expects to see movement in lease rates for recent acquisitions by mid-next year as they work through tenant transitions [52]