CTO Realty Growth(US:CTO)2023-07-28 19:14Financial Data and Key Metrics Changes - For Q2 2023, core FFO decreased by 8.5% to $0.43 per share, while AFFO decreased by 2% to $0.48 per share compared to the same period last year [20] - Year-to-date, core FFO was $0.82 per share and AFFO was $0.91 per share, representing year-over-year decreases of 12.8% and 8.1% respectively [20] - The company ended Q2 with total liquidity exceeding $100 million, which includes undrawn commitments on the revolving credit facility, cash, and restricted cash [37] Business Line Data and Key Metrics Changes - The company signed or renewed a total of 13 leases at Collection at Forsyth, representing over 52,000 square feet at an average rent of $27.85 per square foot, with new comparable leases growing rents by more than 35% [16] - The leasing momentum was driven by recent acquisitions, including Collection at Forsyth and West Broad Village, with strong performance from existing tenants [32][123] - The company anticipates increased disposition activity in the latter half of the year to pay down debt, with a forecast to sell between $15 million and $75 million of assets [2][15] Market Data and Key Metrics Changes - The company reported an occupancy rate of 91.4% at the end of Q2, an increase of 150 basis points from Q1, while leased occupancy remained largely unchanged at 93.4% [18] - The Dallas-Fort Worth metroplex is now the second largest market in the portfolio, representing nearly 18% of in-place cash-based rent [30] - The company expects to benefit from significant population growth and retailer demand in its Sunbelt markets [19] Company Strategy and Development Direction - The company is focused on converting its Exchange at Gwinnett development loan into fee simple ownership and has made several high-quality asset acquisitions [13][29] - The strategy includes maintaining a conservative approach to guidance while aiming for potential upside in 2024 [7][70] - The company is actively negotiating on office assets and expects a competitive bidding environment for some properties [4][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing momentum and operational efficiency programs, maintaining full-year earnings guidance despite challenges [34] - The management team noted that the tenant credit watch list is in good shape, with proactive measures taken to address non-performing tenants [45] - The company anticipates that the floating rate debt will weigh on FFO and AFFO in the third quarter but expects improvements in 2024 as issues are resolved [69][70] Other Important Information - The company distributed a regular cash dividend of $0.38 per share for Q2 2023, marking a 1.8% increase compared to Q2 2022 [58] - The company repurchased shares of common stock and Series A preferred stock during the quarter [59] - The company is exploring opportunities for future acquisitions but remains selective due to current market conditions [114][119] Q&A Session Summary Question: What is the expected timing on the backfill of The Hall? - Management indicated that they expect to have a new operator in place by the fourth quarter, with ongoing negotiations [121] Question: How meaningful is the opportunity at Plaza at Rockwall? - The company noted that the Plaza at Rockwall is a below-market rent story, indicating significant potential for revenue growth [55][91] Question: What is the current state of the tenant credit watch list? - Management reported that the tenant credit watch list is in good shape, with proactive measures being taken to address any issues [45] Question: What is holding the company back from raising full-year guidance? - The company cited potential headwinds from floating rate debt and the loss of rent from The Hall as reasons for maintaining a conservative outlook [69][70] Question: What is the expected leased occupancy by year-end? - Management expects leased occupancy to be in the 94% to 95% range by year-end, with potential for further improvement in 2024 [93]