CTO Realty Growth - Earnings Call - Q3 2025
October 29, 2025
Executive Summary
- Q3 delivered solid operating metrics and leasing momentum, but per-share profitability was slightly softer year over year: Core FFO/share $0.48 vs $0.50 in Q3’24, while absolute Core FFO rose to $15.6M (+24% YoY). Management raised FY25 Core FFO and AFFO guidance ranges, citing improving NOI visibility from SNO and anchor backfills.
- Revenue modestly beat S&P Global consensus: $37.76M actual vs $37.69M consensus; EPS was $0.03, while EPS consensus was not meaningful for this REIT (S&P EPS consensus returned 0.00).* The beat was driven by higher property income and interest income from commercial loans.
- Balance sheet advanced: $150M of new term loans fixed initially at ~4.2% and retirement of a $65M 2026 term loan reduced near-term maturities; net debt/Pro Forma Adj. EBITDA improved to 6.7x from 6.9x in Q2, and liquidity ended at $170.3M.
- Forward growth visibility improved: SNO pipeline increased to $5.5M (5.3% of ABR), with ~75% expected to begin contributing in 2026 and full contribution in 2027; Shops at Legacy secured a 30k sf coworking lease post-quarter and stands ~85% leased, supporting traffic and rent uplift in 2026+.
What Went Well and What Went Wrong
- What Went Well
- Leasing strength and SNO expansion: 143k sf leased in Q3; YTD comparable leases of 424k sf at +21.7% cash rent spreads; SNO pipeline at $5.5M (5.3% of ABR).
- Guidance raised: FY25 Core FFO/share raised to $1.84–$1.87 (from $1.80–$1.86) and AFFO/share to $1.96–$1.99 (from $1.93–$1.98), reflecting higher NOI and balance sheet progress.
- De-risked balance sheet/liquidity: Closed $150M of term loans at ~4.2% fixed initially, repaid $65M due 2026, and ended with $170.3M liquidity; net debt/EBITDA at 6.7x vs 6.9x in Q2.
- What Went Wrong
- GAAP earnings still light: EPS $0.03 vs $0.17 in Q3’24, with net income to common down 76% YoY; per-share Core FFO down to $0.48 vs $0.50 YoY, driven in part by share count changes and deleveraging cadence.
- Elevated non-recurring and TI timing: Non-recurring items were ~$0.5M this quarter (above typical $0.1–$0.3M run rate), and tenant improvements were elevated in Q3 with expectation for similar elevation in Q4 given anchor openings and reimbursements.
- Remaining vacancy focus: Largest vacant anchor (~40k sf at Carolina Pavilion) still in process (considering split-box or single-tenant solutions), implying some timing risk to full SNO ramp.
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by. Welcome to CTO Realty Growth's Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jenna McKinney, Director of Finance. Please go ahead.
Jenna McKinney (Director of Finance)
Good morning, everyone, and thank you for joining us today for the CTO Realty Growth's third quarter 2025 operating results conference call. Participating on the call this morning are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer, and other members of the executive team that will be available to answer questions during the call. I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are discussed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings.
You can find our SEC reports, earnings release, supplemental, and most recent investor presentation on our website at ctorealty.com. With that, I will turn the call over to John.
John Albright (President and CEO)
Thanks, Jenna. We delivered another quarter of strong operating performance driven by the strength of our leasing activity. Year to date through September 30, we have completed 482,000 sq ft of overall leasing activity, including 424,000 sq ft of comparable leasing, and a weighted average base rent spread of 21.7%. Contributing to this leasing performance was our third quarter, in which we executed 143,000 sq ft of new retail leases, renewals, and extensions at an average base rent of $23 per sq ft. This includes 125,000 sq ft of comparable leases, a 10.3% base rent spread. Notably, just after the quarter, we signed a significant lease at the Shops at Legacy, a 243,000 sq ft mixed-use lifestyle center located in Dallas, Texas. I will share more details on this lease and the Shops at Legacy shortly. We also continue to make progress on backfilling our 10 anchor spaces.
Six of the 10 vacant anchor spaces have been leased, and we remain in active negotiations for the remaining four. To date, we are encouraged by the rental upside and value creation these six leases represent and expect the new tenants to increase foot traffic relative to the former tenants. Furthermore, we remain on target to achieve our goal of positive cash leasing spread of 40%-60% across these 10 anchor spaces, and we look forward to providing additional updates on our progress. More broadly, as of today, our signed-not-open or SNO pipeline stands at $5.5 million, representing approximately 5.3% of annual cash base rents in place as of quarter end. We believe that this pipeline positions us for meaningful earnings growth with approximately 76% of our ABR from the SNO pipeline anticipated to be recognized in 2026 and 100% in 2027.
Now, I would like to share some exciting updates related to the Shops at Legacy. Just after the quarter end, we signed a 30,000 sq ft lease with a coworking operator expected to open by year-end 2026. This lease, along with the 20,000 sq ft private members-only social club that we signed in the third quarter of 2024, substantially fills the space formerly leased to WeWork, marking a meaningful inflection point in our releasing efforts. In addition to these large leases, over the last two years, we have signed smaller shop leases for an aggregate of nearly 60,000 sq ft for various restaurants, fitness, and retail concepts that we believe will further increase the vibrancy of the center. Today, reflecting all this leasing activity, the lease percentage of Shops at Legacy stands at approximately 85%.
Now moving to a recent agreement that we signed to acquire a shopping center in South Florida. This is a property that I mentioned on our last call that we were targeting. We believe this shopping center offers value-add potential that aligns well with our leasing and operating strength and presents an opportunity to both acquire the asset and attract initial yield and drive long-term value creation through lease-up of acquired vacancy. We expect to close this transaction before year-end and look forward to providing more details when we close. From a financing perspective, as Phil will discuss in more detail, we recently termed out some debt and refreshed our revolving credit facility, providing enhanced liquidity. This will give us the ability to initially acquire the South Florida property using our line of credit. Ultimately, though, we anticipate funding this acquisition by recycling an asset around year-end.
Overall, we are pleased with our leasing progress and the value creation underway as we continue to execute our strategic priorities. With that, I will hand the call over to Phil.
Philip Mays (CFO)
Thanks, John. On this call, I will discuss our balance sheet, earnings results, and updated full-year 2025 guidance. Starting with the balance sheet, just before quarter end, we closed $150 million in term loan financings, including a new five-year $125 million term loan maturing in September of 2030 and a $25 million upsizing of our existing term loan maturing in September of 2029. Both term loans bear interest at SOFR plus a spread based on our leverage ratio. At closing, we utilized existing SOFR swap agreements, resulting in an initial fixed interest rate of approximately 4.2% for both loans. In March of 2026, when certain of these applied SOFR swap agreements expire and are replaced by other existing SOFR swap agreements, the interest rate for both loans will adjust to approximately 4.7% based on the company's current leverage ratio.
The proceeds from these new term loan financings were used to retire a $65 million term loan scheduled to mature in March of 2026 and to reduce the balance on our revolving credit facility, providing enhanced liquidity. Reflecting this financing, we ended the quarter with approximately $170 million of liquidity, consisting of $161 million available under our revolving credit facility and $9 million in cash available for use. Additionally, we have recently repurchased $9.3 million of common stock at a weighted average purchase price of $16.27 per share. These repurchases consisted of $4.3 million towards the end of the third quarter to close out our previous $5 million repurchase program and $5 million in October under our recently announced $10 million common stock repurchase program.
Reflecting this quarter's balance sheet activity, we ended the quarter with net debt to EBITDA of 6.7x, a slight improvement from 6.9x at the end of the second quarter. We anticipate additional deleveraging as we successfully release our vacant anchor boxes and tenants in our signed-not-open pipeline commence paying rent. Notably, with our recently completed term loan financings, we now only have $17.8 million of debt maturing in 2026. Moving to operating results, core FFO was $15.6 million for the quarter, a $3 million increase compared to $12.6 million in the comparable quarter of the prior year. On a per-share basis, core FFO was $0.48 per share compared to $0.50 per share in the comparable quarter of the prior year.
The change in core FFO per share reflects a reduction in leverage that took place from late third quarter of 2024 through the end of 2024 when we reduced net debt to EBITDA by approximately a full turn. With regard to same property NOI, our same property NOI increased 2.3% during the quarter. This growth was driven by leasing activity across our portfolio, in particular at Beaver Creek with One Life Fitness replacing the former theater, along with strong small shop leasing at West Broad Village, Plaza at Rockwall, and Ashford Lane. Turning to guidance, we are raising both our core FFO and FFO outlook for the full year of 2025. Our new core FFO range has increased to $1.84-$1.87 per diluted share from the previous $1.80-$1.86 per share.
Our new FFO range has increased to $1.96-$1.99 per diluted share from the previous $1.93-$1.98 per diluted share. With that, operator, please open the line for questions.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. The first question comes from Rob Stevenson with Janney Montgomery. Your line is open.
Rob Stevenson (Managing Director, Head of Real Estate Research)
Good morning, guys. Phil, what's the pro forma debt to EBITDA look like once you complete the Florida acquisition and sell the existing asset, and the near-term signed but not commenced leases start to drive revenue?
Philip Mays (CFO)
Yeah, as John discussed on the call, the Florida asset will be temporarily parked on the line, and we have plenty of liquidity there and capacity to do so, but we'll ultimately refund it with recycling and should not significantly change debt to EBITDA. The signed-not-open pipeline, as it stands today, just coming online, would take off about a half a turn as it comes online.
Rob Stevenson (Managing Director, Head of Real Estate Research)
Okay, what is the timing of the bulk of that revenue is that? You know, are you going to see any material amount in the fourth quarter? Is that a first or second quarter 2026 event? How should we be thinking of that when we play around with our models in terms of when the bulk of that,
Philip Mays (CFO)
Yeah.
Rob Stevenson (Managing Director, Head of Real Estate Research)
$5 million+ starts hitting revenue?
Philip Mays (CFO)
It's going to start, beginning of next year. You know, the pipeline's $5.5 million of base rent. I think we said 75% of that's going to be recognized next year, so about $4 million. The way I would ramp that up is about $0.5 million in the first quarter, $1 million in the second, and $1 million in the third, and then about $1.5 million in the fourth, kind of growing throughout the year to a total of about $4 million as the pipeline stands today, or about 75% of the pipeline, with all of it being recognized in 2027. Everybody should be, as currently projected, operating in space, paying cash rent by the end of 2026, so you get the full $5.5 million in 2027.
Rob Stevenson (Managing Director, Head of Real Estate Research)
Okay, that's helpful. John, where is your most significant vacancy today that's not either under contract, letter of intent, or pretty far down the road where you still have some work to do? Where's the opportunity for you guys right now?
John Albright (President and CEO)
We have a 40,000 sq ft vacancy at Carolina Pavilion. We've gone through a couple of tenants, prospective tenants where they were going to take so long that we decided to switch tact. We're kind of going down a route of either splitting the box or talking to a couple of different groups about taking the whole box again. We've had some false starts with some groups that are just going to be really torturous as far as how long they're going to take to get through the process. That's really the largest vacancy, and then we have a little bit left to go at Legacy, but not too much. That's where focus is.
Rob Stevenson (Managing Director, Head of Real Estate Research)
All right, and then last one for me. You've got about $45 million of structured investments that have maturity dates in the first part of 2026. When you take a look at those today, are those likely to be redeemed around that point in time, or are those likely to be extended? How are you guys thinking about that as the, I think it's Waters Creek and Founders Square.
John Albright (President and CEO)
Yeah, Founders Square will pay off, and Waters Creek may extend, but may just pay off as well. We're seeing where that plays out and just depending on how they look at capitalizing that property going forward.
Rob Stevenson (Managing Director, Head of Real Estate Research)
Okay, that's helpful. Thanks, guys. Appreciate the time this morning.
John Albright (President and CEO)
Thank you.
Operator (participant)
The next question will come from Matthew Erdner with Jones Trading. Your line is open.
Matthew Erdner (Director and Equity Research Analyst)
Hey, good morning, guys. Thanks for taking the question. You know, you guys touched on what I was going to ask a little bit with the Florida acquisition, but I'm just trying to think about how you guys are going about capital allocation moving forward, kind of between buybacks and structured investments. You know, given where the stock's trading, are you guys going to continue to buy back shares down at this level?
John Albright (President and CEO)
Yeah, I mean, clearly, we would, we're going to do as much as we can, given our credit facility restrictions. Absolutely, given the stock price, kind of where we're trading below a nine multiple and five-year lows and almost a 10% dividend yield, is fairly ridiculous. Clearly, the best acquisition investment is our own stock.
Matthew Erdner (Director and Equity Research Analyst)
Got it. As a follow-up to that, do you guys have any restrictions on investing more into PINE? If not, is that something that you guys are considering doing, just given that that stock price is trading at similar multiples?
John Albright (President and CEO)
Yeah, we do have a little bit more room there without hitting our restrictions on what we can own of PINE. Of course, we're opportunistic, so just depending on what happens with the stock price there, but clearly right now, I feel like CTO is the double discount.
Matthew Erdner (Director and Equity Research Analyst)
Got it. That's helpful. Thank you, guys.
John Albright (President and CEO)
Thank you.
Operator (participant)
The next question will come from Craig Kucera with Lucid. Your line is open.
Craig Kucera (Managing Director, Equity Research)
Yeah, hey, good morning, guys. You've been pretty active on the structured finance side at PINE. Are you seeing any pickup in potential loans that work for CTO, or are property investments really more compelling right now?
John Albright (President and CEO)
Yeah, not so much at CTO. As you mentioned, we're seeing it more at PINE. You know, given that the CMBS market has come back very strong for these shopping centers, seeing less need for structured finance there, but certainly keeping our eye out there. That's kind of where the market is right now.
Craig Kucera (Managing Director, Equity Research)
Got it. Changing gears, you have a decent amount of leases expiring here in the fourth quarter, I think about 3% of ABR. One is an anchor. Can you talk about your expectations there?
John Albright (President and CEO)
Yeah, we're not really seeing any risk as far as non-renewal. As you know, a lot of these acquisitions had tenants way below market rent and some that we'd like to get back and replace with higher rents. Yeah, there's no risk that we're kind of seeing out there on the renewal side.
Craig Kucera (Managing Director, Equity Research)
Okay, got it. Congrats on the Shops at Legacy leasing. I think that's been, there's been some vacancy there for a while. Can you give a sense of how additive that is to the signed-not-open pipeline?
John Albright (President and CEO)
Yeah, I'll let Phil touch on that, but it has been a long time, longer than we would like, of course. You know, one thing that that's going to bring to the property that people kind of miss out on a little bit is a lot of vibrancy, a lot of bodies coming in. It's going to, even though the restaurants have done really, really well on the leasing, without that, just having that component for that property is really going to be an enhancement. We'll talk about that.
Philip Mays (CFO)
Yeah, out of the entire signed-not-open pipeline of $5.5 million, Legacy is close to $1 million of that, Craig. In particular, the private members club and then the coworking lease that we just signed in October, those two in particular.
Craig Kucera (Managing Director, Equity Research)
Okay. Just one more for me, any change to the credit watch negative list? I know we've talked about maybe home goods or some of those things, but any change there?
John Albright (President and CEO)
Not this quarter. No, same sort of tenants. If anything, credits have gotten a little better, I think.
Craig Kucera (Managing Director, Equity Research)
Okay, thank you.
John Albright (President and CEO)
Great, thank you.
Operator (participant)
Our next question is going to come from Gaurav Mehta with Alliance Global. Your line is open.
Gaurav Mehta (Managing Director, Senior Equity Research Analyst, Real Estate and Financials)
Yeah, thank you. Good morning. I wanted to ask you on the non-recurring items. I think you reported half from $0.5 million on non-recurring at this quarter and also raised your G&A guidance a little bit. I just want to get some color on what those items were.
Philip Mays (CFO)
Yeah, so on the non-recurring, those kind of tend to run, you know, fluctuate between $100,000 and $300,000 a quarter. Generally, average around $250,000. You're correct, it was closer to about $500,000, I believe, this quarter. It was slightly elevated. We tend to get a quarter like that every three or four quarters. It kind of tends to pop up to that number, but generally, for like a good run rate, you know, it's typically closer to $250,000. DNA, I think, you know, for the fourth quarter will be similar to this quarter if you're just looking to model that.
Gaurav Mehta (Managing Director, Senior Equity Research Analyst, Real Estate and Financials)
Okay. Second question I have is on tenant improvement allowances, which seems like it was higher this quarter than last few quarters. How should we think about that line item as you signed new leases?
Philip Mays (CFO)
Yeah, so it was very light the first half of the year. You know, that volume and that size kind of tends to fluctuate as anchors get moved in, complete their construction, and get open. This quarter, you had One Life at Beaver Creek, and they have to support, you know, provide invoices and stuff, so they can get in and get open. By the time we reimburse them, it can lag a little. You had One Life at Beaver Creek. You had Boot Barn and Barnes at Rockwall. It was elevated this quarter. Currently, I would expect the fourth quarter to also be elevated and be similar to the third quarter. Again, that's just going to depend on timing on individual anchors and when they get open and when they get, you know, their paperwork submitted for their TI reimbursements.
We do have a lot of anchors lined up, and I would expect the fourth quarter to be pretty elevated again.
Gaurav Mehta (Managing Director, Senior Equity Research Analyst, Real Estate and Financials)
Okay. Lastly, on the asset recycling that you talked about to fund the acquisition, is that expected to happen this year or that's expected to happen next year?
John Albright (President and CEO)
We think that something will happen this year, but you just never know as far as some things kind of come up and need extensions and so forth. We'll probably at the end of the year.
Gaurav Mehta (Managing Director, Senior Equity Research Analyst, Real Estate and Financials)
Okay, thank you. That's all I had.
John Albright (President and CEO)
Thank you.
Operator (participant)
The next question comes from John Massocca with B. Riley Securities. Your line is open.
John Massocca (Senior Research Analyst)
Good morning. As you think about the anchor box releasing and the $4 million-$4.5 million of potential new base rent there, how much of that is already set with the six leases you've closed, and how much is still contingent on the four leases that you're negotiating or trying to close here in the next couple of months?
Philip Mays (CFO)
Yeah, out of the anchors, the six that are done represent about $2.5 million currently. With the ones that are left, that would be a remaining $2 million.
John Massocca (Senior Research Analyst)
Okay, and then maybe switching gears a little bit on the investment front. Anything else in the pipeline you're seeing that might close in 2025 beyond the kind of South Florida shopping center transaction you talked about earlier?
John Albright (President and CEO)
Given that we're getting kind of tied on time, I wouldn't expect it, but we're not also, you know, if one of the things that we're looking at, we are bidding on quite a bit of assets that we like, not sure how competitive we'll be. We're certainly saying that we can close by year-end if it's important to a seller. Hopeful, but I wouldn't expect an additional one.
John Massocca (Senior Research Analyst)
Okay, and then in terms of 2026, you know, what's the acquisition environment look like today? I guess maybe to the extent you would do new investments, how do you think about funding it, and is there additional assets within the portfolio that you think are targets for capital recycling, beyond the assets you're going to use to fund the Florida acquisition?
John Albright (President and CEO)
Yeah, I mean, that's the easy part. If we find a good acquisition candidate, we do have some stabilized assets given how much leasing we've done over the last couple of years. Taking advantage of that lower cap rate sell, maybe slower growth asset, and recycling into kind of value-add, higher growth asset, higher yielding. We definitely have a nice pipeline of potential sell opportunities. Just want to match that up with something we feel really good about.
John Massocca (Senior Research Analyst)
Do you think the Fidelity property or the New Mexico property is a potential candidate for that capital recycling either for, you know, the acquisition we talked about earlier on the call or, you know, 2026 investment activity?
John Albright (President and CEO)
For sure. We just need to get the lease settled up with the state, and then it'll be in condition to sell. That's probably early 2026. I think maybe previously this year, I mentioned late this year, but it takes a while to settle the lease expansion and so forth. We're probably looking at early 2026 on selling that asset. Yeah, that's definitely a candidate.
John Massocca (Senior Research Analyst)
Okay, and then lastly, with Shops at Legacy, the kind of remaining sq ftage to be leased once you bring in the coworking tenant, what kind is that? Just big picture, is it all kind of small shop space? Is there any kind of anchor space still left in that property? Just kind of curious, you know, what that looks like.
John Albright (President and CEO)
Yeah, it's more small shop space that, you know, we've gone through literally, you know, three different tenants that, you know, we just didn't get there, whether we didn't like their financials or too much TI. We're being a little picky on it. We have a little bit of WeWork space left, but we feel like when the private club opens, they've expressed some interest that that might be an expansion opportunity for them. Everything's very manageable. We're just trying to kind of be picky about, you know, who we put in.
Craig Kucera (Managing Director, Equity Research)
Okay, that's it for me. Thank you very much.
John Albright (President and CEO)
Thank you.
Operator (participant)
This concludes today's Q&A session and today's conference call. Thank you for participating. You may now disconnect.