CTO Realty Growth's Q1 2025: Contradictions Unveiled on Leasing, Investment Strategy, and Liquidity

Leasing activity and tariff impact, investment strategy and opportunities, office asset sale strategy, liquidity and funding strategy, and investment opportunities and strategy are the key contradictions discussed in CTO Realty Growth's latest 2025Q1 earnings call.



Strong Investment and Leasing Activity:
- CTO Realty Growth acquired Ashley Park for $79.8 million at the going-in cash cap rate near the high end of their guidance range, with potential for 20% rent increase.
- The company signed 112,000 square feet of new leases at an average rent of $24.14 per square foot, achieving an 80% leasing spread.
- Growth was driven by strategic acquisitions with lease-up potential and strong tenant demand for high-quality properties in target markets.

Financial Management and Debt Reduction:
- CTO extinguished $50.1 million of debt through settlement, reducing net debt to EBITDA from 7.6x to 6.6x.
- The company executed SOFR swaps, reducing floating interest rates by nearly 100 basis points.
- Financial management included strategic debt reduction and interest rate optimization to enhance financial stability.

Anchor Leasing Progress:
- CTO achieved lease assumptions for two anchor spaces and expects to finalize two more soon, with positive negotiations underway for the remaining five.
- The company expects a positive cash leasing spread of 40% to 60% for these anchor spaces.
- Progress was facilitated by strong tenant interest and negotiations, despite market volatility.

Portfolio Diversification and Strategic Acquisition:
- CTO acquired properties at a basis significantly below replacement costs, such as Ashley Park at $140 per square foot.
- The company maintains a strong pipeline of potential acquisitions across the Southeast and Southwest.
- Strategic acquisitions are part of CTO's strategy to diversify its portfolio and optimize its property mix.