Alpine Income Property Trust (PINE) and CTO Realty Growth (CTO): High-Yield REITs Navigating Macro Challenges

In a world of rising interest rates and economic uncertainty, income investors face a dilemma: chase yield or prioritize safety? Alpine Income Property Trust (PINE) and CTO Realty Growth (CTO) offer a compelling middle ground. Both REITs sport high dividend yields—7.7% and 8.5%, respectively—while maintaining conservative balance sheets and tenant portfolios that are as diversified as they are creditworthy. Let's dissect why these REITs are positioned to deliver steady income through 2025 and beyond.

PINE: Defensive Leasing Meets Conservative Leverage

PINE's Q1 2025 results underscore its strategy: long-term leases with high-quality tenants. Its portfolio of 134 properties includes tenants like Walgreens, Lowe's, and Dollar Tree—companies with stable cash flows and investment-grade ratings. Notably, 50% of its annual base rent (ABR) comes from investment-grade tenants, while 81% is from credit-rated firms. This tenant quality is a bulwark against defaults.

The numbers back this:
- Weighted average lease term: 9.0 years, with new leases averaging 14.3 years.
- Occupancy: 98.6%, among the highest in the sector.
- Balance sheet strength: Net debt/total enterprise value is 57.1%, with a fixed charge coverage ratio of 3.5x, indicating ample liquidity to handle rising rates.

PINE's dividend is 64.8% of AFFO, leaving ample room for growth. The company also raised its 2025 FFO guidance to $1.74–$1.77, up $0.04 from prior expectations.

CTO: Higher Yield, But Still Conservative

CTO's 8.5% yield is even more enticing, but does it hold up under scrutiny? Let's break it down:

• Tenant credit quality: 46% of ABR comes from investment-grade tenants, with a leased occupancy of 93.8%.
• Lease renewal strength: New leases in Q1 2025 saw a 37.2% increase in cash rent, signaling pricing power.
• Liquidity: $138.4 million in cash and undrawn credit facilities, paired with a net debt/Pro Forma EBITDA of 6.6x, suggests manageable leverage.

However, its AFFO payout ratio is 77.6%, slightly higher than PINE's, and its reliance on retail (70.4% of ABR) could be a vulnerability if consumer spending weakens. That said, its portfolio is concentrated in open-air malls and mixed-use properties—defensive assets that thrive in growth regions like Florida and New Jersey.

Why Both Are Worth Considering

Tenant diversification: Both REITs avoid overexposure to any single industry. PINE's top sectors (Sporting Goods, Home Improvement) are recession-resistant, while CTO's focus on retail is offset by its credit-rated tenant base.

Geographic spread: Neither is overly reliant on a single region. PINE's largest markets (Florida, New Jersey) account for just 20% of ABR, while CTO's portfolio spans 24 properties across diverse markets.

Interest rate hedging: Both use swaps to lock in rates. PINE's weighted average interest rate is 4.51%, and CTO's is 4.35%, mitigating refinancing risks.

Risks, But Manageable Ones

• Interest rate volatility: Both REITs have exposure to floating-rate debt, but their hedging programs and low payout ratios (for PINE) provide a buffer.
• Retail sector sensitivity: CTO's heavy retail focus could be a drag if consumer spending weakens, though its lease renewal data suggests resilience.
• Economic slowdown: Tenant defaults are a risk, but the focus on creditworthy tenants (e.g., Walgreens, Lowe's) reduces this likelihood.

The Bottom Line: Income Investors Should Act Now

With the Fed expected to keep rates elevated, dividend-paying stocks with defensive profiles are in demand. PINE and CTO offer above-average yields anchored by:
1. Long-term leases (average 9+ years) that shield cash flows.
2. Strong credit tenants that reduce default risk.
3. Liquid balance sheets to navigate rising rates.

While CTO's higher payout ratio requires closer monitoring, its 8.5% yield and 37% rental growth in Q1 justify a place in income portfolios. PINE's lower payout ratio and 98.6% occupancy make it the safer pick for conservative investors.

Final Call: Buy Both for Income and Stability

For investors seeking to earn 7.7%–8.5% yields while avoiding high-risk bets, these REITs are standout choices. Their conservative leverage, high-credit tenant base, and focus on defensive property types (single-tenant net leases, open-air malls) make them resilient to macro challenges.

Act now before yields compress further. These are the REITs to own in a yield-starved world.

PINE and CTO shares may be volatile in the short term, but their fundamentals suggest they're built to deliver income for years to come.