CTO Realty Growth's Q2 2025: Unpacking Contradictions in Leasing, NOI Growth, and Acquisition Strategies

Leasing activity and strength, same-store NOI growth expectations, acquisition strategy and leverage, dividend strategy and equity recycling, structured investment opportunities are the key contradictions discussed in CTO Realty Growth's latest 2025Q2 earnings call.



Leasing Momentum and Anchor Space Replacement:
- CTO Realty Growth signed approximately 227,000 square feet of new leases, renewals, and extensions at an average cash base rent of $25.43 per square foot, including 190,000 square feet of comparable leases at a 22% cash rent spread.
- The company is making progress on the mark-to-market opportunity of 10 anchor spaces, with 5 new leases executed and 1 signed, aiming for a positive cash leasing spread of 40% to 60%.
- The strong leasing activity is driven by the replacement of underperforming anchors with new tenants that are expected to drive more foot traffic.

Property Performance and Asset Improvement:
- The property portfolio of 5.3 million square feet was 93.9% leased and 90.2% occupied at the end of the quarter.
- Progress is being made at three key properties: Carolina Pavilion, The Plaza at Rockwall, and an Albuquerque office property, with expected unlevered double-digit yields and increased cash rent spreads.
- These improvements are due to proactive leasing efforts and strategic asset management, including retenanting anchor spaces and reducing tenant space in the office property.

Balance Sheet and Debt Management:
- The company fully settled its 3.875% convertible notes for approximately $71.1 million, consisting of $50.1 million of cash and $21 million of common equity.
- CTO Realty Growth ended the quarter with $606.8 million of debt, with only 12% subject to floating interest rates based on SOFR.
- The settlement of convertible notes and the use of proceeds from new term loans will contribute to reducing leverage and maintaining liquidity.

Acquisition and Disposition Strategy:
- The company has a healthy pipeline of potential acquisitions, including one shopping center with value-add attributes that align with their leasing and operating strengths.
- There are no dispositions in the current guidance, indicating a focus on acquiring and holding quality properties.
- The strategy is supported by the recycling of stabilized assets to fund future acquisitions, which could help maintain or reduce leverage.