8-K: CTO Realty Growth Announces New At-the-Market Offering Programs for Common and Preferred Stock

CTO Realty Growth has established new at-the-market offering programs to sell up to $250 million of common stock and $25 million of preferred stock, while terminating previous programs.

Summary

• CTO Realty Growth has entered into new equity distribution agreements for at-the-market offerings of its common and preferred stock.
• The company may sell up to $250 million of common stock through various sales agents, including Janney Montgomery Scott LLC and others.
• These sales may occur through ordinary broker transactions, market makers, or negotiated prices.
• The company may also enter into forward sale agreements with certain forward purchasers.
• The company will not initially receive proceeds from the sale of borrowed shares by forward sellers, but expects to receive net cash proceeds upon settlement.
• Sales agents will receive a commission not exceeding 2.0% of the gross sales price of the common shares.
• The company has also established a preferred stock at-the-market offering program to sell up to $25 million of its 6.375% Series A Cumulative Redeemable Preferred Stock.
• Sales of preferred shares will also be made through various sales agents, with commissions not exceeding 2.0% of the gross sales price.
• The company has terminated its prior common and preferred stock at-the-market offering programs, with approximately $3.6 million and $24.1 million remaining unsold, respectively.

Sentiment

Score: 7

Explanation: The document is neutral to slightly positive. It outlines a standard capital raising activity, which is generally positive for a growing company. The termination of prior programs and the establishment of new ones suggests a proactive approach to capital management. However, the potential for dilution and the costs associated with the offerings temper the positive sentiment.

Positives

• The new at-the-market programs provide CTO Realty Growth with flexible access to capital.
• The company has established relationships with a wide range of sales agents.
• The programs allow for sales at prevailing market prices, potentially maximizing proceeds.
• The termination of prior programs streamlines the company's capital raising efforts.

Negatives

• The company will incur commissions of up to 2.0% on both common and preferred stock sales.
• The company will not initially receive proceeds from the sale of borrowed shares by forward sellers.
• The company has terminated prior programs with unsold amounts, indicating a potential lack of demand at the time.

Risks

• The company may not be able to sell all of the shares offered under the new programs.
• Market conditions could impact the price at which the company is able to sell shares.
• The company may not receive the expected net cash proceeds from forward sale agreements.
• The company may incur additional costs if it elects to cash settle or net share settle forward sale agreements.

Future Outlook

The company intends to use the proceeds from the offerings for general corporate purposes, but no specific guidance is provided.

Industry Context

At-the-market offerings are a common method for REITs to raise capital, providing flexibility and potentially lower costs compared to traditional underwritten offerings. This announcement indicates CTO Realty Growth is actively managing its capital structure and seeking to take advantage of market conditions.

Comparison to Industry Standards

• Many REITs use at-the-market (ATM) programs to raise capital, including companies like American Tower Corporation (AMT) and Prologis (PLD).
• The size of the offering, $250 million for common stock and $25 million for preferred stock, is within the typical range for ATM programs of similar-sized REITs.
• The commission rate of up to 2.0% is also consistent with industry standards for ATM programs.
• The use of forward sale agreements is a less common but not unheard of strategy, allowing for more complex hedging and potentially better pricing.

Stakeholder Impact

• Shareholders may experience dilution as a result of the new common stock offering.
• Shareholders may benefit from the company's increased financial flexibility.
• Employees may benefit from the company's continued growth and stability.
• Customers and suppliers may not be directly impacted by this announcement.

Next Steps

• The company will begin selling shares of common and preferred stock through the new at-the-market programs.
• The company will monitor market conditions and adjust its sales strategy as needed.
• The company will report on the progress of the offerings in its quarterly and annual reports.

Key Dates

Keywords

at-the-market offering, common stock, preferred stock, equity distribution agreement, forward sale agreement, capital raise, real estate investment trust, REIT