8-K: CTO Realty Growth Reports Strong Q2 Leasing Activity, Reaffirms 2025 Outlook Despite Net Loss

CTO Realty Growth, Inc. announced its second quarter 2025 operating results, highlighting robust leasing activity with significant rent growth and the full retirement of Convertible Senior Notes, while reaffirming its full-year Core FFO and AFFO guidance despite reporting a net loss.

Summary

• Reported a Net Loss attributable to common stockholders of $(0.77) per diluted share for Q2 2025, compared to $(0.03) in Q2 2024.
• Core Funds from Operations (FFO) attributable to common stockholders was $0.45 per diluted share for Q2 2025, consistent with Q2 2024.
• Adjusted Funds from Operations (AFFO) attributable to common stockholders was $0.47 per diluted share for Q2 2025, a slight decrease from $0.48 in Q2 2024.
• Signed 190,027 square feet of comparable leases in Q2 2025 at a positive cash rent spread of 21.6%.
• The current signed-not-open (SNO) pipeline represents $4.6 million, or 4.6%, of annual cash base rent in place at quarter end.
• Leased occupancy stood at 93.9% as of June 30, 2025.
• Successfully retired all Convertible Senior Notes, which involved issuing 1,089,555 shares of common stock and aggregate cash payments of $51.0 million.
• Reaffirmed full-year 2025 Core FFO guidance of $1.80 to $1.86 per diluted share and AFFO guidance of $1.93 to $1.98 per diluted share.
• Same-Property Net Operating Income (NOI) increased by 0.9% for Q2 2025 to $17.5 million, and by 2.5% for year-to-date 2025 to $33.5 million.
• Net debt to Pro Forma Adjusted EBITDA was 6.9 times, and net debt to total enterprise value was 46.6% as of June 30, 2025.
• Declared and paid common stock cash dividend of $0.38 per share and Series A Preferred Stock dividend of $0.40 per share for Q2 2025.

Sentiment

Score: 7

Explanation: The company reported a significant GAAP net loss primarily due to a non-cash debt extinguishment charge, which is a negative. However, core operational metrics like Core FFO and AFFO per share were largely stable or slightly down, and full-year guidance for these key REIT metrics was reaffirmed. Strong leasing activity with high rent spreads and the successful retirement of convertible notes are positive indicators for future performance and balance sheet health. The high dividend yield and low FFO multiple compared to peers suggest an attractive valuation.

Positives

• Strong leasing activity with 190,027 square feet of comparable leases signed in Q2 2025.
• Achieved a significant positive cash rent spread of 21.6% on comparable leases in Q2 2025, indicating strong demand and pricing power.
• Robust signed-not-open (SNO) pipeline of $4.6 million, representing 4.6% of in-place annual cash base rent, expected to provide earnings tailwinds into 2026.
• Maintained high leased occupancy of 93.9%, demonstrating effective property management.
• Successfully retired all Convertible Senior Notes, simplifying the capital structure and reducing future interest obligations.
• Reaffirmed full-year Core FFO and AFFO guidance, signaling confidence in future earnings stability and operational performance.
• Made significant progress in filling vacant anchor spaces, with six of ten now leased and ongoing negotiations for the remainder.
• Reported Same-Property NOI growth of 0.9% for Q2 2025 and 2.5% for year-to-date 2025, indicating healthy property-level performance.
• Maintained a high annualized common stock dividend yield of 8.8% and preferred stock dividend yield of 7.9% as of June 30, 2025.
• Strategic investment in a Whole Foods-anchored development includes a right of first refusal to purchase the new retail center, offering future growth potential.
• Portfolio is concentrated in higher-growth markets (Georgia, Texas, Florida, North Carolina), accounting for 83% of Annualized Base Rent (ABR).

Negatives

• Reported a Net Loss attributable to common stockholders of $(25,296) thousand, or $(0.77) per diluted share, for Q2 2025, a significant decline from a loss of $(688) thousand, or $(0.03) per diluted share, in Q2 2024.
• Reported a Net Loss attributable to common stockholders of $(24,913) thousand, or $(0.78) per diluted share, for the six months ended June 30, 2025, compared to a net income of $3,967 thousand, or $0.17 per diluted share, for the same period in 2024.
• Adjusted Funds from Operations (AFFO) per diluted share slightly decreased to $0.47 in Q2 2025 from $0.48 in Q2 2024.
• Core FFO per diluted share for the six months ended June 30, 2025, decreased to $0.90 from $0.93 in the same period of 2024.
• Incurred a significant non-cash 'Loss on Extinguishment of Debt' of $20,396 thousand in Q2 2025 due to the retirement of Convertible Senior Notes.
• Experienced a Realized and Unrealized Loss on Investment Securities of $4,549 thousand in Q2 2025.

Risks

• Ability to remain qualified as a REIT.
• Exposure to U.S. federal and state income tax law changes, including changes to REIT requirements.
• General adverse economic and real estate conditions.
• Macroeconomic and geopolitical factors, including inflationary pressures, interest rate volatility, distress in the banking sector, global supply chain disruptions, and ongoing geopolitical war.
• Credit risk associated with investing in structured investments.
• The ultimate geographic spread, severity, and duration of pandemics (e.g., COVID-19) and governmental actions, and their potential negative impacts on the global economy and financial condition and results of operations.
• Inability of major tenants to continue paying their rent or obligations due to bankruptcy, insolvency, or a general downturn in their business.
• Loss or failure, or decline in the business or assets of Alpine Income Property Trust (PINE).
• Completion of 1031 exchange transactions.
• Availability of investment properties that meet investment goals and criteria.
• Uncertainties associated with obtaining required governmental permits and satisfying other closing conditions for planned acquisitions and sales.

Future Outlook

Reaffirmed 2025 Core FFO guidance of $1.80 to $1.86 per diluted share and AFFO guidance of $1.93 to $1.98 per diluted share. Plans to invest between $100.0 million and $200.0 million in properties and structured investments at an initial cash yield of 8.0% to 8.5%. Anticipates Same-Property NOI growth of approximately 1% and general and administrative expenses between $17.5 million and $18.0 million for the year ending December 31, 2025. Expects current leasing activity to provide earnings tailwinds into 2026.

Management Comments

• "Our portfolio continues to produce strong leasing activity as we leased 190,000 square feet with significant positive spreads, driving our signed-not-open pipeline to $4.6 million, representing 4.6% of in-place cash ABR." John P. Albright, President and Chief Executive Officer.
• "We also made significant progress filling our vacant anchor spaces, with six of the ten now leased with ongoing lease negotiations for the remaining spaces." John P. Albright, President and Chief Executive Officer.
• "We believe that this leasing activity will provide the Company with earnings tailwinds into 2026." John P. Albright, President and Chief Executive Officer.

Industry Context

CTO Realty Growth operates as a publicly traded REIT specializing in high-quality, retail-based properties, primarily open-air centers, located in higher-growth markets across the Southeast and Southwest U.S. This strategy aligns with a broader industry trend favoring suburban, open-air retail formats and regions experiencing robust population and job growth. The company's focus on lease-up and repositioning opportunities, coupled with its attractive dividend yield, positions it as a value-oriented player within the shopping center sector. Its external management and significant interest in Alpine Income Property Trust (PINE), a net lease REIT, further diversifies its income streams within the broader real estate investment trust landscape.

Comparison to Industry Standards

• CTO's 2025E Core FFO Multiple of 9.4x (at guidance midpoint) is notably lower than the peer average of 12.3x, indicating a potential undervaluation compared to competitors such as AKR (14.2x), FRT (13.4x), UE (13.3x), WSR (11.9x), BRX (11.8x), KRG (11.3x), and AAT (10.0x).
• The annualized dividend yield of 8.8% for CTO's common stock is substantially higher than the peer average of 4.8%, and also exceeds all listed peers including AKR (4.3%), FRT (4.6%), UE (4.1%), WSR (4.3%), BRX (4.4%), KRG (4.8%), and AAT (6.9%), offering a compelling income opportunity.
• The company's strategic concentration of 83% of its Annualized Base Rent (ABR) in high-growth markets like Georgia, Texas, Florida, and North Carolina positions it favorably to capitalize on strong demographic and economic trends, potentially outperforming peers with less focused geographic strategies.
• The reported 21.6% comparable cash rent spread in Q2 2025 and 26.6% year-to-date demonstrates strong leasing execution and significant mark-to-market opportunity, which may surpass typical rent growth averages seen in more mature or less dynamic retail portfolios across the industry.

Stakeholder Impact

• Shareholders: Common stockholders experienced a significant net loss per share, but Core FFO and AFFO per share were largely stable, and dividends were maintained. The retirement of convertible notes involved issuing new common shares, which could lead to dilution. The high dividend yield and low valuation relative to peers could be attractive.
• Tenants: Strong leasing activity and positive rent spreads indicate healthy demand for the company's properties, potentially benefiting existing and new tenants through a vibrant retail environment.
• Creditors: The full retirement of Convertible Senior Notes strengthens the balance sheet by reducing debt and simplifying the capital structure, potentially improving creditworthiness.
• Employees: No direct impact mentioned, but stable operations and growth plans generally support employment within the company.

Next Steps

• Host a conference call to present operating results for the quarter ended June 30, 2025, on Wednesday, July 30, 2025, at 9:00 AM ET.
• Continue efforts to fill the remaining vacant anchor spaces within the portfolio.
• Pursue investments, including structured investments, between $100.0 million and $200.0 million at a weighted average initial cash yield between 8.0% and 8.5% for the year ending December 31, 2025.

Key Dates

Recommendation

While the reported GAAP net loss is concerning, it is largely attributable to a non-cash charge from debt extinguishment, a strategic move to optimize the capital structure. The core operational metrics (Core FFO, AFFO) are stable, and the company reaffirmed its full-year guidance, indicating a consistent outlook. Strong leasing activity with significant rent growth and high occupancy demonstrate underlying business health. The stock's attractive dividend yield and low Core FFO multiple relative to peers suggest it may be undervalued. However, the net loss and the non-cash charge introduce some short-term uncertainty. A "hold" recommendation is appropriate, allowing investors to monitor the continued execution of leasing strategies and the impact of the capital structure changes on future profitability, while benefiting from the strong dividend.

Keywords

REIT, retail properties, real estate, shopping centers, FFO, AFFO, leasing, occupancy, dividends, debt retirement, capital markets, Florida, Georgia, Texas, North Carolina, investment properties, structured investments, commercial real estate