CTO Realty Q2 Revenue Jumps 31%

CTO Realty Growth (CTO 1.49%), a real estate investment trust focused on high-growth U.S. markets, released its earnings results on July 29, 2025. Core FFO per share was $0.45. GAAP net income swung to a sharp loss per share of $(0.77), mainly because of a non-recurring charge tied to the early retirement of convertible debt. Total revenues (GAAP) climbed to $37.6 million from $28.8 million in the prior-year period. The quarter’s result shows strong leasing execution, tempered by subdued same-property income growth and the impact of one-off debt costs.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Core Strategy

CTO Realty Growth operates as a real estate investment trust (REIT). It focuses on acquiring, owning, and managing income-producing retail and mixed-use properties in high-growth U.S. markets. Its main presence is in the Sunbelt region, with significant holdings in Florida, Georgia, and Texas.

The company’s business model centers on three priorities: targeting regions with robust economic and population growth, diversifying revenue streams, and managing debt and capital actively. Recent efforts have centered on expanding its property portfolio, driving positive leasing spreads, and growing other income streams like management fees and interest income. Effective property acquisition and execution of long-term leases are key performance drivers.

Quarterly Highlights: Leasing Momentum and Financial Drivers

Growth came from both property income and higher interest income from loans and investments. Management fee income increased by 10.3% compared to the same period in 2024, underpinning revenue growth beyond core property rents.

The leasing team signed 22 leases covering 226,732 square feet. Of these, comparable leases -- those replacing expiring or vacated leases -- totaled 190,027 square feet, and achieved a notable 21.6% cash rent spread. That means new leases brought in 21.6% higher cash rents compared to those they replaced. The average cash rent on these deals was $25.54 per square foot, up from $21.01 previously. Progress was especially strong in filling vacant anchor spaces, with six of ten spaces now re-leased. Some anchor re-leases commanded even larger rent increases, exceeding 80% in certain cases during Q1 2025, according to management. Newly signed leases will begin generating rent in the second half of the year, supporting future income. The company’s signed-not-open pipeline stood at $4.6 million, or 4.6% of annual cash base rent in place, meaning these recently completed leases have not yet started paying rent but will contribute in upcoming quarters, as indicated by management commentary.

Same-property net operating income (NOI) -- a standard metric tracking income from properties owned for the full period -- grew just 0.9% despite the headline revenue increase. This means that a significant portion of revenue growth came from acquisitions or repositioned assets, not higher income from a stable property base. Management cited ongoing property transitions and lagged rent commencements as dampening near-term same-property income growth, with expectations for a pickup as more leases commence over time.

A material factor was a one-time $20.4 million charge for extinguishing convertible senior notes. The company paid off this debt using a mix of cash and new common shares. By removing this debt, CTO Realty Growth faces no further major debt maturities for 2025. Excluding the debt charge, Core FFO per share -- an important earnings measure that strips out one-time charges -- was solid at $0.45. Adjusted Funds From Operations (AFFO), which further removes straight line and non-cash items, reached $0.47 per share, slightly down year over year. The share count increase -- due in part to stock issued for the note retirement -- offset much of the absolute growth in earnings.

The company’s portfolio consisted of 24 income properties covering 5.25 million square feet, with a portfolio-wide leased occupancy of 93.9%. Of the rent base, 69.4% comes from retail space, with mixed-use providing 26.9% and office 3.7%. Management notes that continued tenant demand in core markets is supporting positive leasing spreads, and reported that the competitive environment for acquisitions remains intense as more investors return to retail property.

Total long-term debt was $606.8 million, at a weighted average interest rate of 4.44%. The company had $76.0 million undrawn on its credit facilities and $8.6 million in cash, providing solid liquidity. Net debt-to-EBITDA -- a common leverage ratio for REITs -- stood at 6.9x, on the higher end of sector norms. No major debt payments are due in the remainder of 2025 following the recent note settlement.

Forward Guidance and Outlook

Leadership reaffirmed its full-year financial outlook. Core FFO per diluted share is projected between $1.80 and $1.86, while AFFO per share guidance is $1.93 to $1.98 per diluted share. The net loss per share (GAAP) is projected to be $(0.61) to $(0.57), a range that mainly reflects the sizable debt extinguishment charge already realized.

Management expects about $100 million to $200 million of new investments at initial yields between 8.0% and 8.5%. Guidance also embeds approximately 1% growth in same-property NOI and stable general and administrative expenses. Expectations are that as the current pipeline of signed leases begin paying rent and vacant anchors are fully re-leased, the impact on net operating income and future earnings will be positive. The company continues to declare a quarterly dividend of $0.38 per share, unchanged from prior quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.