CTO Realty Growth, Inc. 2026 Q3 Earnings Call

Jenna, please go ahead. Good morning, everyone, and thank you for joining us today for the CTO Realty Growth third quarter 2026 operating results conference call.

Participating on the call this morning are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer, and other members of the executive team who will be available to answer questions during the call. I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ materially from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are discussed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings.

You can find our SEC reports, earnings release, supplemental, and most recent investor presentation on our website at ctoreit.com. With that, I will turn the call over to John.

Thanks, Jenna, and good morning, everyone. The third quarter was very productive for CTO as we continued our strong leasing and investment momentum. During the quarter, we signed 467,000 square feet of leases and completed $102.3 million of investments at a weighted average yield of 9.1%. That brings our 9-month totals to 833,000 square feet of leasing and $336.5 million of investments at a weighted average yield of 9.4%. This activity drove Core FFO per diluted share growth of 10.4% for the quarter and 13.8% for the 9 months. We have now addressed all 11 of our vacated anchor spaces.

Just after the quarter end, we signed approximately 75,000 sq ft of new leases at Pompano Citi Centre and completed an additional $135.8 million of investments, bringing year-to-date investments to $472 million at a weighted average yield of 9.4%. Reflecting all of this activity, we are raising our 2026 Core FFO guidance, which Phil will walk through shortly. Starting with leasing, our third quarter activity included 396,000 sq ft of comparable leases at a 7% cash rent spread. Year to date comparable leasing totals 726,000 sq ft at a 9% cash rent spread. Regarding the vacated anchor spaces, we addressed the last remaining box this quarter by subdividing the former Conn's space at Carolina Pavilion in Charlotte and signing leases with Cavender's and 2nd & Charles.

We are pleased with how this all played out. Of the 11 spaces, nine have been released at approximately 70% positive spread. The remaining two, as previously announced, are under contract to be sold to a national retailer for $20.7 million with closing expected in the fourth quarter. We expect these new anchors to bring more traffic to our centers and benefit the adjacent small shop space. A few other leasing highlights. First, we signed a 55,000 sq ft lease with Crunch Fitness at Crossroads Town Center in Phoenix to replace Harkins Theatres. Although the Harkins lease runs through late 2028, we had negotiated an early termination right that let us proactively backfill the space at a positive cash spread with a use that will drive more foot traffic.

We expect roughly 12 months of downtime between Harkins vacating in early 2027 and the Crunch lease commencing in 2028. Second, just after the quarter end, Amped Fitness signed a lease to expand by 19,000 sq ft at Pompano Citi Centre, bringing this immersive experience-driven fitness destination to 53,000 sq ft. An Amped affiliate also leased 56,000 sq ft for research, development, and testing of gym equipment in experiential rooms, as well as office operations. This space is part of the 62,000 sq ft of unfinished second-floor shell space we identified as upsize when we acquired the property last December. Because the space is not currently in the center's square footage, the lease will increase Pompano Citi Centre to 565,000 sq ft. Third, our outparcel program. This quarter we signed four leases at multi-tenant buildings in two outparcel developments.

T-Mobile at the Plaza at Rockwall, and Jason's Deli, Acapella Nail Spa, and Nothing Bundt Cakes at Beaver Creek in Raleigh. Together with the Swig and Cooper's Hawk leases signed earlier this year, we are making steady progress. We continue to expect a blended low double-digit unlevered yield on about $30 million of investments across these six outparcels, with earnings contribution beginning in 2027 and a full benefit in 2028. Turning to occupancy, excluding Zona Rosa, leased occupancy increased to 95.7% from 95.4% last quarter. Including Zona Rosa, which was 67% leased when we acquired it, the total portfolio was 92.4% leased at September 30. Zona Rosa gives us real room to grow, which I will come back to in a moment. At quarter end, our signed-not-open pipeline was $5.6 million, or about 4.6% of in-place cash rent.

That's down modestly from last quarter, mainly because the State of New Mexico began paying rent at our Albuquerque property in September, though new leasing during the quarter offset most of this impact. We expect the majority of the signed-not-open pipeline to commence rent over the course of 2027. Moving to investments. On our last call, we said we expected to close at least one more acquisition this year. We closed two, both in Kansas City, a new market for CTO, with more than 2.2 million people in a pro-business climate. Together, these two centers, both in strong local submarkets, add about 1.3 million square feet to our portfolio. First, Zona Rosa, which we acquired in the third quarter for approximately $63 million, or $82 per square foot, well below replacement cost.

It's a top lifestyle center in Kansas City's Northland submarket with about 5.5 million annual visits and is anchored by Dick's Sporting Goods, Barnes & Noble, Old Navy, Burlington, and DSW. Beyond the lease-up opportunity, the property includes 10 acres of entitled development land and about 100,000 square feet of underutilized space we can reposition. Second, Summit Woods Crossing, which we acquired in early October for $103 million or $189 per square foot, also well below replacement cost. It's a 545,000 square foot power center in Lee's Summit, one of the metro's most affluent submarket. It's 99% occupied and anchored by Lowe's, Kohl's, Best Buy, TJ Maxx, and Total Wine, with a SuperTarget on the site that we don't own. With about 7.3 million annual visits, it's among the most visited shopping centers in the Kansas City metro area.

These two acquisitions also strengthen our tenant credit, with Dick's and Best Buy both investment grade becoming our two largest tenants. On the structured investment side, in July, we originated a $37 million loan, of which $29.8 million was funded at closing. It's secured by a leasehold interest in a mixed-use property in Austin, Texas, has a two-year term and carries a 9.75% initial cash yield. Then at the quarter end, we closed a $32 million preferred equity investment in a joint venture that owns 10 shopping centers. It is fully funded at closing, has a three-year term, and yields 17%, including 7% paid-in-kind. Our structured investment portfolio now totals approximately $260 million at a blended rate of 12.1%. Finally, during the quarter, we closed a new expanded credit facility that gives us ample capacity to fund this activity. Phil will cover the details.

In summary, we're very pleased with the nine months of 2026. We believe our embedded growth drivers, including below-market in-place rents, the signed-not-open pipeline, lease-up opportunities, outparcel developments, and disciplined capital recycling, positions CTO for meaningful earnings growth. With that, I'll turn the call over to Phil.

Thanks, John. On this call, I will briefly highlight our quarterly results and provide an update on our balance sheet and revised full-year outlook. Starting with operating results. For the third quarter, Core FFO was $0.53 per diluted share, up 10.4% from $0.48 a year ago. Growth was driven primarily by leases that commenced paying rent over the past year, along with contributions from our property acquisitions and structured investments. Year to date, Core FFO is $1.57 per diluted share, up 13.8%. Shopping center same-property NOI grew 3.8% for the quarter and 6.2% for the year to date. As we flagged on our last call, growth moderated as several anchors that opened in late 2025 moved into the prior year comparable period. Including our few non-core properties, total same-property NOI grew 2.3% for the quarter.