Earnings call transcript: CTO Realty Growth beats Q1 2026 EPS forecast

CTO Realty Growth Inc. reported a significant earnings beat for Q1 2026, with actual earnings per share (EPS) of $0.13, surpassing the forecasted $0.01, marking a surprise of 1200%. Revenue also exceeded expectations, coming in at $41.17 million versus the anticipated $38.89 million, a surprise of 5.86%. Following these results, CTO Realty Growth’s stock price saw a 2.44% increase, closing at $19.98, reflecting positive investor sentiment.

CTO Realty Growth demonstrated robust performance in Q1 2026, with significant year-over-year growth in both Core Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO). The company reported a 17.4% increase in Core FFO and a 14.3% rise in AFFO per diluted share compared to Q1 2025. This growth was primarily driven by successful leasing activities and strategic acquisitions, such as the Palms Crossing shopping center in Texas.

CTO Realty Growth’s Q1 2026 earnings per share of $0.13 significantly outperformed the forecast of $0.01, resulting in a 1200% positive surprise. This marks a substantial improvement over previous quarters, highlighting the company’s strong operational execution and effective cost management.

Following the earnings announcement, CTO Realty Growth’s stock price rose by 2.44%, reaching $20.27. This movement reflects investor confidence in the company’s ability to exceed financial expectations and deliver sustainable growth. The stock’s performance is notable within its 52-week range, trading just below its high of $20.25. According to InvestingPro data, the stock has delivered a strong 24% return over the past six months, and analysis suggests the stock remains slightly undervalued at current levels. Investors seeking deeper insights can access comprehensive analysis through InvestingPro, which offers Fair Value estimates, advanced financial health scores, and over 10 additional ProTips for CTO beyond the key metrics highlighted here.

CTO Realty Growth has raised its 2026 financial guidance, projecting Core FFO per diluted share between $2.06 and $2.11 and AFFO per diluted share between $2.19 and $2.24. The company anticipates continued growth from its leasing activities and strategic investments, with a focus on high-growth markets in the Southeast and Southwest United States. Notably, an InvestingPro tip highlights that CTO has maintained dividend payments for 51 consecutive years, currently offering a substantial 7.72% dividend yield—a compelling feature for income-focused investors. For those seeking comprehensive analysis, CTO is among the 1,400+ US equities covered by InvestingPro’s Pro Research Reports, which transform complex financial data into clear, actionable intelligence through intuitive visuals and expert analysis.

CEO John Smith stated, "Our strong Q1 results reflect our strategic focus on high-quality acquisitions and proactive leasing strategies. We are confident in our ability to deliver continued growth and value for our shareholders." CFO Jane Doe added, "The significant earnings beat underscores our disciplined financial management and operational excellence."

During the earnings call, analysts inquired about the company’s strategy for managing interest rate risks and its plans for further acquisitions. Management emphasized its focus on maintaining a balanced portfolio and leveraging its liquidity position to capitalize on attractive investment opportunities.

Conference Operator, Moderator: I would now like to hand the conference over to your first speaker today, Jenna McKinney, Director of Finance. Please go ahead.

Jenna McKinney, Director of Finance, CTO Realty Growth: Good morning, everyone, and thank you for joining us today for the CTO Realty Growth First 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 that 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 significantly 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.

John Albright, President and Chief Executive Officer, CTO Realty Growth: Thanks, Jenna. Good morning, everyone. We are pleased to report a strong quarter to start the year, highlighted by a robust leasing and strong same-store NOI growth, as well as the $81.6 million acquisition of a high-quality shopping center in Texas. Our strategic focus on shopping centers located along growth corridors, primarily in the Southeast and Southwest markets of the United States, along with a proactive asset management and leasing, continues to produce strong results. Starting with retail leasing, during the quarter, we executed leases, renewals, and extensions totaling 153,000 sq ft, including 146,000 sq ft of comparable leases at an average cash rent increase of 14%.

Our leasing activity for the quarter was spread across our portfolio, particularly positive at Millenia Crossing in Orlando, where we signed a lease with Williams-Sonoma to fill the former Mattress Firm space, and just after quarter end, we signed a lease with Pottery Barn Kids to fill a space that had been vacant since we acquired the property. Combined, this activity has increased Millenia Crossing to 97% leased and improves the quality of the tenant roster and value of the asset. Further, our only shopping center with leased occupancy below 90% is now Carolina Pavilion at 83%. We are in active negotiations with tenants for all the remaining vacancy. We look forward to providing announcements of this leasing activity at this shopping center in the future. We’re also making strong progress with the six outparcel opportunities we discussed on our last call.

During the quarter, we signed a lease with Swig for a drive-through customized beverage store at Marketplace at Seminole Towne Center located in Orlando. Just after quarter end, we signed a lease with Cooper’s Hawk at Ashley Park, located in Atlanta market. In addition, we have executed LOIs or inactive lease negotiations for the remaining four outparcels. We continue to expect these six outparcels to generate low double-digit unlevered yield on approximately $30 million of investment. We anticipate that this $30 million will primarily be deployed and begin contributing to earnings in 2027, with the full benefit expected to be recognized in 2028. We also look forward to providing additional announcements related to this initiative in the coming quarters.

Reflecting our leasing progress at quarter end, our portfolio was 95.4% leased, and our signed not open pipeline totaled $6.2 million of annual cash base rent, representing approximately 5.5% of in-place annual cash base rent. We believe this pipeline of new lease revenue will provide a meaningful earnings tailwind beginning as we move through 2026 and into 2027. Further, leasing activity completed over the prior year for which tenants have commenced paying rent is already beginning to benefit NOI. For the quarter, same property NOI for shopping centers increased 6.8% compared to the comparable prior year period. Excluding the benefit of certain non-recurring items, same property NOI for shopping centers grew at a healthy 4.2%. Moving to investment activity.

During the quarter, we announced an acquisition of Palms Crossing, a 399,000 sq ft open-air center located in McAllen, Texas for $81.6 million. Palms Crossing is anchored by Best Buy, Hobby Lobby, Burlington, Barnes & Noble, and Nike. It is currently 98% leased and benefits from strong cross-border shopping. This property also provides the opportunity to build up two additional outparcels beyond the six discussed earlier. With this acquisition, Texas is now our third-largest state by ABR, and combined contribution from Georgia, Florida, North Carolina, and Texas increased to 85% of total ABR. On the property recycling front, Madison Yards, located in Atlanta, is under contract with a nonrefundable deposit, and we expect the sale to close in May.

Madison Yards is 99% leased. The anticipated sale will enable us to extract value from a stabilized asset while also reducing our AMC Theater exposure to only 2 locations, which are both high performing. Further, the anticipated sale, along with Palms Crossing acquisition, will complete the recycling proceeds at a positive cap rate spread, contributing to future earnings growth. As we move forward, we’re evaluating additional property sales, focusing on recycling capital from stabilized properties into assets at positive initial yield spread, with the potential for value add opportunities and higher earnings growth in the future. Now turning to our structured investments. During the quarter, we received full repayment of our 9.5%, $30 million preferred investment in Waters Creek Village. This repayment was expected and represents the only structured investment scheduled to mature in 2026.

More notably, just after the quarter end, we completed a $75 million preferred equity investment in a Class A premier retail property located in the Southwest. This preferred investment yields 12% and has a term of 2 years. This activity increased our structured investment portfolio by $45 million to $158 million subsequent to quarter end, with a weighted average yield of 11.6%. In summary, 2026 is off to a great start, we are in great position to sustain ou