CTO Realty Growth, Inc. is a publicly traded self managed equity real estate investment trust that elected to be taxed as a REIT beginning with its 2020 taxable year. The company concentrates on acquiring owning and managing high quality retail and mixed use properties primarily in markets that demonstrate faster population and job growth business friendly tax policies and where retail demand outpaces supply. Its investment approach emphasizes fee simple ownership of…
CTO Realty Growth, Inc. is a publicly traded self managed equity real estate investment trust that elected to be taxed as a REIT beginning with its 2020 taxable year. The company concentrates on acquiring owning and managing high quality retail and mixed use properties primarily in markets that demonstrate faster population and job growth business friendly tax policies and where retail demand outpaces supply. Its investment approach emphasizes fee simple ownership of properties complemented by strategic use of commercial loans and preferred equity investments. As of the end of 2025 the firm held 21 properties encompassing about 5.5 million square feet spread across seven states in the United States. The company’s history includes a reorganization that resulted in a merger which reincorporated the business in Maryland and facilitated compliance with REIT requirements. This structural change allowed the firm to access capital markets under the ticker symbol CTO on the New York Stock Exchange.
The company generates revenue mainly from base rent and expense recoveries collected from tenants leasing space in its income producing properties. Rental income is supported by long term leases many of which are triple or double net arrangements shifting operating costs to tenants. In addition to property earnings the firm receives management fee income for overseeing its investment in PINE for managing third party portfolios under a Portfolio Management Agreement and for administering subsurface interests via a Subsurface Management Agreement. Interest income is derived from a portfolio of commercial loans and preferred equity investments that are typically secured by real estate collateral and bear fixed or floating rates. The company also realizes revenue from its real estate operations which include the sale of mitigation credits and the disposition of subsurface mineral interests. Furthermore the firm earns origination fees when it funds new loan commitments and may receive prepayment penalties on certain debt instruments.
The company operates through the following segments: Income Properties Management Services Commercial Loans and Investments and Real Estate Operations.
• The Income Properties segment consists of 21 retail and mixed use assets including 17 shopping centers and four other properties totaling roughly 5.5 million square feet located in Florida Georgia Texas Arizona North Carolina Virginia and New Mexico. These properties generate the majority of the company’s revenue through lease payments expense recoveries and percentage rent arrangements. The segment focuses on maintaining high occupancy rates executing lease renewals that reflect market conditions and pursuing selective acquisitions and dispositions to recycle capital. As of the end of 2025 the weighted average remaining lease term for the shopping center portfolio was five years while the other properties averaged about four years.
• The Management Services segment provides asset management oversight for PINE third party portfolios and subsurface interests earning fees based on equity values and transaction activity. It receives a base management fee equal to a percentage of PINE’s total equity with a reduced rate on the incremental equity arising from preferred stock proceeds. The segment also earns disposition fees leasing commissions and other advisory fees under the Portfolio Management Agreement and the Subsurface Management Agreement. In addition the segment may earn incentive fees if certain performance thresholds are met by the managed entities.
• The Commercial Loans and Investments segment holds four corporate loan investments and two preferred equity investments that are primarily secured by real estate assets and generate interest income origination fees and potential appreciation. The loans typically have terms ranging from one to ten years and are structured as senior mezzanine or pari passu arrangements depending on the underlying collateral. As of the end of 2025 the carrying value of this segment was approximately $104.8 million. The segment’s earnings are influenced by the credit quality of borrowers the prevailing interest rate environment and the timing of loan repayments.
• The Real Estate Operations segment encompasses revenues from the sale of mitigation credits and subsurface mineral interests as well as associated costs. During 2024 the company sold its remaining mitigation credits for about $1.8 million and disposed of its subsurface interests for roughly $5.0 million generating gains on those transactions. As of the end of 2025 the segment held minimal assets consisting mainly of a small amount of receivables related to prior sales. The segment’s activity is subject to fluctuations in commodity prices regulatory changes and the timing of environmental permit approvals.
The real estate industry is characterized by intense competition for acquiring quality assets and attractive financing terms. The company competes with other publicly traded REITs private equity groups institutional investors and regional operators when bidding for properties and originating loans. Its competitive strengths stem from a disciplined focus on markets with strong economic fundamentals a self managed structure that reduces reliance on external advisors and a diversified platform that combines property ownership management services and lending activities. Additionally the firm benefits from access to a revolving credit facility term loans and the ability to use 1031 like kind exchange transactions to defer taxes on property dispositions. The company also leverages its long standing relationships with lenders and its expertise in evaluating real estate fundamentals to identify opportunities that offer risk adjusted returns.
The company serves a broad range of retail tenants that include national chain restaurants grocery stores fitness centers service providers and boutique retailers. Its shopping center properties typically anchor with larger tenants such as supermarkets or big box stores while surrounding spaces are occupied by smaller local businesses. Lease structures vary with many tenants paying proportionate shares of property operating expenses under triple or double net agreements. Geographic diversification across seven states reduces reliance on any single regional economy. The tenant mix is regularly reviewed to ensure credit quality and to align with the company’s goal of maintaining stable cash flows through long term occupancy.
Sectors:Real Estate · Financial ServicesSector rationaleThe company is a self-managed equity REIT that primarily generates revenue from base rent and expense recoveries from its portfolio of 21 retail and mixed-use properties. A secondary sector of Financial Services is justified because the company operates a distinct 'Commercial Loans and Investments' segment that generates interest income and origination fees from corporate loans and preferred equity investments.Industries:Retail REITsReal EstatePrimaryThe company is an equity REIT whose primary assets are 17 shopping centers and four other retail/mixed-use properties totaling 5.5 million square feet. Its majority revenue is generated from base rent and expense recoveries from retail tenants such as grocery stores and national chain restaurants.Commercial Real Estate ServicesReal EstateSecondaryThe company operates a Management Services segment that earns base management fees, disposition fees, and leasing commissions for overseeing third-party portfolios and subsurface interests under Portfolio Management Agreements.Specialty FinanceFinancial ServicesSecondaryThe Commercial Loans and Investments segment originates and holds a portfolio of corporate loans and preferred equity investments secured by real estate collateral, earning interest income and origination fees.Classified using BQ-MICSCIK: 0000023795
Investment Thesis
▲ Bull case
CTO's strategic focus on growth corridors in the Southeast and Southwest United States positions it to capitalize on long-term demographic and economic tailwinds that the market is underestimating. The company's acquisition of Palms Crossing in McAllen, Texas for $81.6 million is particularly compelling because it is currently 98% leased and benefits from strong cross-border shopping activity with Mexico, a factor management did not emphasize but which provides a durable demand driver less sensitive to domestic economic fluctuations. This asset adds to an already concentrated footprint where Georgia, Florida, North Carolina, and Texas now contribute 85% of total annual base rent, creating a high-quality portfolio in markets experiencing above-average population and income growth. The market appears to be overlooking how this geographic concentration in high-growth regions, combined with the property's existing occupancy and cross-border dynamics, could sustain NOI growth beyond the guided 3.5% to 4.5% range for shopping centers, especially as inflationary pressures subside and consumer spending normalizes. The proactive leasing activity, including the Williams Sonoma and Pottery Barn Kids deals at [indiscernible] Crossing in Orlando that pushed occupancy to 97%, demonstrates effective asset management that is generating tangible value accretion not fully reflected in current valuations. Furthermore, the completion of the $75 million preferred equity investment in a Class A premier retail property in the Southwest at a 12% yield—funded in part by recycling the $30 million Watters Creek Village repayment—shows disciplined capital allocation into high-yielding structured investments that enhance overall portfolio returns without significantly increasing leverage, a nuance the market may be missing when assessing the sustainability of CTO's earnings growth trajectory. The company's ability to maintain leverage at 6.4x net debt to pro forma adjusted EBITDA despite the Palms Crossing acquisition, supported by opportunistic ATM issuances and strong operating cash flow, indicates a resilient balance sheet that can support continued accretive investments, a strength that is not being adequately priced into the stock given the company's conservative guidance and underappreciated pipeline of value-add opportunities.
The Signed-Not-Open pipeline, totaling $6.2 million of annual cash base rent or approximately 5.5% of in-place annual cash base rent, represents a significant and underappreciated earnings tailwind that is poised to meaningfully boost NOI and FFO growth in 2027, a catalyst the market is largely ignoring. Management explicitly stated that almost all of this pipeline will be recognized in 2027, with only one tenant pushing benefits into early 2028, which directly supports the company's guidance for approximately 12% core FFO and AFFO growth at the midpoint of the new ranges ($2.06-$2.11 and $2.19-$2.24 per diluted share, respectively). This pipeline is backed by tangible leasing progress, including the 153,000 square feet of leases executed in Q1 FY26, with 146,000 square feet being comparable leases at a 14% average cash rent increase—evidence of strong tenant demand and pricing power that is not being fully discounted in current expectations. The market appears to be focusing too heavily on near-term headwinds while overlooking how the roll-in of this signed-but-not-yet-open space, combined with the low double-digit unlevered yield expected from the 6 outparcel developments (projected to require ~$30 million of investment and begin contributing in 2027 with full benefit in 2028), will create a multi-year growth trajectory. Additionally, the disciplined capital recycling strategy—exemplified by the pending sale of Madison Yards in Atlanta, which is 99% leased and expected to close in May—reduces exposure to lower-performing assets like AMC Theatres while generating proceeds to reinvest into higher-yielding opportunities, a process that management noted will contribute to future earnings growth through positive cap rate spreads. The fact that this recycling activity is occurring without increasing leverage, as demonstrated by the Q1 results, underscores the sustainability of this approach, a factor that is not receiving sufficient weight in current valuations given the company's proven ability to extract value from stabilized assets and redeploy capital efficiently.
CTO's strategic focus on growth corridors in the Southeast and Southwest United States positions it to capitalize on long-term demographic and economic tailwinds that the market is underestimating. The company's acquisition of Palms Crossing in McAllen, Texas for $81.6 million is particularly compelling because it is currently 98% leased and benefits from strong cross-border shopping activity with Mexico, a factor management did not emphasize but which provides a durable demand driver less sensitive to domestic economic fluctuations. This asset adds to an already concentrated footprint where Georgia, Florida, North Carolina, and Texas now contribute 85% of total annual base rent, creating a high-quality portfolio in markets experiencing above-average population and income growth. The market appears to be overlooking how this geographic concentration in high-growth regions, combined with the property's existing occupancy and cross-border dynamics, could sustain NOI growth beyond the guided 3.5% to 4.5% range for shopping centers, especially as inflationary pressures subside and consumer spending normalizes. The proactive leasing activity, including the Williams Sonoma and Pottery Barn Kids deals at [indiscernible] Crossing in Orlando that pushed occupancy to 97%, demonstrates effective asset management that is generating tangible value accretion not fully reflected in current valuations. Furthermore, the completion of the $75 million preferred equity investment in a Class A premier retail property in the Southwest at a 12% yield—funded in part by recycling the $30 million Watters Creek Village repayment—shows disciplined capital allocation into high-yielding structured investments that enhance overall portfolio returns without significantly increasing leverage, a nuance the market may be missing when assessing the sustainability of CTO's earnings growth trajectory. The company's ability to maintain leverage at 6.4x net debt to pro forma adjusted EBITDA despite the Palms Crossing acquisition, supported by opportunistic ATM issuances and strong operating cash flow, indicates a resilient balance sheet that can support continued accretive investments, a strength that is not being adequately priced into the stock given the company's conservative guidance and underappreciated pipeline of value-add opportunities.
The Signed-Not-Open pipeline, totaling $6.2 million of annual cash base rent or approximately 5.5% of in-place annual cash base rent, represents a significant and underappreciated earnings tailwind that is poised to meaningfully boost NOI and FFO growth in 2027, a catalyst the market is largely ignoring. Management explicitly stated that almost all of this pipeline will be recognized in 2027, with only one tenant pushing benefits into early 2028, which directly supports the company's guidance for approximately 12% core FFO and AFFO growth at the midpoint of the new ranges ($2.06-$2.11 and $2.19-$2.24 per diluted share, respectively). This pipeline is backed by tangible leasing progress, including the 153,000 square feet of leases executed in Q1 FY26, with 146,000 square feet being comparable leases at a 14% average cash rent increase—evidence of strong tenant demand and pricing power that is not being fully discounted in current expectations. The market appears to be focusing too heavily on near-term headwinds while overlooking how the roll-in of this signed-but-not-yet-open space, combined with the low double-digit unlevered yield expected from the 6 outparcel developments (projected to require ~$30 million of investment and begin contributing in 2027 with full benefit in 2028), will create a multi-year growth trajectory. Additionally, the disciplined capital recycling strategy—exemplified by the pending sale of Madison Yards in Atlanta, which is 99% leased and expected to close in May—reduces exposure to lower-performing assets like AMC Theatres while generating proceeds to reinvest into higher-yielding opportunities, a process that management noted will contribute to future earnings growth through positive cap rate spreads. The fact that this recycling activity is occurring without increasing leverage, as demonstrated by the Q1 results, underscores the sustainability of this approach, a factor that is not receiving sufficient weight in current valuations given the company's proven ability to extract value from stabilized assets and redeploy capital efficiently.
CTO's heavy geographic concentration in the Southeast and Southwest United States, while presented as a strength, introduces significant regional economic and demographic risks that the market is ignoring, particularly as consumer spending patterns shift and certain markets show signs of overbuilding in retail space. The company's reliance on Texas, Georgia, Florida, and North Carolina for 85% of total annual base rent creates vulnerability to localized downturns, such as potential slowdowns in migration trends, housing market corrections, or energy sector volatility in Texas, which could disproportionately impact occupancy and rent collections despite current high leasing activity. Management's discussion of the Palms Crossing acquisition highlighted strong cross-border shopping but did not adequately address risks related to potential changes in trade policy, currency fluctuations, or Mexican economic stability that could abruptly reduce cross-border consumer traffic—a critical demand driver for this asset that was not stressed during the Q&A but represents a material, under-discussed vulnerability. Furthermore, the company's assertion that there has been "no hesitancy" in leasing and "no pullback whatsoever" in tenant demand, as stated by John Albright in response to macro uncertainty concerns, appears increasingly evasive given broader retail sector warnings about consumer strain from persistent inflation and higher interest rates, suggesting management may be downplaying or failing to recognize emerging softness in tenant willingness to commit to long-term leases, especially for anchor spaces where three of the original ten vacant anchor spaces remain unsigned despite ongoing negotiations. The market may be underestimating how prolonged lease discussions—with Albright noting that deals with large national companies "go really slow" and take up to nine months from lease signing to rent commencement—could delay expected NOI growth, particularly if macroeconomic conditions deteriorate during this extended timeline, turning what management frames as a temporary delay into a more structural leasing challenge.
CTO's growing reliance on structured investments, which increased by $45 million to $158 million subsequent to quarter end with a weighted average yield of 11.6%, introduces complexity and risk that the market is not fully appreciating, especially as the company approaches the 15% cap on such investments relative to undepreciated assets—a level John Albright acknowledged as a potential ceiling. While these investments yield attractive returns, they are inherently less stable than core property NOI, subject to counterparty credit risk, and often tied to specific asset performance or market conditions that could deteriorate rapidly in a downturn, as evidenced by the need to highlight the Watters Creek Village repayment as "expected" and the only structured investment maturing in 2026—a detail that underscores the limited pipeline of near-term liquidity from this segment. The market appears to be overlooking how the shift toward structured finance, including the recent $75 million Southwest preferred equity investment at 12%, may be masking slowing organic growth in the core shopping center portfolio, particularly when same-property NOI growth excluding nonrecurring items was only 4.2% in Q1 FY26—a figure that, while healthy, is modest and may not be sustainable without continued accretive acquisitions or favorable nonrecurring benefits. Additionally, the company's guidance assumes same-property NOI growth for shopping centers of only 3.5% to 4.5% for the full year 2026, a range that leaves little room for error and suggests management itself sees limited upside in core operations, forcing reliance on external growth drivers like acquisitions and structured investments that carry execution and integration risks. The pending sale of Madison Yards, while presented as value-accretive, also reduces the company's scale and diversification, and if cap rates decompress or financing conditions tighten, the expected proceeds may fall short of projections, undermining the capital recycling thesis and leaving CTO with fewer options to deploy capital at attractive spreads—a scenario the market is not currently pricing in given the overly optimistic tone around disposition proceeds and their impact on future earnings.
CTO's heavy geographic concentration in the Southeast and Southwest United States, while presented as a strength, introduces significant regional economic and demographic risks that the market is ignoring, particularly as consumer spending patterns shift and certain markets show signs of overbuilding in retail space. The company's reliance on Texas, Georgia, Florida, and North Carolina for 85% of total annual base rent creates vulnerability to localized downturns, such as potential slowdowns in migration trends, housing market corrections, or energy sector volatility in Texas, which could disproportionately impact occupancy and rent collections despite current high leasing activity. Management's discussion of the Palms Crossing acquisition highlighted strong cross-border shopping but did not adequately address risks related to potential changes in trade policy, currency fluctuations, or Mexican economic stability that could abruptly reduce cross-border consumer traffic—a critical demand driver for this asset that was not stressed during the Q&A but represents a material, under-discussed vulnerability. Furthermore, the company's assertion that there has been "no hesitancy" in leasing and "no pullback whatsoever" in tenant demand, as stated by John Albright in response to macro uncertainty concerns, appears increasingly evasive given broader retail sector warnings about consumer strain from persistent inflation and higher interest rates, suggesting management may be downplaying or failing to recognize emerging softness in tenant willingness to commit to long-term leases, especially for anchor spaces where three of the original ten vacant anchor spaces remain unsigned despite ongoing negotiations. The market may be underestimating how prolonged lease discussions—with Albright noting that deals with large national companies "go really slow" and take up to nine months from lease signing to rent commencement—could delay expected NOI growth, particularly if macroeconomic conditions deteriorate during this extended timeline, turning what management frames as a temporary delay into a more structural leasing challenge.
CTO's growing reliance on structured investments, which increased by $45 million to $158 million subsequent to quarter end with a weighted average yield of 11.6%, introduces complexity and risk that the market is not fully appreciating, especially as the company approaches the 15% cap on such investments relative to undepreciated assets—a level John Albright acknowledged as a potential ceiling. While these investments yield attractive returns, they are inherently less stable than core property NOI, subject to counterparty credit risk, and often tied to specific asset performance or market conditions that could deteriorate rapidly in a downturn, as evidenced by the need to highlight the Watters Creek Village repayment as "expected" and the only structured investment maturing in 2026—a detail that underscores the limited pipeline of near-term liquidity from this segment. The market appears to be overlooking how the shift toward structured finance, including the recent $75 million Southwest preferred equity investment at 12%, may be masking slowing organic growth in the core shopping center portfolio, particularly when same-property NOI growth excluding nonrecurring items was only 4.2% in Q1 FY26—a figure that, while healthy, is modest and may not be sustainable without continued accretive acquisitions or favorable nonrecurring benefits. Additionally, the company's guidance assumes same-property NOI growth for shopping centers of only 3.5% to 4.5% for the full year 2026, a range that leaves little room for error and suggests management itself sees limited upside in core operations, forcing reliance on external growth drivers like acquisitions and structured investments that carry execution and integration risks. The pending sale of Madison Yards, while presented as value-accretive, also reduces the company's scale and diversification, and if cap rates decompress or financing conditions tighten, the expected proceeds may fall short of projections, undermining the capital recycling thesis and leaving CTO with fewer options to deploy capital at attractive spreads—a scenario the market is not currently pricing in given the overly optimistic tone around disposition proceeds and their impact on future earnings.