Good day, and thank you for standing by. Welcome to CTO Realty Growth's First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jenna McKinney, Director of Finance. Please go ahead.

Good morning, everyone. And thank you for joining us today for CTO Realty Growth’s first quarter 2025 operating results conference 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 disclosed 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 filings, 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. I am pleased to share that CTO produced another strong quarter across all areas of our business, once again driven by investment volume and leasing activity. Beginning with investment activity during the quarter, we acquired Ashley Park for $79.8 million at the going-in cash cap rate near the high end of our guidance range. Ashley Park is a 559,000 square-foot open-air lifestyle center located in the Newnan submarket of Atlanta, anchored by well-known national brands. Further, Ashley Park has many of the attributes we look for in acquisitions, including lease-up potential, in-place below-market rents, and a basis significantly below replacement costs. More specifically, we have active tenant interest for nearly half of the approximately 40,000 square feet of vacancy, approximately 200,000 square feet of the shop space paying below-market rent, of which 100,000 square feet have no contractual options. Our acquisition basis is approximately $140 per square foot. Accordingly, we are encouraged by the opportunity that this center provides to grow NOI. In addition, we continue to have a strong pipeline of potential acquisitions across our target growth markets in the southeast and southwest. On the leasing front, we signed more than 112,000 square feet of new leases, renewals, and extensions at an average rent of $24.14 per square foot, almost 25% higher than our in-place portfolio average of $19.41 per square foot. Our leasing results continue to demonstrate the strong tenant demand for high-quality properties within our markets. I would now like to provide an update on our anchor leasing activity. As you may recall, we have a unique mark-to-market opportunity related to the 10 anchor spaces that were leased to several tenants that filed for bankruptcy near the end of 2024 and early 2025. One of these spaces, a former Joann's at Price Plaza in Houston, is in line to be assumed by a national retailer pending court approval. With regards to the other nine spaces, we have executed leases for two and expect to have two more leases shortly and are actively in discussions for the remaining five. Accordingly, our releasing outlet for these anchor spaces remains positive and we still expect to achieve a positive cash leasing spread of 40% to 60% in total. We also continue to make progress with respect to our 10 acres of undeveloped land adjacent to our shopping center and collection at Foresight located in Atlanta. Lease negotiations continue to progress here in addition to anchor spaces and we look forward to providing more lease updates in the near term. At quarter end, our portfolio was 93.8% leased and 91% occupied. Our signed not open leasing pipeline now stands at $4 million of annual base rent representing 4% of cash rents at the quarter end. The rent commencement associated with this pipeline will be weighted towards the second half of 2025 and along with our anchor releasing will provide a strong tailwind going into 2026. Finally, I want to provide some comments relating to the recent tariff uncertainty. While there is little visibility today on the ultimate resolution, CTO is positioned well with high-quality properties and growing markets in a well-diversified tenant base. We will continue to monitor the situation as it evolves across the tenant landscape and remain focused on executing our strategy to deliver growth for our shareholders. And with that, I will now hand the call over to Phil.

Thanks, John. On this call, I will discuss our balance sheet, earnings results, and full year 2025 guidance. At quarter end, we had approximately $604 million of debt with $120 million or 20% subject to floating interest rates based on SOFR. However, in April, when interest rates temporarily dropped in connection with the initial tariff announcements, we executed two SOFR swaps fixing SOFR for $100 million of principal at a weighted average rate of 3.32% for five years beginning April 30th. These swaps are initially being applied to $100 million of borrowing currently outstanding on a revolving credit facility, reducing the applicable interest rate by nearly 100 basis points from approximately 5.8% at quarter end to approximately 4.8% based on our anticipated leverage and pricing tier. Turning to our convertible notes, our 3.875% convertible notes with an outstanding principal balance of approximately $51 million matured on April 15th. As previously discussed, due to our common stock price and dividends paid over the term of these notes, they required settlement at a premium. In early April, prior to maturity, we completed a series of privately negotiated transactions with several of the note holders to settle their holdings with a combination of cash and newly issued common shares. At maturity, we paid off the remaining holders solely in cash. This strategic approach permitted us to generally settle the face amount of these notes in cash and the premium in shares. Ultimately, the convertible notes were retired in full for approximately $71.2 million consisting of $50.1 million of cash and $21.1 million of common equity. This repayment resulted in an extinguishment of debt charge of approximately $20.5 million that will be recorded in the second quarter. Consistent with past practice, charges related to the extinguishment of debt are excluded from our computation of both core FFO and AFFO. One last balance sheet note. We ended the quarter with net debt to EBITDA of 6.6x. While this is slightly elevated from last quarter end as a result of the Ashley Park acquisition, it is still a full turn lower than one year ago. Furthermore, at the end of this quarter, we had almost $140 million of liquidity and with our convertible notes now extinguished, no debt maturing for the remainder of 2025. Moving briefly to operating results for the quarter. Core FFO was $14.4 million for the first quarter, a $3.7 million increase compared to the $10.7 million reported in the first quarter of 2024. On a per share basis, core FFO was $0.46 in the first quarter of 2025 compared to $0.48 in the first quarter of 2024. This change of $0.02 per share is primarily the result of our reduction in leverage and downtime associated with the releasing of the anchor spaces. I would like to provide some additional context related to the releasing of our 10 anchor spaces that John mentioned earlier. Specifically, the timing of when they vacated is impacting our 2025 earnings. First, as a reminder, four of the spaces were vacated towards the end of 2024. In 2025, our three Party City locations paid rent through March before vacating and our three Joann's locations paid rent through April. We recently got back two of our Joann's and at least for the third, as discussed, may be assumed by a national retailer. This timing is in line with what we expected and is reflected in our guides. Similar to last quarter, page eight of our investor presentation summarizes the status and leasing upside related to these anchor spaces. Now on to guidance. We are reaffirming our full year 2025 first year outlook for core FFO of $1.80 to $1.86 and AFFO of $1.93 to $1.98. The assumptions underlying this outlook remain consistent with those initially provided. And with that operator, please open the line for questions.

And our first question comes from RJ Milligan of Raymond James.

Hey, good morning, guys. John, I was wondering if you could give us a little bit more detail on the anchor space negotiations. I'm curious if any of the recent volatility has maybe put a pause in retailer discussions or if you're seeing any impact there as you're looking to re-tenant those boxes.

Yes. Thanks, RJ. Surprisingly, at least to me, the leasing activity has been very consistent and very strong. There had not been any sort of backup or pause. Tenants, whether they're public or private are moving forward. You probably saw the release that Burlington bought a bunch of Joann leases in bankruptcy. So that's just a testament that those tenants are moving forward in this market. Everything's been very good, strong, and robust. So I don't see any problems there.

Okay. That's helpful. And then the new lease spreads, obviously a big number in the quarter, and I'm assuming that it was just maybe one big lease that was driving that number higher, but maybe you could give some detail on that.

Yes, RJ, this is Phil. There are actually two leases, and they made up the bulk of the square footage in the new leases. One of them was replacing one of the anchors that had vacated, and another one was where we had a tenant who had no options and wanted to stay, but we could mark it up and have someone in waiting there and sign the new lease with them. Those two leases accounted for approximately 54,000 square feet out of the 63,000 square feet of new leasing that we signed, driving the leasing spread over 80%.

And so that sort of aligns to the expectation for the pretty healthy spreads on the re-tenanting of the boxes. Is that the way to look at it?

Yes. It was on the high end of that.

Our next question comes from Rob Stevenson with Janney Montgomery Scott.

Good morning, guys. How much CapEx are you guys having to put into those bankrupt tenant spaces that you're in the process of releasing or have already signed deals on?

Yes, Rob, it's still. So we have, we included the same slide we did last quarter. It's on page 8 of our investor deck. And in addition, we say we're rolling those up 40% to 60%. And as I was just discussing with RJ, we were on the high end of that or actually exceeded the high end of that on the one anchor that we signed this quarter. But we also on that same slide disclosed the CapEx, which we say is in the $9 million to $12 million range. If we're on the high end of the CapEx, we expect to be on the high end of the spread, obviously. And that includes all landlord work, PIs, commissions, and the full load when we say $9 million to $12 million on that slide.

Okay. And then what is reasonable these days in terms of after you sign the lease, getting these guys to be rent-paying? Is it a year? Is it nine months? Is it longer depending on the build-out? How should we be thinking about the sort of time frame? You announced that you signed somebody in one of these spaces today, how long would it generally be before you start seeing monthly rent?

So basically, I would say a safe number is a year. But we are seeing some tenants that are aggressively trying to get into some of these markets and they're willing to take as-is and start fairly quickly. However, in other circumstances, it is better for us to get a higher rent and perhaps a better credit tenant, which might take longer, around the duration of a year.

All right, that's helpful. And then how are you guys thinking about funding that at the moment? Is that sale of existing assets? And what are your current thoughts on selling the remaining office property? Is there other sort of ways that you're thinking about funding stuff, with the stock, call it $18 or so?

Yes, I mean, look, it's not a large number, so we can handle it internally with our liquidity. But you touched on the office building, the one office building we have left. And in that one, we are going to look to sell closer to the end of the year. We're very close to finalizing a lease there. So that will give us kind of the runway we need to get the best price. That's an objective for us. Other than that, we are looking at perhaps recycling some assets into better opportunities, properties that have been stabilized. Given that we're seeing capital come back into the space, as we've talked about in previous quarters, we're seeing pricing of assets getting very sporty. So there's maybe an opportunity for us to sell a lower cap rate property and recycle into more higher yielding and opportunistic properties that we've been buying lately. So a combination of things.

Okay. And then last one for me, Phil, you said that the three Party City locations paid through March and the Joann's paid through April. Combined, what are those sort of, what's a ballpark in terms of what they were paying you on a monthly basis that we need to start deducting as we finalize second quarter estimates here?

Yes. So the three Party City locations, when you include the recoveries and all, are close to $900,000 a year. The three Joann's, I'll just give you the two, because we, it looks like one is going to be assumed. So out of the two, they were paying about $600,000 a year. The three Party City were there for the full first quarter, and it'll be dropping off; all three Joann's paid for April, then two will drop off.

Our next question comes from Matthew Erdner of JonesTrading.

Hey, good morning, guys. Thanks for taking the question. As we look at the investment guidance, what's going to kind of drive it to that high range? We expect to see some dispositions if we're going to see about $200 million in investments, or kind of up at that higher end.

Well, I think that, given that we're seeing strong leasing activity, that certainly is one component. As we talk about that, there is a lag there. We are starting to see a lot more properties coming to market. The good news is there's more opportunities out there. The bad news is there's a lot more competitors, but we think we're going to find the opportunities. Just a combination of things. The recycling would be something that would be more for next year, given the timing, but that part is sort of an easy way to enhance our earnings growth.

Yes, got it. That's helpful. And then, I'm guessing a majority of this would kind of go on the credit facility and you guys don't really have a problem with taking that up and using the liquidity that you have available?

Yes, so we would initially place it on the credit facility. Our bank group is very supportive. We did a $100 million term loan in September. We've had conversations with the bank group and they're all eager to put more money to work. So we could easily turn out a significant portion of our credit facility very quickly if we needed to, to get that liquidity right back.

Our next question comes from John Massocca of B. Riley Securities.

Good morning. So understanding that you left the investment yield guidance unchanged, have you seen anything since the tariff announcement change in terms of cap rates? Or particularly the yield on structured investments, just given some of the widening we've seen in credit spreads and bond markets.

Yes. So it's a little bit of a disconnect between the credit spreads in the bond market, as you mentioned, and where we're seeing traditional core assets and really down the fairway sort of retail shopping centers. That market has not seen a bump whatsoever in terms of a higher cap rate. Cap rates have stayed consistent or have gone lower. It used to be last year where a property would come to market, brokers would guide to a number and the pricing of the asset would end up being lower than where the brokers were guiding. Now we're seeing an opposite where brokers are guiding to a number and assets are trading for higher than their guidance. The market backdrop for the shopping center space is very strong on the investment side, even with everything going on in the capital market. From the debt side as well, property debt has been very supportive from all the credit bonds and banks, so nothing has really disrupted the capital markets on the shopping center side yet.

Okay. Understood. And then just because you're pretty active on the acquisition front last year, how is the non-same-store portfolio trending in terms of NOI growth?

I mean, it's positive. We're not seeing any situations where tenants are rolling down their rents. We're still able to increase them, especially given where we're buying assets. For instance, with the acquisition in Town Center, we bought that for less than half our replacement costs for tenants, which still is a bargain for the rent levels. They're experiencing rent shock at other locations. There's no resistance to raising those rents given that they got a bargain five years ago when they signed their leases. That's leading to a good backdrop for raising rents. Traffic and sales are up, so that's good.

Okay. If I think of the acquisition you did, I believe it was in the third quarter of last year. What's the timeline to mark-to-market on those? I know it could be potentially accelerated by some of these bankruptcies that occurred late last year, but is that timeframe two to three years out? Just broadly speaking?

Yes, I wouldn't say two or three years out. I would say you're going to start seeing leases with the tenants that went through bankruptcy last year and early this year. There is kind of a year lag. If we're doing leases now, it would be early part of next year through the middle part of next year. I think you will see some real movement by the middle part of next year for sure.

Our next question comes from Gaurav Mehta of Alliance Global Partners.

Thank you. Good morning. I wanted to ask you about the Ashley Park acquisition. I think in the prepared remarks you talked about some opportunity for leasing potential and then mark-to-market as well. Can you provide some numbers around how much mark-to-market upside there is for that acquisition?

Yes, I would say basically we're seeing opportunities that are around 10% to 20% at lease, potentially north of that. Given that we bought that at such a high cap rate and we have a fair amount of vacancy to work with, we're not concerned about the mark-to-market. There's so much low-hanging fruit, just leasing up vacant space and creating more activity at the property. We're really happy with this acquisition. We also have some out parcels that we could sell after 18 months. Those would trade in the low-6s, providing an opportunity to enhance the acquisition yield even further, getting closer to double digits. This acquisition will keep us well occupied in terms of value enhancing for the next 12 to 24 months.

Okay. Second question on the re-leasing CapEx of $9 million to $12 million, how much of that is already spent and how much do you expect to spend this year?

Yes, very little has been spent so far. The tenants generally have to get open and do their work before we start reimbursing on that. So very little has been spent at this point in time.

Our next question comes from Craig Kucera of Lucid Capital Markets.

Yes. Hey, good morning, guys. John, last quarter, I think you mentioned that the pipeline was almost entirely sort of core property investments and you really weren't seeing much in the way of structured investment opportunities. Is that still the case here heading into mid-year?

We're starting to see some interesting other opportunities. So it has changed a little bit as far as the character of the investment opportunity. We're excited again about being active in the next three months.

Got it. And I think last quarter, you sort of handicapped that you thought you might add anywhere from $40 million to $50 million for the year. Is that still kind of your thinking?

It could be. If things go correctly, our way could be higher than that.

Okay. Great. Following up on some of your comments on Ashley Park, are you expecting any meaningful CapEx at the property to achieve some of that low-hanging fruit, or is it just a little simpler than that?

Yes. So, no heavy lift on any kind of renovation there. It would be light touch CapEx.

Got it. And you had some shifting assumptions in your sign-that-open ABR recognition timing. Should we expect kind of a quiet second, maybe even third quarter? Or how should we think about the cadence there?

Yes, it'll be the second half, and it'll build. More so in the third quarter.

Thank you. This concludes the question-and-answer session on today's conference call. Thank you for participating. And you may now disconnect.