Philip R Mays; Senior Vice President, Chief Financial Officer and Treasurer; CTO Realty Growth Inc
John Massocca; Analyst; B. Riley Securities
Good day. And thank you for standing by. Welcome to CTO Realty growth third quarter, 2024 earnings call.
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I would now like to hand the conference over to your host today, John Albright, President and CEO. Please go ahead.
Good morning everyone and thank you for joining us today for the CTO realty growth third quarter, 2024 operating results conference call. I'm joined today by Phil Mays, our Chief Financial Officer. Before we begin, I'll turn it over to Phil to provide a customary disclosure regarding today's call. Phil.
Thanks John. 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 our 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 reports, earnings release, supplemental and most recent investor presentation on our website at CTO re dotcom. With that, I will turn the call over to John.
Thanks, Phil. I'm pleased to report on another strong quarter with significant accomplishments across all areas of our business. In the quarter, we invested $191.3 million in a weighted average yield of 9.5% including $137.5 million for a three property portfolio of shopping centers located in North Carolina and Florida on the leasing front. We signed more than 200,000 square feet of new leases, renewals and extensions and an average rent of $21.'17 per square foot. Bringing our year-to-date leasing activity to 385,000 square feet at an average rent of $23.74 per square foot.
Our comparable lease spreads were 12% in the third quarter and 26% in the first nine months of 2024.
Notable new leases included approximately 24,000 square feet leased to the Pickler a pickle ball facility replacing the former airfare at the collection of foresight and 20,000 square feet of the former wework space to the Legacy Club. A high end membership only social club at the shops at Legacy Anchor Renewals included Ross at price Plaza, Barnes and Noble like the collection and Michael's at Ashford Lane.
With this leasing activity, we ended in the third quarter with leased occupancy of 95.8% an increase of 120 basis points from the previous quarter.
Before leaving the topic of leasing, I want to note that our signed not open pipeline continues to grow and now stands at $6.5 million in future rents just over 7% of our current in place cash based rent.
Now turning to investment, as mentioned earlier, we acquired three open air shopping centers for $137.5 million including Carolina Pavilion, Millennia Crossing in Lake Brandon Village. These properties are all aligned with our investment strategy as they expand our geographic reach and strengthen our presence in key growth markets, Carolina Pavilion as the Charlotte, North Carolina market and Brandon Village as Tampa Florida market to our portfolio. While Millennium Crossing grows our existing Orlando Florida presence combined. These centers added almost 900,000 square feet to our portfolio, growing our GL A by over 20%.
In addition to growing our property portfolio. This quarter, we also grew our structured investment portfolio, adding a first mortgage and a preferred equity investment in September. We originated a $43.8 million first mortgage loan with an initial term of two years and initial interest rate of 11%. This loan is secured by over 100 acres entitled for over 2 million square feet for a mixed use development located in Herndon, Virginia, near Dulles Airport and adjacent to the metro rail Silver Line station in August. We also completed a $10 million preferred equity investment as subsidiary of a publicly listed hospitality entertainment company with a dividend rate of 14% inclusive of both property acquisition and structured investments. Our year-to-date investment activity now totals almost $275 million at a weighted average yield of 9.1%.
With this amount of investment activity, we were pleased that we were able to efficiently raise capital that Phil will discuss. In a few moments on the disposition front, we sold Jordan Landing located in West Jordan Utah, resulting in 100% of our portfolio. Now being in the Southeast and southwest. With that, I will now hand the call over to Phil.
Philip R Mays
Thanks John.
On this call. I will briefly discuss our strength and balance sheet strong earnings and revised full year 2024 guidance.
Starting with the balance sheet. During the quarter, we issued approximately 6.9 million shares at a weighted average share price of $18.63 per share under our common stock ATM program, generating net proceeds of $125.7million. These equity proceeds along with $18 million of proceeds from our disposition of Jordan Landing provided over 75% of the capital needed to fund our $191 million of investment activity announced this quarter. Additionally, we closed $100 million million.05 year term loan. The funds from this new loan were used to term out $100 million that was outstanding on a revolving credit facility for which the company had already entered into. So for swaps utilizing these existing. So for swaps, the initial fixed rate of this $100 million million.05 year term loan was 4.68%.
Notably, our equity issues and term loan combined permitted us to incrementally improve both leverage and liquidity. We ended the quarter with net debt of 6.4 times a full term lower than last quarter. Net debt to total enterprise value of 43% and over $200 million of liquidity thereby providing a strengthened balance sheet to support continued growth.
Moving to financial results core FFO was (50¢) per diluted share for the quarter compared to (47¢) reported in the third quarter of 2023.
A FFO was 51¢ per diluted share for the quarter compared to 48¢ reported in the third quarter of 2023. This represents approximately 6% growth in both core FFO and A FFO.
As John discussed, the company continues to have positive leasing momentum and the result of this momentum is evident in our same property. No I growth of 6.3% for the quarter.
This growth was spread among our same property portfolio but primarily driven by growth at Ashford Lane. The collection at foresight, the shops at Legacy and price Plaza. Moreover, our signed not open pipeline of $6.5 million will continue to add no I growth as the new tenants take possession and commence paying rent.
Regarding our common dividend. As we announced in August, we distributed a third quarter regular cash dividend of (38¢) per share resulting in A Q3 A FFO payout ratio of approximately 75% consistent with past practice towards the end of November, we will announce our quarterly dividend for the fourth quarter.
Lastly, with regard to guidance, we are pleased that our increase in investment activity at attractive yields, same property. No I growth and attractive term loan pricing enables us to raise our guidance. While at the same time growing our common equity market capitalization and strengthening our balance sheet.
Accordingly, We are raising our full year 2024 outlook to a new core of fo range of $1.83 to $1.87 per share from $1.81 to $1.86 per diluted share. And raising the low end of our A FFO range to a new range of $1.96 to $2 per diluted share from $1.95 to $2 per diluted share. The assumptions that underlie our guidance are detailed in our earnings press release. However, I do want to note our increased investment guidance, the 274 million of investments close here today, we are again increasing our investment guidance to a new range of $300 million to $350 million million.
As a reminder, our investment outlook includes both property acquisitions and structured investments.
With that operator. Please open the line for questions
Operator
(Operator Instructions)
Rob Stevenson,Janney Montgomery Scott.
Rob Stevenson
Good morning guys. John, other than the John, other than the 14% dividend, what's the attractive thing about the $10 million hospitality investment and what's the collateral if they wind up not being able to pay over the next five years?
John J Albright
Rob, can you repeat that we lost temporary connection.
Rob Stevenson
Okay. Can you hear me
John J Albright
Now?
Yes, I can.
Okay.
Rob Stevenson
So other than the 14% dividend, what's the attractive thing about the $10 million hospitality investment? And what is the collateral if they can't pay over the next five years at some point?
John J Albright
Well, you had me at 14%. But, and basically, you know, it's a publicly traded company that just raised the quite a bit of capital on a rights offering. And might have had the preview the CFO at at CTO with the CFO there.
Okay.
Rob Stevenson
And you know, Phil talked about the acquisition, the raised acquisition guidance. How are you thinking about funding that, is that going to be fun through ATM issuance or there are more dispositions that you're teeing up and just won't close until early '25. How are you thinking about the, the funding of the equity portion of you know, deals over the next six months?
John J Albright
Well, now that now that we have our leverage down to a level that, you know, we haven't seen in quite a while. And as, as Phil mentioned, the liquidity that we have, you know, we'll, you know, probably use the line. But, you know, we obviously exceeded our investments here this year. There are a few smaller deals that we hope to close this year. But we'll, it would feel like we're in a great spot to you know, monitor the capital markets and and obviously it's dependent on finding acquisition, but you won't see us recycling as much as we have in the, in the past years.
Rob Stevenson
And how are you thinking about the remaining office asset versus selling today versus holding into the future? How is that sort of math looking like to you in terms of the optimization there?
John J Albright
Yeah, I mean, we're, we're, we're monitoring it. The tenant is, you know, utilizing it and they're, you know, thinking about their future plans at the same time that that asset is experiencing an incredible market environment in Albuquerque. It's, it's near the the missile range, it's near the Netflix Movie studios that are nearing completion. There's an incredible amount of housing so and the state needs office space, the the university needs office space and there's no one building offices as you know. So we're actually getting in a better, better situation. But the to answer your question, wait to find out how Fidelity wants to utilize it for the long term and we're just kind of waiting on them, but everything's been been going the right direction, but at some point, yes, we will exit it.
Rob Stevenson
Okay. And then, so you guys have talked about the $6.5 million of signed but not open leasing. When does that start to hit ffo and when are the, is it chunky or is it evenly sort of spread throughout when that comes online in 2025.
Philip R Mays
Yeah. So just for modeling purposes, if you wanted to kind of ratably ramp it up over the next 9 to 12 months, somewhere in that time period, kind of ramping it up, ratably will approximate how that'll come online.
Rob Stevenson
All right, that's helpful. And then last one for me, any known move outs of note at this point in 2025 in the portfolio.
John J Albright
No, I mean, the the only one that you know, really you can think of our that is, is strategic and that they don't have a renewal, right? And we already have two tenants that wanted higher rents and better quality tenants. So nothing, that's a problem. Everything is more of an opportunity.
Rob Stevenson
All right, thank you. Thanks guys for the time and have a great weekend.
John J Albright
All thanks Rob, you as well.
Operator
Craig Kucera,Lucid Capital Markets.
Craig Kucera
Hey, good morning guys. Obviously a pretty aggressive acquisition quarter and, and based on guidance, it looks like you could do another 25 to 75 million roughly for the rest of the year. Based on the yield assumptions looks like that would all be properties. But are you looking at any other additional structured finance investments?
John J Albright
We are looking at one, it's, it's smaller but it's very high quality. And it actually, it's very close to one of our assets. And so it would be a nice loan to own. We would love to own it. We just don't think we'll have an opportunity to because it's still, it's such high quality that it'll go for much lower cap rates and kind of what, what we're targeting. But, it's more strategic than just an investment. And then, you know, on the acquisition side, we have, you know, something in our line of sight that's smaller. But, you know, high quality,
Craig Kucera
Got it and, and with the sale of the medication credits this quarter, should we expect to see any more remaining earnings from real estate operations or is that effectively ceased?
John J Albright
That is in the rearview mirror?
Craig Kucera
All right,
John J Albright
I think that's 120 years.
Craig Kucera
Yeah, the changing gears. I want to talk about the $44 million mortgage investments, looking at that project up by Dulles. You know, it looks like there's at least at one point some potential hotel space. A lot of office is the collateral underlying loan all of the entire project or is it carved out towards maybe, you know, retail, multi family or something else?
John J Albright
No, it's all the property. The, the, the vast majority of the value there is multi family. As you can imagine, your top tier, multi family developers are lining up to buy sites from the developer and they're in contracts Lois and contracts for, you know, I would say 3 to 4 right now. And on the hotel side, they are looking to maybe develop that themselves. There's 160,000 square feet designed and permitted for retail that we would love to be helpful in that investment with a developer. As you know, we don't, you know, we're not a developer, but it's more like a Reston town Center opportunity. So, and then, and then part of the property is on top of the Fairfax, it's in Fairfax County on top of the metro station that's close to the Dulles.
And as you can imagine all the data, if this was a data center land, it would be worth, you know, $300 million million. So it's, it's a, it's an awesome development project they've been working on for '15 years, just imagine entitlements have taken that that long. And now it's now you're seeing dirt starting to starting to move,
Craig Kucera
Got it. So they, so they have broken ground at this point.
John J Albright
They've done more basically earthwork horizontal development as they're waiting for, you know, basically the the multi family developers to do the next stage.
Craig Kucera
Got it. And, and looking at the three property portfolio you acquired this quarter, you know, it looks like there's a lot of occupancy upside to where the assets have already been leased. Can you talk about maybe any sort of capex spend that you're expecting at those properties.
John J Albright
Yeah, so when we, when we bought it, you know, these leases were in place and so they've already been addressed as far as the capex. So we're very excited about, you know, what, what the transformation of this the Carolina Pavilion project is going to be because it's been, some of these boxes have been vacant for some time and now the tenants are just now getting to the build out outside side of it, but we took credit for the landlord side of it. When we act acquired it, the, the, the interesting thing after the acquisition is cons and, and big loss. We're not part of the signed leases that are going to open. But now we've gotten those, we're in the process of trying to get those spaces back. We we basically have multiple tenants that want that those boxes at better, more favorable rents than we bought the project under. So this is looking, you know, as a fantastic investment. So, you know, knock on wood, we feel like the execution here is going to be fairly easy and fairly fast.
All right, thanks, appreciate it. Thank you.
Operator
John Massocca,B. Riley Securities.
John Massocca
Good morning, everybody morning.
Maybe just kind of curious on the disposition of Jordan landing, kind of what drove the cap rate there? Just give it fully occupied property. In a, in a pretty high growth market, there's going to be more color on that particular asset in that sale.
John J Albright
Yeah, I mean,you're right, it's a vibrant market, is a smaller property and really is at home. Is it was the issue? So, we looked at, if we held on to it and in that home, something happened at home, you know, amount of time on Dems that home space and so forth, we decided, you know, let's just sell it is small property. So that, that's what's driving the higher cap rate.
John Massocca
Understood. And then, in terms of correct me if I misheard, but the lease up of the, the former Wework Space, is that a partial lease up or was that all of, of the previously vacated space?
John J Albright
Yes, about a third of it. And we're pretty excited about it. It's almost like a kind of a soho club, sort of a tenant. And they, they've gotten a great feedback and, and pre membership, investments. And so unfortunately, it was not going to open up until the latter part of 2025. So that income primarily from that space is going to hit 2026. And we're waiting a little longer to make an announcement in that market, you know, to help with the, the rest of the lease up of the Wework Space. So it's taking longer. But, you know, this is going to be exciting, exciting tenant for the property. You know, bringing a lot, a lot of activity there. So we're excited about it
John Massocca
And just because it sounds like you have some big close prospects for the remaining two thirds of the space there.
John J Albright
What we're going to, we're looking at doing is dem it. So it's going to be a lot of smaller tenants. Some of the larger tenants we've been talking to just taking longer. So we'd rather just kind of let's just kind of ground it out here and get it leased up.
John Massocca
And then maybe bigger picture. You know, have you seen any change just given some of the macroeconomic uncertainty around retailer demand for either their existing space or to kind of take over, you know, move outs or reposition space, etcetera.
John J Albright
Not really. I mean, the really, the only the softness that we're seeing is some of the restaurants sales are down. And, you know, we're, we're definitely monitoring that but, you know, as a, as a commentary on the economy, I would say on the restaurants, that's where you're seeing more of the, the challenges and the softness,
John Massocca
Any change in demand for backfill for those types of assets.
John J Albright
Well, yeah, so far there's no one that's really kind of like we're out sort of situations. I mean, we're in, we have, we're in lease negotiations for new ones, especially a legacy. So, but to answer your question, you know, the, the space that's the easiest to least and restaurant land is, is second generation. So if any of these tenants do succumb, we'll have a backfills readily available.
John Massocca
Okay. And then last one for me, I know you didn't provide 2025 guidance because we kind of think about same through and I growth for next year. Any kind of notable puts and takes there that could impact, you know, the comparisons versus what you're going to do this year.
John J Albright
You know, next year we're doing a lot of work because we've been so active on leasing side, the acquisition side investment side, you know, wait till the end of the year to kind of give you a better guidance. You know, there's a lot of moving, moving parts and you know, the good news is it's all good news.
John Massocca
That's fair and that's it for me. Thank you very much.
John J Albright
Thank you.
Operator
RJ Milligan,Raymond James.
R J Milligan
Hey, good morning guys. Most of my questions have been asked, but I really want to focus on the leverage. And John you mentioned and, and we saw in the release that leverage has come down pretty nice here. And as at one of the lowest levels it's been, and I'm just curious, how do you think about running leverage going forward? Given historically, you've been more willing to run a high leverage. But obviously as the company gets bigger, I'm just curious how, how you're thinking about running the balance sheet over the next two years.
John J Albright
Look. Yeah, we love the leverage being down. That that's the goal and we, the capital markets were, were fantastic for us in the last, you know, couple months where we're able to do that. So, so we would run leverage up only for the short duration for an acquisition opportunity. And then look to to rebalance. So where we are is a very comfortable sort of level level for our leverage. But, you know, we don't mind, you know, taking it up a bit if there's a great opportunity, but then look for an opportunity to bring it back down.
R J Milligan
Okay. That makes sense. That's it for me. Thanks guys.
John J Albright
Thank you
Operator
Gaurav Mehta, Alliance Global Partners.
Gaurav Mehta
Yeah, thanks. Good morning. I, I wanted to ask you on your asset recycling. I think earlier in the call, you said that not expect as much recycling going forward as in the past, just wondering within your portfolio. Are there any assets that that may be sold in the future?
John J Albright
You know that some of these smaller assets that we have talked about, You know, the Daytona assets, could be opportunities where we're just looking for scale now. And so we'll you continue to look at that, here at Winter Park, we have a mixed use property that's small. And the market is very strong here. We're just waiting for it to get a little stronger. So just more clean up on the size versus, you know, some sort of, you know, other opportunities, look if the pricing gets better and better. You know, there may be one that doesn't have a lot of growth in it and we may look to sell something if strategically makes sense but nothing on the horizon.
Gaurav Mehta
Okay. Thank you. That's all I had.
John J Albright
Great. Thank you,
Operator
Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect.
