CTO Realty Growth, Inc.

Good day and thank you for standing by. Welcome to the CTO Q1 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Partridge. Please go ahead.

Good morning, everyone, and thank you for joining us today for the CTO Realty Growth First Quarter 2023 Operating Results Conference Call. With me today is our CEO and President, John Albright. Before we begin, I'd like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. 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 the 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 reports, earnings relief, supplemental, and most recent investor presentation on our website at ctoread.com. With that, I'll now turn the call over to John.

Thanks Matt. Good morning everyone and thank you for joining us. Today we'll provide a brief overview of our first quarter results, discuss the largely completed repositioning of our largest assets, Ashford Lane, and highlight the continued strength we're seeing on the leasing front. Our operating business continues to demonstrate fundamental strength driven by resilient consumer, no new supply, and strong tenant demand. As CTO, we experience high retention rates with our first quarter renewals, options, and extensions, generating comparable rent growth of 8.4%. The high tenant retention is a testament to the quality of our properties and demographic trends in our markets. These dynamics have us optimistic that we can continue to build on our very strong signed but not yet opened pipeline that will drive organic earnings in the years to come. This pipeline represents more than $4 million of net revenue that will come online in the next 18 months, or upwards of 15 cents per share of annualized FFO, and more than 300 basis points of future occupancy. This prospective earnings tailwind is in addition to the progress we've made with some of the near-term tenant disruptions we discussed during our earnings call in February. More specifically, We entered into a short-term lower rent amendment with Regal to keep them at our Beaver Creek Crossings property through the first quarter of next year in order to give us runway to find a replacement tenant and evaluate a multifamily alternative for the site. Additionally, the hall at Ashford Lane is set to open in May, which we believe will be well-received in the market and finally stabilize them for long-term success. We're also in negotiations with a replacement tenant for the WeWork location at our shops and legacy property outside of Dallas, which we think will be additive to the overall tenant mix and increase foot traffic at the property. As we look forward, we see more lease up and retention opportunities in the portfolio and plan to execute on the revitalization of some of the larger centers we've purchased similar to our approach with Asher Lane. Since we purchased Ashford Lane just before the pandemic in early 2020, we have repositioned the property as a premier lifestyle center in the infill perimeter sub-market of Atlanta, Georgia. As part of our repositioning efforts, we re-tenanted previously vacant units, up-tiered the overall tenant mix by turning over approximately one-third of the square footage with new tenants, and reintegrated the community with the creation of our well-received green space, the lawn. Nearly three years later, after working our way through disruptions of the pandemic in design and permitting and construction, we have had some notable tenants such as Super Rica, Hawkers, Jenny's Ice Cream, Sweetgreen, Hay Day, and Paris Baguette open their doors for business. And we have the Hall, Camp, Grana, and Culinary Dropout on deck to open later this year. Our focus now is to replicate this success at our more recent acquisitions, West Broad Village, located just outside of Richmond, Virginia, and the collection at Foresight, which is just northeast of Atlanta. While we're in the early days of our ownership, we've already signed new leases representing more than $600,000 of base rent at acquired vacant units at West Broad Village, and we're starting to see significant activity at the collection at Foresight, which is being leased by the same team that executed our Ashford Lane repositioning. As we've discussed in the past, we've exercised caution while setting our guidance, and we will continue to maintain a disciplined approach to deploying capital for the long-term advantage of our shareholders as we execute on our value-add business plan. In terms of investments, we acquired a 6,000 square foot property in phase two of the exchange at Gwinnett located just outside of Atlanta for a purchase price of $3.3 million and a going-in cap rate of 7.2%. We currently hold the development loan for the balance of the Phase II development, and we're under contract to acquire the remaining properties that constitute the retail portion of Phase II of the exchange at Gwinnett, which we expect will occur towards the end of the second quarter. Additionally, we originated a $15 million first mortgage secured by Founders Square Property located in Dallas, Texas. This investment is a great risk-adjusted yield with a sponsor we're very familiar with and who has a great vision for long-term success of the property. On the dispositions front, we did not have any property sales during the quarter, but we do anticipate more activity in the remainder of the year as we look to opportunistically exit some of our smaller assets and create more operational efficiencies by redeploying proceeds into larger assets with more operational upside. Overall, Our 2023 earnings guidance represents a year of near-term disruption for the issues we've previously discussed. We're very positive on the prospects for earning growth in 2024 and 2025 and beyond as we work to maximize the value of our existing portfolio through active asset management, leasing, and our strategic capital investment programs. With that, I'd like to hand the call back over to Matt.