CTO Realty Growth, Inc.

Good day and thank you for standing by. Welcome to the CTO Realty Growth fourth quarter 2023 earnings 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. We'll 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'd now like to hand the conference over to your host today, Matt Partridge, Chief Financial Officer. Please go ahead.

Good morning, everyone. Thank you for joining us for the CTO Realty Growth Fourth Quarter and Full Year 2023 Operation 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 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 release, quarterly 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, and good morning, everyone. We had a terrific fourth quarter of execution in nearly all aspects of our business, resulting in core FFO and AFFO per share growth of 41%, which was meaningfully ahead of our expectations and consensus estimates. Our strong fourth quarter drove a significant beat above the top end of our previously provided full-year guidance, fueled by fourth quarter same property NOI growth of 4.7%, Better than expected tenant retention and property level NOI at some of our more recently acquired properties that are not included in our same property statistics. Continued strength in leasing, where we generated comparable rent spreads of nearly 18% during the quarter and 7.5% for the year. And beneficial timing related to the flurry of dispositions we had to finish 2023. Overall, I'm pleased with the way our team executed as we worked our way back from some unexpected tenant departures early last year. I'm happy to say we're continuing to see that positive momentum carry forward into the first quarter of 2024, where we've had a very strong couple of months. The supply-demand balance that many people have highlighted as a multi-year tailwind for retail helped drive our strong leasing activity during the quarter. This is evidenced by our signing of nearly 100,000 square feet of new leases, renewals, options, and extensions, an average rent of $32.66 per square foot. To put that into perspective, this per square foot value for the fourth quarter was at least 23% higher than the average rent achieved in the first, second, or third quarters of 2023. In addition to our ability to push rates, quality of the leasing during the fourth quarter was relatively widespread, with the collection at Foresight and West Broad Village seeing the most activity in more than half of the rents coming from leading brands such as REI, Fidelity, UBS, Ford's Garage, and J.Crew. Our 18 percent comparable growth in new cash-based rents versus expiring rents is going to help push same-store NOI in 2024 and even more so in 2025, when we'll get the full benefit of some of the larger leases signed on acquired vacancy when we lap over the natural timing disruption. For the full year, the quality of our locations, strong demographics, and targeted lease-up strategies allowed us to sign nearly half a million square feet of leases, resulting in our signed but not open pipeline, totaling more than 6% of the portfolio cash-based rent, and it's growing. We ended the year with a modest increase to occupancy, finishing at 90.3%, and leased occupancy increased to 93.3%, both of which are a testament to our leasing activity, given that we've largely been selling 100% occupied assets. During the fourth quarter, we sold six properties for $64 million at a weighted average exit cap rate of 7.8%. These dispositions include a community shopping center in Fort Worth, Texas, a small format retail property in Henderson, Nevada, three single tenant retail out parcels at our Crossroads Town Center in Chandler, Arizona, and one of our two remaining single tenant office properties. For the full year, we sold nine properties for $87 million at a weighted average exit cap rate of 7.5% and generated total gains of sales of 6.6 million. On the investments front, it was a relatively quiet period. However, throughout 2023, we invested $80 million into four retail properties and one land parcel and originated two first mortgage investments totaling $30 million. In aggregate, we've invested at a blended going-in cash yield of 7.7%, which is notably above our 2023 disposition cap rate that was negatively impacted by the higher exit cap rates on two office property sales. As we close the book on 2023 and shift our focus on 2024, I'm very excited about some of the recent activity in our portfolio and the investment opportunities we're seeing in the market. From a transactions perspective, we are under contract with a non-refundable deposit to sell our mixed-use property in Santa Fe, New Mexico for $20 million. We anticipate this sale will close before the end of the quarter and the proceeds from this sale, combined with the restricted cash and seller financing proceeds from the most recent office sale, give us dry powder to acquire larger format retail properties that are more core to our strategy. To put some context around the early 2024 positive momentum, Politan Row, an established food hall experience in Atlanta, and Culinary Dropout, a well-known Sam Fox restaurant concept, both opened at Ashford Lane this month. And Fogo de Chow just opened last week to a very strong reception at West Broad Village in Richmond. Together, just these three tenants combined for approximately $1.4 million in annual base rent. In addition, just in the past week, we signed a ground lease on the undeveloped 10 acres we purchased less than six months ago that is adjacent to the collection at Foresight. In the same week, we sold our remaining non-income producing subsurface insurance for a gross proceeds of $5 million, which we intend to tax efficiently redeploy into an investment acquisition. With that, I'll let Matt highlight our portfolio, go into details about 2023 financial results and provide some more specifics regarding our 2024 guidance. And then we'll open it up for questions. Matt?