CTO Realty (CTO) Sells Office Asset, Boosts Financial Resilience
In a significant move toward portfolio optimization, CTO Realty Growth, Inc. CTO has successfully closed the sale of Sabal Pavilion, a 120,500-square-foot single-tenant office property in Tampa, FL. The transaction, valued at $22 million, resulted in a loss on the sale of approximately $0.7 million. CTO concurrently provided a $15.4 million first mortgage to the buyer at a fixed interest rate of 7.5%, with a term of 179 days.
This marks the culmination of a series of strategic dispositions by the company in 2023, with a total disposition volume of $87.1 million year to date. The sale of Sabal Pavilion is a pivotal step in accretively divesting nearly all of CTO's legacy office exposure.
CTO Realty Growth's proactive approach to asset sales is evident in its year-to-date performance, having sold nine properties at a weighted average exit cap rate of 7.5%. The company generated gains on sales of $6.3 million.
The disposition of Sabal Pavilion is part of a broader strategy to optimize the portfolio and enhance financial flexibility. CTO Realty Growth intends to utilize the sales proceeds as part of a Section 1031 like-kind exchange, with the ultimate goal of repaying a portion of the outstanding balance under its revolving unsecured credit facility. The company currently holds approximately $6.9 million in 1031 restricted cash accounts following the Sabal Pavilion transaction.
In addition to the Sabal Pavilion sale, CTO Realty Growth announced the sale of three single-tenant outparcels in Chandler, AZ, earlier in December, achieving a combined price of $9.2 million. The outparcels were part of the Crossroads Towne Center property, featuring tenants such as Olive Garden, Old Chicago Pizza + Taproom and Mattress Firm. The weighted average exit cap rate of 5.9% and aggregate gains of approximately $3 million underscore the attractiveness of these dispositions.
Furthermore, recent dispositions in November and October, including the sale of Eastern Commons Shopping Center in Henderson, NV, for $18.2 million and Westcliff Shopping Center in Fort Worth, TX, at $14.8 million, highlight CTO Realty's commitment to refining its asset mix. These moves align with the company's strategy to recycle non-core assets and redeploy these proceeds into higher growth, larger format retail and mixed-use properties.
In conclusion, CTO Realty's strategic dispositions reflect a proactive approach to portfolio optimization, debt reduction and tax-efficient capital deployment. The company's commitment to refining its portfolio while strategically positioning itself for future opportunities bodes well for its financial resilience and long-term growth potential. Investors should closely monitor CTO Realty Growth as it continues to navigate the dynamic real estate landscape with a focus on value creation.
Shares of this Zacks Rank #3 (Hold) company have rallied 6% in the past three months but underperformed the real estate market’s growth of 14.2%.
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Stocks to Consider
Some better-ranked stocks from the REIT sector are Lamar Advertising Company LAMR and STAG Industrial, Inc. STAG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Lamar’s current-year FFO per share has been revised 1.7% upward over the past two months to $7.31.
The Zacks Consensus Estimate for STAG Industrial’s 2023 FFO per share has moved marginally upward in the past two months to $2.28 and indicates an estimated increase of 3.2% year over year.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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