CTO Realty (CTO) Sells Properties, Bolsters Financial Resilience
In a strategic move, CTO Realty Growth, Inc. CTO has closed the sale of Eastern Commons Shopping Center in Henderson, NV, marking another significant step in the company's initiative to optimize its portfolio. The 129,600-square-foot community shopping center was sold for $18.2 million, reflecting an exit cap rate of 7.4% and generating a gain of approximately $1.7 million.
According to John P. Albright, the president and CEO of CTO Realty Growth, this transaction was part of the company's ongoing effort to divest smaller non-core properties. Albright emphasized that the sale of Eastern Commons, the company's sole property in the Las Vegas market, aligns with its broader strategy to pay down debt while strategically waiting for larger format opportunities at attractive values.
The noteworthy aspect of CTO's disposition strategy is its intention to utilize the sales proceeds through a Section 1031 like-kind exchange. This approach allows the company to defer capital gain taxes, providing a tax-efficient method for optimizing its portfolio. Following the completion of the 1031 Exchange, CTO plans to use the available proceeds to repay part of the outstanding balance under its revolving unsecured credit facility. As a result of the Eastern Commons transaction, the company now has approximately $53.7 million held in 1031 restricted cash accounts.
The Eastern Commons sale is part of a series of successful dispositions by CTO Realty Growth. In October, the company closed the sale of Westcliff Shopping Center in Fort Worth, TX, and Reston Metro Center II in Reston, VA.
The Westcliff property, a 134,750-square-foot single-community shopping center, was sold for $14.8 million, resulting in an exit cap rate of 5.2% and a loss on sale of approximately $0.9 million. Albright stated that the proceeds from this sale would be used to pay down debt, further enhancing the company's balance sheet and generating improved free cash flow.
Similarly, the sale of Reston Metro Center II, a 64,319-square-foot single-tenant office property leased to General Dynamics, was closed for $18.5 million. This transaction yielded an exit cap rate of 7.2% and generated a gain on sale of approximately $1.3 million. Albright highlighted that this sale is part of their strategy to recycle non-core assets into core retail shopping center properties in business-friendly growth markets.
In conclusion, CTO Realty's strategic dispositions showcase 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 5.7% in the past month but have underperformed the real estate market’s growth of 11.9%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Tanger Factory Outlet Centers SKT and Urban Edge Properties UE. While Tanger Factory Outlet Centers sports a Zacks Rank #1 (Strong Buy), Urban Edge Properties carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ current-year FFO per share has moved marginally northward over the past week to $1.94.
The Zacks Consensus Estimate for Urban Edge Properties’ ongoing year’s FFO per share has been raised marginally over the past two months to $1.19.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Tanger Inc. (SKT) : Free Stock Analysis Report
Urban Edge Properties (UE) : Free Stock Analysis Report
CTO Realty Growth, Inc. (CTO) : Free Stock Analysis Report
