CTO Realty Growth, Inc. (CTO): SWOT Analysis [Nov-2025 Updated]

You're looking at CTO Realty Growth, Inc. (CTO), and the picture is split: operationally, they are crushing it in the Sun Belt with occupancy at 94.2% and a compelling 8.8% dividend yield, but the financial statements show real stress. While they've raised their 2025 Adjusted Funds From Operations (AFFO) guidance to a strong $1.96 to $1.99 per share, their GAAP net income is nearly flat at just $0.03 per share, and their 6.9x leverage ratio is high. You need to understand how this cash-flow strength squares up against the high debt and rising capital costs-like the expected 4.7% interest rate jump-before making your defintely informed decision.

CTO Realty Growth, Inc. (CTO) - SWOT Analysis: Strengths

High Portfolio Occupancy and Leasing Momentum

CTO Realty Growth demonstrates a significant operational strength through its consistently high portfolio occupancy and strong leasing activity. As of the end of the third quarter of 2025 (Q3 2025), the company's total portfolio leased occupancy stood at a solid 94.2%. This is a defintely strong number in the retail real estate sector, showing consistent tenant demand for its properties.

The company's leasing team is executing well, having leased a substantial 482,000 square feet year-to-date through Q3 2025. This high occupancy rate is a key indicator of stable, reliable cash flow, which is crucial for a real estate investment trust (REIT).

Strong Rent Growth and Embedded Value

The most compelling financial strength is the company's ability to drive significant rent growth on new and renewed leases. For comparable leases signed year-to-date through Q3 2025, CTO Realty Growth achieved a positive cash rent spread of 21.7%.

This double-digit spread is a clear signal of two things: the quality and desirability of the underlying real estate and a successful strategy of marking below-market rents up to current market rates. Here's the quick math: a 21.7% increase on a new lease means a substantial, immediate boost to the property's net operating income (NOI) and overall valuation.

Furthermore, the company has a substantial 'signed-not-open' (SNO) pipeline, representing $5.5 million in annual cash base rent that has been leased but is not yet generating revenue. This pipeline, which represents 5.3% of the in-place cash base rent, acts as a built-in earnings tailwind, with the majority of the revenue expected to commence in 2026.

Raised Full-Year 2025 AFFO Guidance

Management's confidence in operational execution is reflected in the raised full-year 2025 Adjusted Funds From Operations (AFFO) guidance. Following the strong Q3 2025 performance, the company raised its AFFO guidance to a range of $1.96 to $1.99 per diluted share. This metric, AFFO, is the most commonly used measure of a REIT's operating performance and ability to pay dividends, essentially showing the cash flow available to shareholders.

The upward revision signals that the market should anticipate higher distributable cash flow than previously expected, driven by the leasing spreads and overall portfolio performance. This is a powerful signal to the market that the business is performing better than its initial projections.

Attractive Common Stock Dividend Yield

For income-focused investors, CTO Realty Growth offers an attractive annualized common stock dividend yield of approximately 8.8%. This high yield is a core strength, positioning the stock as a compelling option for those seeking significant current income.

The company's dividend policy is consistent, with a declared quarterly cash dividend of $0.38 per share for the fourth quarter of 2025. The low end of the company's Funds From Operations (FFO) guidance for 2025 provides a healthy 122% dividend coverage ratio, suggesting the payout is well-supported by operating cash flow.

Strategic Focus on High-Growth Sun Belt Markets

CTO Realty Growth's portfolio is strategically concentrated in high-growth Sun Belt markets, primarily across the Southeast and Southwest U.S., which provides a demographic tailwind for its retail properties.

The markets where CTO operates are characterized by superior demographics compared to the national average. For example, the average annual household income in CTO's markets was approximately $141K in 2024, significantly higher than the US average of $113K.

This focus on areas with strong population and job growth helps ensure sustained demand for retail space and justifies the high positive rent spreads. The company's portfolio is concentrated in:

• Atlanta, Georgia
• Phoenix, Arizona
• Dallas, Texas
• Tampa, Florida
• Daytona Beach, Florida

This geographic positioning is a long-term structural advantage, as these regions continue to see net migration and economic expansion, supporting resilient tenant performance and future rent increases. What this estimate hides is the potential for increased property taxes in high-growth areas, but the demand is undeniable.

CTO Realty Growth, Inc. (CTO) - SWOT Analysis: Weaknesses

GAAP (Generally Accepted Accounting Principles) net income remains very low at $0.03 per diluted share in Q3 2025.

You need to look past the top-line revenue growth and focus on the bottom line, which is where CTO Realty Growth shows a clear weakness. The company's GAAP (Generally Accepted Accounting Principles) net income attributable to common stockholders for the third quarter of 2025 was only $0.03 per diluted share. Honestly, that's a razor-thin margin for a real estate investment trust (REIT) of this size.

While REITs often prioritize Funds From Operations (FFO) or Adjusted FFO (AFFO)-which were much stronger at $0.48 and $0.50 per diluted share, respectively, in Q3 2025-the low GAAP net income highlights a fundamental issue. It means that after accounting for non-cash expenses like depreciation and amortization, the true accounting profit is barely positive. This low net income makes it defintely harder to build up retained earnings and strengthen the balance sheet organically.

Negative P/E ratio of -14.21, indicating an accounting loss over the last four quarters.

The Price-to-Earnings (P/E) ratio is a quick snapshot of market sentiment versus accounting profitability, and CTO Realty Growth's ratio is a flashing warning sign. As of late October 2025, the P/E ratio stood at a negative -14.21. This negative number is a direct consequence of the company reporting a net accounting loss over the trailing twelve months, which is a significant weakness for any publicly traded company.

A negative P/E tells investors that the company is losing money on an accounting basis. Here's the quick math: investors are paying a price for a stock that has no GAAP earnings to back it up. While the market often looks at FFO for REITs, a sustained negative P/E can scare off more conservative investors and institutions who rely on traditional profitability metrics. It's a drag on valuation compared to peers with positive earnings.

Significant reliance on debt financing with a debt-to-equity ratio around 1.11.

CTO Realty Growth relies significantly on debt to finance its property portfolio, and this is a major structural weakness, especially in a rising interest rate environment. The debt-to-equity (D/E) ratio, which measures total liabilities against shareholder equity, was around 1.11 as of November 2025. This means for every dollar of shareholder equity, the company has about $1.11 in debt.

This level of leverage is higher than many conservative REITs. To be fair, real estate is a capital-intensive business, but a high D/E ratio increases financial risk. Plus, the high debt level is reflected in the company's total liabilities, which reached $665.1 million as of September 30, 2025, up from $580.3 million in the prior year. This debt load makes the company more vulnerable to economic downturns or unexpected increases in borrowing costs.

The table below summarizes the key financial metrics that underscore this high leverage:

Net debt to Adjusted EBITDA leverage ratio of 6.7x is at the higher end of their target range.

The Net Debt to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) ratio is the best measure of a company's ability to service its debt from its core operations. CTO Realty Growth ended Q3 2025 with this ratio at 6.7x. What this estimate hides is that while this is a slight improvement from the 6.9x reported at the end of Q2 2025, it still sits squarely in the upper half of their typical operating range of 6x to 8x.

Operating so close to the upper limit of your target range-the 8x mark-leaves very little margin for error. If operational performance dips, or if the company takes on more debt for an acquisition, the ratio can quickly move past the 7x-7.5x mark, which is where lenders start to get nervous. This high leverage is a structural headwind that limits immediate financial flexibility and increases the cost of future borrowings.

The key leverage risks are clear:

• Increases interest expense, which reduced Q3 2025 net income.
• Limits capacity for large, opportunistic acquisitions without issuing new equity.
• Exposes the balance sheet to higher refinancing risk for the debt maturing in 2026.

The company has a strong liquidity position of $170.3 million as of September 30, 2025, but that cash is vital for managing this heavy debt structure. Finance: monitor the fixed charge coverage ratio closely for any deterioration by the next earnings call.

CTO Realty Growth, Inc. (CTO) - SWOT Analysis: Opportunities

You're looking for where CTO Realty Growth, Inc. (CTO) can drive tangible growth in the near term, and the answer is clear: the company has several self-help levers-a strong leasing pipeline, a disciplined acquisition strategy, and a non-core management fee stream-that are set to translate into higher cash flow and better shareholder returns in 2025 and 2026. This isn't just theory; the numbers are already locked in.

Future Revenue from a Signed-Not-Open (SNO) Pipeline of $5.5 Million in Annual Base Rent

One of the most concrete opportunities for CTO is the signed-not-open (SNO) pipeline. This is money in the bank that simply hasn't started flowing yet-leases are signed, but the tenant hasn't moved in or started paying rent. As of the third quarter of 2025, this pipeline stood at a robust $5.5 million in future annual base rent (ABR).

To put that in perspective, this SNO pipeline represents approximately 5.3% of the company's in-place annual cash base rents. This is a significant built-in revenue ramp. The commencement schedule gives us a clear timeline for when this new income hits the books, which is a defintely positive tailwind.

• 76% of the SNO ABR is anticipated to be recognized in 2026.
• 100% of the SNO ABR is anticipated to be recognized by 2027.

Capital Allocation Plan Targets $100-$200 Million in New Acquisitions at High Cash Yields (8.00-8.50%)

The company is sticking to a disciplined capital allocation strategy focused on accretive acquisitions. For the full year 2025, CTO has guided for investments, including structured investments, totaling between $100 million and $200 million. This is a massive opportunity to deploy capital into high-growth markets, primarily in the Southeast and Southwest U.S. where they focus on open-air retail centers.

The key here is the target yield. CTO is not just buying for the sake of it; they are seeking a weighted average initial cash yield between 8.0% and 8.5%. This is a strong return profile, especially when compared to the cost of capital for many of their peers, and it immediately boosts cash flow per share. Here's the quick math: a $150 million acquisition (the midpoint of their target) at an 8.25% yield adds over $12.3 million in annual cash net operating income (NOI).

External Management of Alpine Income Property Trust, Inc. (PINE) Provides a Separate, Recurring Income Stream

The relationship with Alpine Income Property Trust, Inc. (PINE), a publicly traded net lease REIT, is a valuable source of non-property revenue. CTO externally manages PINE and also holds a meaningful equity interest in the company. This creates a separate, recurring management fee income stream that diversifies CTO's revenue away from just property rents.

The core of this income is a 1.5% annual base management fee on PINE's total equity, plus potential incentive fees. To be fair, a recent development in November 2025 saw CTO's management subsidiary agree to a partial waiver, reducing the base management fee to 0.75% per annum on the net cash proceeds from PINE's new preferred equity offering. Still, this fee income is a high-margin, low-overhead business line that provides stability and a clear alignment of interest between the two companies.

Share Repurchase Program (New $10 Million Authorization) Can Boost Earnings Per Share (EPS) and Signal Confidence

Management's confidence in the stock's valuation is a powerful signal. In September 2025, the Board of Directors approved a new common stock repurchase program authorizing the company to buy back up to $10 million of its shares.

This follows the successful completion of a previous $5 million program, where approximately $4.3 million of stock was repurchased in just the 60 days prior. Repurchasing shares when the stock is trading below its net asset value (NAV) is a highly accretive capital allocation move. It reduces the share count, which mechanically increases Earnings Per Share (EPS) and Funds From Operations (FFO) per share, directly benefiting existing shareholders. Management views this as 'the best acquisition investments is our own stock.'

CTO Realty Growth, Inc. (CTO) - SWOT Analysis: Threats

Here's the quick math: the operational cash flow (AFFO) looks great, but the GAAP net income is a clear red flag. It tells you they are generating cash from operations but facing high non-cash charges or debt costs that hit the bottom line.

Your next step should be to run a sensitivity analysis on that 4.7% interest rate adjustment to see its exact impact on the 2026 AFFO guidance. Finance: update 2026 AFFO model with the higher debt cost by next Wednesday.

Rising Cost of Capital: The March 2026 Debt Adjustment

The most immediate, quantifiable threat is the step-up in your long-term debt costs. CTO Realty Growth secured a $150 million term loan financing in September 2025, which included a new $125 million loan due in 2030 and a $25 million upsize to an existing loan. This debt initially carries a fixed rate of approximately 4.2% due to existing SOFR swap agreements (interest rate derivatives used to manage floating-rate debt risk).

But here's the problem: those initial swaps mature in March 2026. The rate is then scheduled to adjust up to approximately 4.7% based on current leverage ratios, as the company transitions to existing forward SOFR swap agreements. That 50 basis point jump on a significant portion of your debt will directly erode your Adjusted Funds From Operations (AFFO) in 2026. For context, Q3 2025 Net Income Attributable to the Company was only $2.9 million, down from $6.2 million in the prior year period, a decline partially driven by higher interest expenses. Every basis point matters.

Exposure to General Capital Market Volatility

Even with forward swaps in place, the company remains highly exposed to broader capital market volatility, which directly impacts property valuations and future acquisition funding. Your net debt to Pro Forma Adjusted EBITDA ratio stood at 6.9 times as of June 30, 2025, which is on the higher end for a retail REIT. This leverage makes the company's enterprise value more sensitive to interest rate fluctuations and cap rate expansion (the inverse relationship between property value and net operating income).

Higher interest rates make all real estate acquisitions less accretive (immediately profitable) and can depress the value of your existing portfolio. Plus, any sustained market downturn could restrict access to the capital markets for new equity or debt, forcing you to slow your growth strategy. You defintely don't want to be forced to sell assets in a soft market to manage liquidity.

Competition for High-Quality Retail Assets

Competition is fierce for the high-quality, open-air shopping centers CTO targets in the Southeast and Southwest U.S. Management has noted the competitive environment for acquisitions remains intense as more investors return to the retail property sector. This competition can lead to a phenomenon called cap rate compression, where the price of an asset rises relative to its Net Operating Income (NOI), thus lowering the yield.

CTO is guiding for new investments in 2025 with a target initial cash yield of 8.00% to 8.50%. If competition drives property prices higher, maintaining that yield target becomes harder, forcing the company to either accept lower-yielding deals or slow its acquisition pace. The market already prices CTO at a discount, trading at a 2025E Core FFO multiple of 9.4x versus the peer average of 12.3x, suggesting investors are wary of the company's ability to execute its growth strategy at attractive yields.

Risk of Losing Real Estate Investment Trust (REIT) Status

As a Real Estate Investment Trust, CTO Realty Growth must meet specific Internal Revenue Code requirements, primarily related to the source of its income and the nature of its assets. Failing these income or asset tests, even temporarily, would result in the loss of its REIT status, subjecting the company to corporate income tax. This would be a catastrophic blow to shareholder returns.

The company explicitly includes the risk of being unable to remain qualified as a REIT in its forward-looking statements. While the company's core business is in qualifying real estate, its ancillary businesses-like management services for Alpine Income Property Trust or commercial loan investments-must be carefully managed to ensure they do not violate the 75% and 95% gross income tests. The loss of this tax-advantaged status would immediately wipe out a significant portion of the cash flow available for dividends, which is currently yielding approximately 8.8%.