Q1 2021 CTO Realty Growth Inc Earnings Call
Good day and welcome to the CTO Realty growth first quarter 2021 the earnings conference call.
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After todays presentation, there will be an opportunity to ask questions to ask questions. You May Press Star then one on a touchtone phone.
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I would now like to turn the conference over to John Albright, President and CEO. Please go ahead.
Thank you operator, good morning, everyone and thank you for joining US day for the CTO royalty growth first quarter 2021 operating results conference call.
With me is Matt Partridge, our Chief Financial Officer, before we begin I'll turn it over to Matt to provide the customary disclosures regarding today's call Matt. Thanks, John 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 for its forward looking statements and we undertake no duty to update these statements.
And the rest of the 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 and our earnings release on our website at <unk> Dot com.
With that I'll turn the call back over to John Thanks, Matt We had a nice start for the year as we invested in two new properties and terrific growth markets sold two properties at attractive cap rates completed our up listing to the NYSE continue to monetize non income producing assets and made good progress on a number of operational initiatives.
Across the portfolio.
Both of our acquisitions in the first quarter were in new markets for us with strong demographics and great long term growth trends, our first acquisition, which is the 183000 square foot center was acquired for $20 million of in densely populated sub market of <unk>.
Salt Lake City, Utah and anchored by at home in Burlington. Our second acquisition is in the Henderson Submarket of Las Vegas, and a shadow anchored by trader Joe's and anchored by seafood city and at home, we acquired the property for $18 $5 million of totals approximately of 147000 square feet and include the.
Single tenant of our parcel lease too.
To all of <unk>.
In total we invested $38 5 million during the first quarter into two high quality multi tenant retail properties at a weighted average cap rate of seven 9% and average price per square foot of $117 on the desk.
This is side of things, we sold our mode southwest Grill in Jacksonville, Florida, and two tenant property and Brandon, Florida for a combined sales price of $4 9 million at a weighted average cap rate of six 4% the.
The net spread on our investments, which compares our weighted average cap rate of the dispositions of funded our acquisitions of against our weighted average acquisition cap rate was more than 130 basis points and represent a comparative NOI increase of approximately 20%.
In addition to our Q1 dispositions.
We've continued the asset sales momentum into the second quarter, where we recently closed on the sale of the Burlington in North Richland Hills, Texas to Alpine for a sales price of approximately $11 5 million and an extra cap rate of seven 3%.
As of the end of the quarter. Our income property portfolio consisted of 27 properties comprising approximately two 8 million square feet of rentable space and is located in 12 states.
The portfolio was 93% occupied and some of our top tenants include Wells Fargo Fidelity for motor credit channel dynamics and at home with at home moving into our top 10 of US as a result of our two first quarter acquisitions from a geographic perspective more than 30% of our <unk>.
<unk> ran comes from our largest state of Florida, which is benefiting from the accelerating population growth and companies relocating to the state as a result of tax and business friendly policies.
Nearly 90% of our portfolio of rents come from Msas with over a million people and approximately 85% of rents come from urban land Institute. The top 30 markets. We think the combination of these two data points reflects the quality of the markets, we're investing within and the potential for positive supply demand dynamics.
Over the long term when combined with the support of demographic trends and strong positioning of our assets. We are excited about the potential for our portfolio of long term success.
In terms of non income producing assets. We did have success monetizing more than 25000 acres of sub surface interest for net proceeds of $1 9 million in the first quarter.
While it was a quiet quarter regarding land sales, we are building some momentum with all of our land sell pipeline related to our land joint venture, where we still own approximately 600 acres of land.
Finally, we continue to focus on our property repositioning programs of leasing initiatives, while we made solid progress during the first quarter of note where three of the design phase of Ashford line rebranding and we are starting to see increased leasing activity at the property to provide some figures for context, we or at least are negotiating an LOI.
With more than five different tenants so while still in the early stages with some of the opportunities. There has been a very positive reception to what we're doing with the property.
We also anticipate the previously announced expansion of crowds on the beach in Daytona Beach.
To finish up the design process and began expansion in the back half of the year.
<unk> and our other Daytona of base beside restaurants have seen extremely strong sales of Florida has continued to see an influx of vacationers and people relocating for a number of reasons and there are no signs of that trend slowing some of their expansion can't come soon enough of.
Overall within the quarter, we executed new leases of renewals or extensions of more than 133000 square feet and we're looking forward to announcing additional leasing activity in the coming months.
With that I'll now turn it over the call to Matt to discuss our financial results and balance sheet activities.
Thanks, John the company continued to experience excellent rent collection results during the first quarter collecting 100% of contractual base rent.
Total revenues for the first quarter of 2021 were $14 $7 million of 14, 6% increase over the first quarter of 2020.
Driven by a 4% increase in revenues associated with our income property portfolio and $1 $9 million of revenues from the sale of subsurface interest John previously referenced.
The revenues within the quarter were also impacted by the timing of asset sales in the fourth quarter and the subsequent redeployment of the proceeds late in the first quarter, which will normalize as we move into the second quarter.
G&A expense in the first quarter was relatively flat, increasing one 3% as compared to the first quarter of 2020.
For the first quarter of 2021 funds from operations were $5 $2 million or 89 cents per share and adjusted funds from operations were $5 $7 million of 97 cents per share.
Everybody that our year over year per share comparisons of materially impacted by the one 2 million shares issued as part of the special distribution related to the company's REIT conversion that occurred on December 21 2020.
Our <unk> in the first quarter was also positively impacted by approximately $220000 of repayments of deferrals related to the previously mentioned rent deferral agreements. We do anticipate of continued positive impact to our <unk> in future periods of 2021 from the scheduled repayments of previously deferred rent with the second quarter of 2021.
Presenting the height of the repayment obligations.
As previously announced the company paid the first quarter regular cash dividend of $1 per share on March 31 to shareholders of record on March 22nd and as we highlighted in yesterday's press release, our board of Directors has approved and the company has declared a second quarter cash dividend of $1 per share to be paid on June 30 of 2021 to stockholders of record.
As of the close of business on June 21, 2021.
Our second quarter cash dividend represents a 300% increase year over year, when compared to the company's second quarter of 2020 cash dividend and an annualized yield of approximately seven five per cent.
We ended the quarter with total cash and restricted cash of $5 3 million and total long term debt outstanding of 287 $3 million net debt to total enterprise value at quarter end was approximately 48%.
Within the quarter, we originated a new five year $50 million unsecured term loan at an initial fixed interest rate of 172%. This term loan of allowed us to bring in and of new banking partner extend our debt maturity profile and provided ample liquidity to repay the mortgage secured by our wells Fargo occupied property in Raleigh, North Carolina.
Ahead of the scheduled maturity date in April.
Looking forward to the balance of 2021, we are reaffirming our guidance, which suggests increasing transaction activity as we move throughout the year with dispositions still largely focused on the sale of single tenant properties of <unk>.
The 21 total disposition volume guidance continues to be $75 million to $125 million.
With expected exit cap rates falling into a range between $6, three 5% and 675%.
We anticipate corresponding acquisition volume as we redeploy disposition proceeds with target investment yields between six 5% and seven 5%. Although this could move higher as our pipeline continues to firm up.
2021, <unk> per share is anticipated to be between $3 80 and.
The $4 10 per cent per diluted share and <unk> per share guidance of $3 90 to $4 20 per diluted share.
I'll remind everyone that this guidance does not include any additional assumptions for outside equity it can be heavily influenced by the timing of dispositions and the subsequent redeployment of proceeds and is subject to the future performance of our current tenants from perspective tenants and includes the full year dilutive effect of the one 2 million shares issued as part of the company's special distribution related to the <unk>.
Version that I will turn the call back over to John Thanks.
Thanks, Matt we're off to a good start of the year and we have some very exciting opportunities to continue positioning ourselves as one of the highest quality of diversified Reits in the industry.
I wanted to thank our shareholders for their continued support and at this time, we will now open it up for questions.
Operator.
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Operator tell them.
The first question comes from Rob Stevenson with Janney. Please go ahead.
Hey, good morning, guys the guys.
Good morning, sorry about that.
<unk> delay not sure of what happened of our operator, but.
We're here.
Sure.
Rob you there.
Okay.
That.
Yes, we can hear you Rob sure Okay.
So John can you talk a little bit about the pipeline right now.
It's sort of timing the offset the sales declined as the how quickly you expect to be able to backfill that NOI.
And what the.
From the standpoint of.
Some of the land sales is it is that going into the funding as well that youll need to replace place.
Yes, so in general we have the good pipeline of acquisitions that were actively pursuing.
More in the due diligence phase.
Hopeful we like kind of what we have in front of us.
Hopefully, we can kind of close on it.
And that will be.
Guess pretty far down the road on the acquisition side.
And once we know we have something that we're looking like it's going to go to closing will.
Accelerate some of the dispositions that we want to do so we feel like the timing of acquisitions of dispositions will be pretty good for us.
And then on the land side, we're going to start becoming a little bit more aggressive in moving out of the land.
A lot of these contracts are taking the long time, we're getting good activity, but.
As people that really want a longtime for due diligence and closing and we're going to try to accelerate that but were not really depending on the land to fund the acquisitions because we just as you know have so much.
You of single tenant properties one of the monetize.
So so we have plenty of that so if we get some land sales done Dell of just being on top of kind of what we have in the plan.
Okay, and then what's left in the CTO portfolio that might appeal to pine from both an asset and a pricing standpoint.
After the transaction infection, Yeah, I mean, just the kind of gave you probably of broad brush numbers, maybe it's kind of in the.
$20 million to $50 million range.
That could be of possibility for for pine down the road.
And given what's hot what's your pipeline looks like is there a chance that additional sales would.
Would wind up being in 2021 or is that more likely to be in 2022 as you re as you backfill the pipeline pipeline.
It is probably late 'twenty or 'twenty one.
Okay I appreciate the time guys. Thank you.
Okay.
Okay.
The next question comes from William All of Ari, who is a private investor. Please go ahead.
Hi, John and Matt Good morning.
Good morning, Bill planning of.
Yes.
I wanted to ask regarding.
In light of what the New administration is looking at in the Washington, what kind of activity are we looking at the opportunity zone properties, we still kind of.
Is anything happening on that it seems to be a way to go for some future investment for for.
For folks.
So.
We've been talking with.
It's funny the opportunity zone structure, we thought was going to have an incredible amount of lags in capital chasing an opportunity zone investments, but the opportunity the zone bonds that have been raised.
They've had.
The the funds that they've raised haven't been as much as they thought and are as you know some of the opportunity zones around the country or in the areas that.
Sure.
The much larger msas like for instance, a good part of.
Washington D C is.
Is there an opportunity zone.
The Alexandria, Virginia.
Places that.
A lot of the funds or want to focus on the larger msas versus smaller msas like Daytona Beach. So.
So to answer your question there hasnt been as much activity as we would of thought.
But having said that there are a couple of that we've run into that are looking at some of our.
Land holdings for that.
Yes, there seems to be a lot of focus on the.
The low income housing or whatever I'm looking at the opportunity zones as the as the vehicle and I was wondering.
If you were getting more activity in that direction. So that we can move more of that land.
<unk>.
Okay.
That said I would I'd ask how are we in our peer group.
<unk> regarding our.
Our book value to us.
The market value.
We are we in the mid range of where do we stand whereby at $8 or so low or a book value.
The market.
So the DSO.
So obviously.
We're closer to book the book than we have in a long time, and I think commodity to read obviously.
Made debt kind of GAAP narrow a bit but look the of what we look at is <unk>.
<unk> multiple and there was only the second quarter of being a REIT and so.
The people, who havent looked at us as a REIT are starting to look in and when we compare ourselves that way you know were very low low valued in the market compared to.
The other Reits and so we want to kind of get the story out people start looking at us on the asset.
Multiple basis and I think.
I think we'll be in good shape.
Okay. Thank you.
Thank you Bill.
Okay.
As a reminder, if you have a question press Star then one to be joined the queue. The next question comes from Craig <unk> with B Riley Securities. Please go ahead.
Okay.
Hey, good morning, guys.
Matt I think you were expecting about 400000 of deferrals in 2021 last quarter.
You brought in a little north of 200000 this quarter second quarter looks higher can you give us an update of what you're expecting for the whole year.
At this point, yes, it's actually a little bit of higher than that Craig.
For the full year I think it's going to be probably closer to 700 750000 next quarter, it's going to be around 400000 in and of itself.
Okay. So the good thing is is we're on the other side of all of the deferrals in all of our tenants are back to there.
True.
For all of rats, and so there was no impact from deferrals in this quarter other than the repayments, which we expect obviously the to wrap up here in the second quarter.
Got it so that that will just leave the stub I think of about 300000, and then kind of post 'twenty one is that correct.
Yes, it'll be a.
Little bit less of that so some of the got pulled forward into 2021. So in the in 2022, we're expecting about 100000, and then closer to 35000 in 2023 and that will resolve all of it for all of repayments.
So the bulk of it should come in the second quarter.
And obviously, we had a decent amount of the first quarter of this year.
Okay.
That's helpful.
I'd like to talk about your leasing activity this quarter.
Not a ton of leases, but you do.
The execute reasonably well can you give us a sense of where the leases were typically executed versus prior rents on either of cash or GAAP basis.
A lot of the was with tenants who are doing.
Early exercising of of renewals.
You know on the with regards to new leases they were.
For a very accretive to our acquisition of underwriting.
And if I had to kind of handicap kind of where it was.
Somewhere of 10% to 20% above kind of acquisition underwriting as far as for lease up of vacant space that we bought.
Sort of an acquisition.
Okay. That's helpful. Thanks.
Well just with housing booming as it is can you give us a sense of how much land in the JV is zone for residential I know theres. The large industrial piece Thats still there, but is there much industrial residential left.
Unfortunately, not because as is <unk>.
Your point.
Residential land it would be flying off the shelves.
So.
With regards to the industrial piece given that that's a.
Large component of the portfolio of the good news is.
There are some industrial land trades going on about 20 miles from from our park.
Were really high.
Tom.
Per acre prices, so we're starting to see activity from.
Developers, who weren't able to buy that particular site and are discovering kind of the value proposition of our land. So yeah, I mean like literally in the last couple of weeks. We've we've had people come out of property tours dig in.
So that's good and then the the the other large piece of the 177 acres around buggies.
Barclays has opened the people who have gone to see you just.
Extremely surprised at how incredible amount of energy there and how busy it is people coming from 90 miles away and further so it's a real destination. So that's helped activate decided debt, but it's really.
A little bit difficult fine on the retail developers these days, who will take on that kind of size property. So we're looking at other ways to kind of.
Parcel out of the property.
That monetize.
Got it.
You've made sort of of strategic shifted pine and maybe exiting or at least reducing your exposure to single tenant office are you thinking at all about recycling capital out of the remaining single tenant office at Cts.
Eventually.
So.
If if we find some really good acquisition opportunities.
CTO.
We'll have it will not be shy about taking advantage of it and use that as an opportunity to to bring forward some monetization.
So eventually yes.
It's really acquisition dependent.
Got it and I know you don't have a lot of leases rolling over in 'twenty, one but are any of those single tenant office or are they predominantly in retail.
The process, mostly retail.
Not not all of the single tenant office side.
Okay great.
And I know you mentioned that you've made some some real progress at the at Ash.
Ashford Lane are.
Are you undergoing any strategic redevelopment of Westcliff center or are you basically looking just to kind of lease up the existing space more or less as it is.
Yes. The way we are doing is really doing it as is but we've been approached by literally in the last couple of weeks.
By developers fairly large developers, who who want to look at it as the redevelopment play for themselves.
So we're we're you know.
Obviously open to selling that in the latest someone else do of heavy lift if they want to do of redevelopment because as we we bought it it was always under the premise that it's really a covered land play.
And that's that's kind of happening, but the we're leasing it up as is because we'll get some of the space leased up and it has a nice.
The nice yield to the investment, but if someone really wants to do a bigger play there we're happy to sell out of the right price.
Got it.
And just one more from me, Matt I just wanted to.
Kind of confirm that's when he turned out the $50 million of debt and amended the credit facility what would your total debt capacity beyond the line of credit at the as at the end of the first quarter.
What's the debt capacity on the line of credit is that the question correct.
Yes, yes.
So we've got about $65 million remaining on the revolver.
And then obviously, we had $5 million of cash on the balance sheet. So we've got a decent amount of dry powder to work with over the next couple of months.
Okay. That's it for me Thanks, guys for me Thanks, guys. Thanks, Craig.
Thank you.
As we have no further questions. This concludes our question and answer session I would now let's turn the conference back over to John Albright for any closing remarks.
Thank you for joining us.
Okay.
The conference has now concluded.
You for attending today's presentation you may now disconnect.
Okay.
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