Investment Case Update: March 23, 2026

Price: $18.57 (3/23/26)
Market Capitalization: $604.6MM
Enterprise Value: $1.3B

What the Company Does

CTO is a real estate investment trust (REIT) with ownership interests in retail and mixed-use properties located in areas that have been growing faster than the rest of the continental United States. This has resulted in a heavy concentration in the southeast and southwest regions of the United States, also known as the “Sun Belt” states. CTO owns 21 properties spanning 5.5MM square feet with a leased occupancy rate of 95.9% as of YE25, predominantly (~96% of annualized base rent) concentrated in open-air retail centers (grocery-anchored, lifestyle, and power centers), and the remaining ~4% of rent derived from other formats, including mixed-use, single-tenant retail, and office assets. CTO’s largest tenants include Fidelity, AMC, Best Buy, and Dick’s Sporting Goods, among others.

Why We Own It

CTO offers strong growth prospects as the company’s recently constructed portfolio positions the REIT to continue to benefit from outsized tenant demand and limited supply. Based on CTO’s figures, the average annual household income was $140K in 2025 in the markets in which CTO operates, compared to the US average annual household income of $116K, and strong population growth could be on the horizon in CTO’s markets, as 88% of CTO’s rent comes from cities ranked in Urban Land Institute’s top 30 markets markets based on overall real estate prospects. Management is guiding for shopping center same-property net operating income growth of 4.0% this year, on top of 4.4% growth in 2025, as CTO continues to lease up recently developed/acquired properties along with mark-to-market rent upside from existing below-market leases. Additionally, management has already re-leased 7 anchor properties out of the 10 total anchor properties that were recently vacated after tenant bankruptcies and remains in active negotiations for the remaining 3 properties, with new rents expected to be roughly 60% higher than the previous in-place rents across the 10 properties.

Despite CTO’s favorable portfolio positioning, shares trade at 8.5x FY27 funds from operations (FFO) estimates, or a roughly 31% discount to peers (FRT, SKT, UE, AKR, KIM, WSR, BRX, KRG, AAT). The stock also offers an 8.2% dividend yield, while none of its peers have dividend yields in excess of 7.3%.

How Management Allocates Capital

Management’s top capital allocation priority is developing and acquiring high-quality properties that offer opportunities for long-term cash flow growth, with management guiding for investments of $150MM this year. Operating as a REIT, CTO is required to distribute at least 90% of its annual taxable income, but management targets a payout ratio of 100%. Management also finds the REIT’s current valuation very compelling, leading to $9.3MM in share buybacks (1.5% of market cap) in 2025. CTO ended 2025 with a net debt to pro-forma EBITDA leverage ratio of 6.4x as of quarter-end, which is within the company’s typical 6-8x leverage range in recent years, and management expects its $6.1MM signed-not-open pipeline and potential asset sales to offset the expected temporary increase in their leverage ratio due to a pending property acquisition in Texas as they progress through 2026.

We originally posted our investment case for CTO on October 16, 2024.