Investment Case Update: September 17, 2026

Price: $20.40 (9/17/26)
Market Capitalization: $764.7MM
Enterprise Value: $1.5B

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 5.8MM square feet with a leased occupancy rate of 95.4% as of 2Q26, 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 its recently constructed portfolio positions CTO to benefit from outsized tenant demand and limited supply. Based on CTO’s figures, the average annual household income was $137K 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 77% of CTO’s rent comes from cities ranked in Urban Land Institute’s top 30 markets based on overall real estate prospects. Management is guiding for shopping center same-property net operating income growth of 5.5% 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. After agreeing to sell 2 of its vacant anchor spaces to a national retailer, CTO has now re-leased 8 of the 9 remaining anchor spaces that were recently vacated due to retail tenant distress and remains in active negotiations for the final space, with new rents expected to be roughly 75% higher (up from initial expectation for +40-60%) than the previous in-place rents across the 9 spaces being re-leased.

Despite CTO’s favorable portfolio positioning, shares trade at 9.0x FY27 funds from operations (FFO) estimates, or a ~31% discount to peers (IVT, AKR, REG, PECO, UE, KIM, BRX, KRG). The stock also offers a ~7.5% dividend yield, while none of its peers have a dividend yield of >5%.

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 ~$350MM this year (up from $213MM previously). 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%. CTO ended 2Q26 with a net debt to pro-forma EBITDA leverage ratio of 5.8x, down from 6.4x as of 1Q26, which is also below CTO’s typical 6-8x leverage range in recent years. Management expects to fund future acquisitions through a combination of rent commencements from its $6.3MM signed-not-open pipeline, potential asset sale proceeds, and capital recycling from its structured investment portfolio, enabling CTO to act quickly on attractive acquisition opportunities while maintaining a disciplined leverage profile.

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