CTO Realty Growth, Inc. (NYSE:CTO) Q3 2023 Earnings Conference Call October 27, 2023 9:00 AM ET

Company Participants

Matt Partridge – Chief Financial Officer

John Albright – President and Chief Executive Officer

Conference Call Participants

Rob Stevenson – Janney Montgomery Scott

Matthew Erdner – JonesTrading

R.J. Milligan – Raymond James

Operator

Good day, and welcome to the CTO Realty Growth Third Quarter 2023 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Chief Financial Officer, Matt Partridge. Please go ahead.

Matt Partridge

Good morning, everyone. Thank you for joining us today for CTO Realty Growth's third quarter 2023 operating results conference call. With me today is our CEO and President, John Albright.

Before we begin, 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 in these forward-looking statements. And we undertake no duty to update these statements.

Factors and risks that 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, earnings release, quarterly supplemental and most recent investor presentation on our website at ctoreit.com.

With that, I'll now hand the call over to John.

John Albright

Thanks, Matt, and good morning, everyone. I'm pleased to announce we had a strong quarter of operational execution that led us to meaningfully increase our full year FFO and AFFO guidance. The strength in our numbers were driven by better-than-forecasted tenant retention for lease renewals, accelerated new tenant rent commencements, outsized percentage rent from food and beverage and theater operators and improved expense controls, where we have direct cost exposure.

All of this strength was partially offset by a credit loss associated with our WeWork location, where they have stopped making payments as of September. And those payments were set to expire in April of 2024.

Leasing activity during the quarter was strong. The team signed 21 leases totaling more than 132,000 square feet, including approximately 26,000 square feet of previously acquired vacancy. This is the second-highest volume of square feet leased in one quarter in our company's history. The activity was relatively widespread and included the signing of a replacement lease for the food hall space at Ashford Lane in Atlanta. The new lease is with Politan Row, a well-known successful operator of food halls, who has a multiple location presence in Atlanta. While the rent is lower than the previous food hall lease, we are getting a more established operator with a better credit profile. And we did not have to make any additional capital investments. They are scheduled to open before the end of the year.