CTO Realty Growth Q2 2026 Earnings Report

CTO Realty Growth EPS Results

• Actual EPS: $0.38
• Consensus EPS: $0.10
• Beat/Miss: Beat by +$0.28
• One Year Ago EPS: N/A

CTO Realty Growth Revenue Results

• Actual Revenue: $43.83 million
• Expected Revenue: $42.31 million
• Beat/Miss: Beat by +$1.52 million
• YoY Revenue Growth: N/A

CTO Realty Growth Announcement Details

• Quarter: Q2 2026
• Date: 7/28/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, July 29, 2026
• Conference Call Time: 9:00AM ET

CTO Realty Growth (NYSE:CTO) (NYSE:CTO) is a self-managed real estate investment trust that owns and operates a portfolio of income-producing commercial properties in the United States. The company primarily focuses on retail and mixed-use properties, including open-air shopping centers and other assets leased to national, regional and local tenants.

CTO Realty Growth generally targets properties in high-growth markets with favorable demographic characteristics. Its portfolio is designed to provide exposure to necessity-based and service-oriented retail, along with selected commercial real estate investments. The company’s activities include acquiring, leasing, managing and strategically disposing of properties to support long-term growth.

The company traces its history to Consolidated-Tomoka Land Co., a Florida-based land and real estate business founded in 1938. It adopted the CTO Realty Growth name as part of its evolution toward a broader commercial real estate strategy. CTO Realty Growth is headquartered in Daytona Beach, Florida, and is led by President and Chief Executive Officer John P. Albright.

CTO Realty Growth Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Core FFO rose nearly 18% year over year to $0.53 per diluted share, while AFFO increased to $0.55 per share, driven by rent commencements, acquisitions, and structured investments.
• Positive Sentiment: Operating momentum remained strong, with shopping-center same-property NOI up 10.1% in the quarter, portfolio occupancy reaching 95.4%, and comparable lease spreads of 6% for the quarter and 10% year to date.
• Positive Sentiment: The company raised 2026 investment-volume guidance to $300 million-$400 million, increased Core FFO and AFFO guidance, and lifted expected shopping-center same-property NOI growth to 5%-6%.
• Positive Sentiment: CTO completed $153 million of quarterly investments at a 10.2% initial yield, including a fully occupied Dallas retail center, while its pro forma structured-investment portfolio reached approximately $222 million at an 11.5% weighted-average yield.
• Neutral Sentiment: Management expects same-property NOI growth to moderate in the second half because of tougher comparisons, including unusually low bad debt in last year’s third quarter and the prior-period inclusion of recently opened anchor tenants.

Presentation

[Operator]

Hello, and welcome to the CTO Realty Growth Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jenna McKinney, Director of Finance. Please go ahead.

[Jenna McKinney, Director of Finance at CTO Realty Growth]

Good morning, everyone, and thank you for joining us today for the CTO Realty Growth second quarter 2026 operating results conference call. Participating on the call this morning are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer, and other members of the executive team that will be available to answer questions during the call. I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. 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 discussed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings.

[Jenna McKinney, Director of Finance at CTO Realty Growth]

You can find our SEC reports, earnings release, supplemental, and most recent investor presentation on our website at ctoreit.com. With that, I will turn the call over to John.

[John Albright, President and CEO at CTO Realty Growth]

Thanks, Jenna, and good morning, everyone. Our strategy of owning and operating high-quality shopping centers in high-growth markets, complemented by our structured investments, continues to produce results across all areas of our business. For the quarter, we again delivered strong results driven by robust same-property NOI growth, healthy leasing, and $153 million of investments at a weighted average initial yield of 10.2%. Starting with leasing, during the quarter, we executed 25 new leases, renewals, and extensions totaling 213,000 sq ft, including 184,000 sq ft of comparable leases at a positive cash rent spread of 6%. Year-to-date, we have now completed 366,000 sq ft of leasing, including 330,000 sq ft of comparable leases at a cash rent spread of 10%.

[John Albright, President and CEO at CTO Realty Growth]

Leases signed during the quarter include Cooper's Hawk, an outparcel development at Ashley Park, and Party City Kids at Millenia Crossing, which is in front of the Mall of Millenia in Orlando. Reflecting this leasing momentum, at quarter end, our total portfolio was 95.4% leased, up 150 basis points from a year ago. The current spread between leased and occupied rates is 400 basis points, and our signed not open pipeline is $6.3 million, representing approximately 5.8% of in-place annual cash base rent. We believe this provides a meaningful and visible earnings tailwind as these tenants are expected to take possession and commence paying rent through the balance of 2026 and into 2027. One final leasing note: The Cheesecake Factory recently opened its nearly 7,000 sq ft of restaurant space at The Collection at Forsyth in Georgia on July 21st.

[John Albright, President and CEO at CTO Realty Growth]

The opening was highly successful, and the shopping center continues to strengthen its position as a vibrant focal point in Atlanta's most affluent suburb. In addition, demand for the center's 10-acre outparcel remains strong, and we are in active lease negotiations with an anchor tenant to take possession. Also reflecting the strength of our operating performance, same property NOI for our shopping centers increased 10.1% for the quarter compared to the prior year period. Phil will provide additional details on same property NOI shortly. Moving to investment activity, during the quarter, we acquired Gallery on the Parkway, a 152,000 sq ft open air retail power center in Dallas, Texas for $53.3 million.

[John Albright, President and CEO at CTO Realty Growth]

The center is fully occupied and anchored by Dick's House of Sport, Nordstrom Rack, Cost Plus World Market, and Portillo's. Situated on 12 acres along the Dallas North Tollway with over 121,000 vehicles passing daily, this property serves a dense trade area with a population of approximately 368,000 residents within a five-mile radius. It is also just two miles from the proposed site of the Dallas Mavericks' new arena and entertainment district. On a year-to-date basis, we have now completed $234.2 million of investments at a weighted average yield of 9.5%. On the recycling front, during the quarter, we completed $90.7 million of property dispositions at a weighted average exit cap rate of 6.7%. These sales included Madison Yards, a 163,000 sq ft shopping center in Atlanta, Georgia, and Granada Plaza, a 74,000 sq ft shopping center in Tampa, Florida.

[John Albright, President and CEO at CTO Realty Growth]

These dispositions allow us to continue recycling capital out of low cap rate stabilized assets and into higher yielding investment opportunities. Further, the State of New Mexico is expected to take possession of approximately 98,000 sq ft at our Albuquerque, New Mexico office property this fall, bringing the property back to full occupancy. Accordingly, we are now preparing to take this property to market. This will represent our last non-core asset to sell. In addition, we are under contract to sell, subject to customary closing conditions, a 76,500 sq ft portion of Carolina Pavilion in Charlotte, North Carolina, to a national retailer. This square footage consists of two adjacent vacant anchor boxes, formerly leased to Value City Furniture and JOANN Fabrics. Assuming this sale closes, we will have resolved all but one of the vacant anchor boxes we have been discussing on prior calls.

[John Albright, President and CEO at CTO Realty Growth]

Based on the eight completed anchor leases and current lease negotiations for the one remaining vacant box, we anticipate a positive lease spread of approximately 75% for these nine anchor spaces combined. Notably, beyond the favorable earnings impact driven by these new anchors, we believe that they will also drive more foot traffic and create vibrancy to our shopping centers. Turning to our structured investment platform, which continues to be an attractive complement to our investment strategy. During the quarter, we originated two preferred equity investments totaling $96.4 million. The first was a previously announced $75 million preferred equity investment in a Class A premier retail property located in the Southwest, which generates a 12% initial cash yield and has a two-year term.

[John Albright, President and CEO at CTO Realty Growth]

The second was a $21.4 million preferred equity investment in a grocery anchored development located in the Northeast, which generates a 12% initial yield, including 3% accrued paid in kind interest and has an 18-month term. After the quarter end, we originated a $37 million first mortgage investment secured by a leasehold interest in a mixed-use property located in Austin, Texas, of which $29.8 million was funded at closing. This investment generates a 9.75% initial cash yield and has a two-year term. Including this investment, our pro forma structured investment portfolio stands at approximately $222 million, or approximately 15% of undepreciated assets, which is our target. The pro forma structured investment portfolio generates a weighted average yield of approximately 11.5%. Just a brief update on our six identified outparcel opportunities.

[John Albright, President and CEO at CTO Realty Growth]

As previously discussed, last quarter we signed a lease with Swig for a drive-thru customized beverage store at Marketplace at Seminole Towne Center, located in the Orlando market. In this quarter, we signed a lease with Cooper's Hawk at Ashley Park, located in the Atlanta market. We remain active in lease negotiations for the remaining four outparcels, which are located at Beaver Creek, West Broad Village, Plaza at Rockwall, and Collection at Forsyth. We continue to expect these six outparcels combined to generate a low double-digit unlevered yield on approximately $30 million of investment, with capital being deployed over late 2026 and into 2027, and beginning to contribute to earnings in 2027, with the full benefit expected to be recognized in 2028. We look forward to providing updates related to this initiative as additional leasing is completed.

[John Albright, President and CEO at CTO Realty Growth]

Looking forward, we have built a robust pipeline of acquisition opportunities and are actively underwriting shopping centers that align with our growth strategy. We expect to close at least one additional acquisition before year-end, further strengthening our portfolio. Together with our year-to-date activity, this leads us to raise our investment volume guidance by over $100 million to a new range of $300 million-$400 million. In summary, we are very pleased with our performance through the first half of 2026, and we remain excited about the embedded growth drivers across our portfolio, including our below market in-place rents, our signed but not open pipeline, our outparcel development opportunities, and our disciplined capital recycling. We believe these initiatives position the company to deliver meaningful earnings growth for years to come. With that, I'll hand the call over to Phil.

[Philip Mays, CFO at CTO Realty Growth]

Thanks, John. On this call, I will briefly highlight our quarter results, provide an update on our same property NOI growth and balance sheet, and discuss our updated 2026 outlook. For the second quarter, Core FFO was $18.4 million, a $3.8 million increase compared to $14.7 million reported in the comparable quarter of the prior year. On a per diluted share basis, Core FFO was $0.53 per share, versus $0.45 per share, an increase of nearly 18%. AFFO was $19.1 million for the quarter, an increase of $3.9 million compared to $15.3 million reported in the comparable quarter of the prior year. On a per diluted share basis was $0.55 per share versus $0.47 per share.

[Philip Mays, CFO at CTO Realty Growth]

The growth in both Core FFO and AFFO was primarily driven by leases executed over the past year that have commenced paying rent, along with earnings contributions from our recent acquisitions and structured investments. Regarding same property NOI, as John mentioned, same property NOI for our shopping centers increased 10.1% in the quarter compared to the prior year period. On a year-to-date basis, shopping center same property NOI increased 8.2%, or 7%, excluding certain non-recurring recovery benefits recorded during the first quarter of the year. Total same property NOI, including our few non-core properties, increased 6.7% for the second quarter and 4.5% for the six months ended June 30th. This year-to-date growth, including non-core properties, was impacted by one tenant vacating 98,000 sq ft of the 212,000 sq ft at our Albuquerque, New Mexico property at the beginning of December in 2025.

[Philip Mays, CFO at CTO Realty Growth]

As John discussed earlier, the space has been fully leased to the State of New Mexico, which is expected to commence paying rent in late 2026. Strong same-property NOI growth for our shopping centers in the first half of the year was driven by new anchor tenant openings, including Onelife Fitness at Beaver Creek, Barnes & Noble at The Plaza at Rockwall, and the Picklr pickleball facility at The Collection at Forsyth, all of which opened in late 2025 and are now contributing to cash rent against a prior year period that excluded them. As we move into the back half of the year, these tenants, along with certain anchor backfills that took possession and began paying cash rent late in 2025, will begin to roll into the prior year comparable periods. In addition, the third quarter of 2025 had unusually low bad debt expense.

[Philip Mays, CFO at CTO Realty Growth]

Accordingly, while we still expect healthy same-store growth going forward, we expect it to moderate from the beginning of the year pace. Moving to the balance sheet. At June 30th, we had total debt of $660.8 million, consisting of $643 million of unsecured borrowings and $17.8 million mortgage note payable, with a weighted average interest rate of 4.6%. We ended the quarter with total liquidity of $131.8 million, consisting of $107 million of undrawn commitments under our revolving credit facility and $24.8 million of cash on hand. Our only remaining debt maturity in 2026 is the $17.8 million mortgage note payable, which matures in August and carries an interest rate of 4.06%. At maturity, we intend to repay this mortgage using our revolving credit facility.

[Philip Mays, CFO at CTO Realty Growth]

During the quarter, we issued approximately 4.2 million common shares under our common stock ATM program at a weighted average gross price of $20.29 per share for total net proceeds of $83.6 million. For the six months ended June 30th, we issued approximately 4.9 million common shares at a weighted average gross price of $20.18 per share for total net proceeds of $97.8 million. These proceeds, together with our disposition and structured investment repayment activity, funded our investment volume while allowing us to reduce leverage. As a result, we ended the quarter with net debt to pro forma adjusted EBITDA of 5.8x, a decrease of 0.6x from the end of the first quarter. We expect to continue to delever as our signed ATM pipeline commences paying rent.

[Philip Mays, CFO at CTO Realty Growth]

Although leverage can vary quarter by quarter depending on investment and disposition activity and how it is funded. Regarding our investment and management of Alpine Income Property Trust, income from Pine for the quarter was $2.1 million, consisting of $1.4 million in management fees and $0.7 million in dividend income. Reflecting Pine's recent earnings and dividend growth, our new annualized run rate is $8.9 million, consisting of $5.7 million in management fees and $3.2 million in dividend income, representing a $0.4 million increase from the annualized second quarter results. One unusual item that I would like to note, income tax expense was elevated at $1.1 million. Of this amount, approximately $800,000 is related to deferred taxes on unrealized gains on securities such as Pine, held in our taxable REIT subsidiary, or TRS, and does not affect our non-GAAP measures because such unrealized gains are excluded net of income taxes.

[Philip Mays, CFO at CTO Realty Growth]

Accordingly, only approximately $300,000 of income tax expense impacted our non-GAAP measures this quarter. Now turning to guidance. Reflecting our strong first half results and our completed and pending investment activity, we are raising our full year 2026 outlook. We are increasing Core FFO guidance to a new range of $2.09-$2.13 per diluted share, up from our prior range of $2.06-$2.11. We are increasing our AFFO guidance to a new range of $2.21-$2.25 per diluted share, up from our prior range of $2.19-$2.24. At the midpoint, our revised Core FFO guidance represents approximately 13% growth compared to actual results for 2025. Key assumptions reflected in our revised guidance include investment volume, including commercial loans and structured investments of $300 million-$400 million, up from our prior range of $175 million-$250 million.

[Philip Mays, CFO at CTO Realty Growth]

Same-property NOI growth for shopping centers of 5%-6%, up from our prior range of 3.5%-4.5%. General and administrative expenses of $20 million-$20.2 million. With that, operator, please open the line for questions.

[Operator]

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press one one on your telephone and wait for your name to be announced. To withdraw your question, please press one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matthew Erdner from Jones. Your line is now open.

[Matthew Erdner, Analyst at Jones]

Hey, good morning, guys. Thanks for taking the question. I would like to touch on the signed not open pipeline. The recognition of that across 2027, is that gonna be balanced throughout the year? Is it more loaded into the first or second half?

[Philip Mays, CFO at CTO Realty Growth]

Yeah. Hey, Matt, it's Phil. Over at 2027 it'll be pretty even. Going for the remainder of this year, there's probably $400,000 or so that picked up in the third quarter, then that probably doubles to about $800 or $1,000 or so in the fourth quarter. Then everything is almost online. Over 90% is online after that, and it's pretty evenly going forward, $1 million, $3 million for a quarter going forward. That's just base rent

[Matthew Erdner, Analyst at Jones]

Got it. That's helpful. Looking ahead to 2027, 2028, you have 27% of the ABR rolling over. Have you had any preliminary discussions there? I guess what opportunity do you think that provides you guys on top of the current signed docs and pipeline, and then the out parcel development?

[John Albright, President and CEO at CTO Realty Growth]

Yeah. In not a particular order, we have a very robust lease negotiations and LOI stages and discussions with almost all of the rest of the vacancy. If all that kind of comes through, you're going to be high 98% sort of level. Basically, the tenants that are expiring, really the one hole we'll have that's kind of meaningful would be in West Broad, where we're having a tenant downsize. Everything else is pretty. One thing I think we mentioned before that our theater in Phoenix, we're working on a tenant to take over that box, so that will be good. We really don't have any issues that have any concern. We have good renewals and a lot of interest for the boxes.

[Philip Mays, CFO at CTO Realty Growth]

You'll see even starting next quarter, the 2027 expirations come down. I think we've already had a couple people getting close to 100,000 square feet already renew. You'll start to see those just kind of come down as we get close to year-end as is typical.

[Matthew Erdner, Analyst at Jones]

Perfect. Awesome. Thank you guys.

[John Albright, President and CEO at CTO Realty Growth]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Craig Kucera from Lucid Capital Markets. Your line is now open.

[Craig Kucera, Analyst at Lucid Capital Markets]

Yeah. Hey, good morning. John, you sold out of Atlanta this quarter. Was that more of a portfolio decision to reduce exposure there or AMC, or did you just think the asset had reached full value since I think it was about 99% occupied?

[John Albright, President and CEO at CTO Realty Growth]

A little bit of all the above. Obviously Atlanta was our largest market, so it lighten up that market probably was prudent. AMC sort of was something that investors and analysts brought up quite a bit. Knocking out an AMC was good, and obviously the cap rate was low where we can recycle in accretive acquisitions, like the one we did in Dallas on the Dallas North Tollway.

[Craig Kucera, Analyst at Lucid Capital Markets]

Got it. I'd like to talk about that transaction, which appears to be a little different than your typical acquisition. I think it was about 100% occupied, but it sounds like in a great location. Is there any value add opportunity there, maybe out parcel development or below market rents, or I guess kind of what's the? Was it just a high cap rate and a very attractive market?

[John Albright, President and CEO at CTO Realty Growth]

Yeah, you're right, Craig. You answered it for me that it was a very attractive location. Right by, north of the Galleria Mall, but close to where the Dallas Mavericks are going to build their arena. Basically, the cap rate was higher than you would normally think for a stabilized assets, and Dick's had just taken over and opened a new box, and Portillo's had just opened. The ability to sell off a pad site if we wanted to, for instance, the Portillo's, would make it even more accretive on the cap rate. We don't intend to, but that's a potential kind of value-enhancing opportunity we have.

[Craig Kucera, Analyst at Lucid Capital Markets]

Okay, great. Changing gears. Phil, you had some interest rate swaps expiring over at Pine. Can you give us some color on your thoughts on the January 2027 expirations? Are you expecting to swap them again, or kind of your thoughts there?

[Philip Mays, CFO at CTO Realty Growth]

We'll keep all of our term loans swapped. I believe there is a roll-up in rate on the 2027. Don't recall right off the top of my head what it's probably going to run. That will run up closer to like a market rate. Most of our term loans, if we were to do new swaps now, Craig, would be around 5%.

[Craig Kucera, Analyst at Lucid Capital Markets]

Okay.

[Philip Mays, CFO at CTO Realty Growth]

Just thinking about new term loans going forward, that's probably a decent rate to model.

[Craig Kucera, Analyst at Lucid Capital Markets]

Okay, that's useful. Just one more from me, John. I think the Whole Foods loan you did was the first investment you made outside of the South or Southwest. Was that more of a one-off or do you think CTO might grow and deploy more capital maybe outside of the South and Southwest going forward?

[John Albright, President and CEO at CTO Realty Growth]

I think more one-off. The developer we did that with is super talented and has a big pipeline of Whole Foods developments, so, we may be able to do some more with him in the future. Yeah, this is more of a one-off.

[Craig Kucera, Analyst at Lucid Capital Markets]

Okay. Thank you.

[John Albright, President and CEO at CTO Realty Growth]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Jay Kornreich from Cantor Fitzgerald. Your line is now open.

[Jay Kornreich, Analyst at Cantor Fitzgerald]

Hey, thanks. Good morning. If I could just ask a bigger picture question to start. Can you just talk a little bit about the general supply-demand fundamentals you're seeing across the portfolio? Is it correct to say that even the power centers have become, I guess, more of a landlord's market where you have more pricing power than, say, a year ago, where you are maybe experiencing some cap rate compression? Then just finally, within that, if that is the case, is that what led to the increase in same-store NOI and guidance, or are there other dynamics pushing that higher?

[John Albright, President and CEO at CTO Realty Growth]

Sure. I'll take the first part of that question and let Phil answer the second part. Look, definitely the power center market has been very strong of late and a lot of more investor interest, more diverse tenant interest because if you think about it, these large formats are in locations you can't find the land, you can't build it for the cost that we're able to buy these things for. Tenants are able to get in good locations, good markets for the box they need. These power centers are sort of morphing into community centers. For instance, at Carolina Pavilion, we mentioned that we're under contract to sell a vacant JOANN's to a tenant. The tenant is a tenant that usually doesn't go into a power center.

[John Albright, President and CEO at CTO Realty Growth]

It'll be great for the center, create more traffic and diverse traffic, and bring down the cap rate of the property by a fair amount, in our opinion.

[Philip Mays, CFO at CTO Realty Growth]

Yeah. On the same-store, Jay, it's really kind of three different things moving it. One, I've talked about it before. The same-store pool is relatively small. A couple hundred thousand in a quarter is 100 basis points of growth. I think early in the year, we tend to be a little conservative. Beyond that, just on the revenue side, tenants just moving in at a little quicker pace and getting open a little quicker. On the expense side, we really had expenses, I think even if you look comparably, they're down year-over-year. It's really three things. Management expense is a little less as we've internalized management at a couple of properties. We had a favorable insurance renewal, and insurance costs came down. Just timing of repair and maintenance, it was a little lighter in the quarter.

[Philip Mays, CFO at CTO Realty Growth]

It's really just kind of all of those things that led to the bump in same-store guidance.

[Jay Kornreich, Analyst at Cantor Fitzgerald]

Okay. I appreciate that. I guess maybe just following up on the reference to the Carolina Pavilion and the two vacant anchor boxes that you're under contract to sell there. I guess over the past year and a half, two years, there's been a lot of discussion just around the 10 or 11 vacant big box assets, finding tenants to lease that up. Just curious to hear more about what made selling these assets the more compelling opportunity. Assuming the sale does close, how do you want to utilize those proceeds?

[John Albright, President and CEO at CTO Realty Growth]

One really, our intention to sell it, but the user really wanted to buy it versus a lease. Given that the use that this tenant would have is very accretive to the whole center, definitely made it an easy choice for us. Obviously, it lessens the CapEx for us. We don't have to do a lot of TI that a normal tenant would require. Then on the other box that we have there, Conn's were in the final throes of lease negotiations there. We hope to kind of get that announced in 30 days or less and get them going. That's going to be great to fill out that property. I'm sorry, what was the last question on part of.

[Philip Mays, CFO at CTO Realty Growth]

Use of the proceeds.

[John Albright, President and CEO at CTO Realty Growth]

Yeah.

[Philip Mays, CFO at CTO Realty Growth]

Initially, we'll just take the proceeds and pay down the line, Jay.

[Jay Kornreich, Analyst at Cantor Fitzgerald]

Okay, great. If I could just squeeze in one last one, just on the reference to the office property in New Mexico, it sounds like you're about to go to market with that asset. Is that likely, do you think, to be a second half of 2026 event? Or what do you think about just in terms of the timeline to actually get that asset sold?

[John Albright, President and CEO at CTO Realty Growth]

It'll probably be the end of the year or early next year. Given the tenant staying in New Mexico, most likely we'll get occupancy before October. Certainly a buyer's going to want to have that and see how the property looks before executing on something. We're out in the market now, but don't anticipate something happening till very end of the year or next year.

[Jay Kornreich, Analyst at Cantor Fitzgerald]

Okay, great. Thank you very much.

[John Albright, President and CEO at CTO Realty Growth]

Thanks.

[Operator]

Thank you. Our next question comes from the line of RJ Milligan from Raymond James. Your line is now open.

[RJ Milligan, Analyst at Raymond James]

Yeah. Hey, good morning, guys. John, just to follow up on the last question, can you give us any indication on the expected pricing on that sale?

[John Albright, President and CEO at CTO Realty Growth]

Yeah, we haven't come out with that. Certainly, with State of New Mexico, as far as where we internally had the property NAV and so forth, it's definitely higher than it was a year ago. There are costs associated with putting State of New Mexico in. It's at a cap rate that we feel like it's going to trade, that we'll be able to move that capital into a retail property with not a big frictional sort of decrease in yield. Maybe a little bit, but not a big one.

[RJ Milligan, Analyst at Raymond James]

Okay. Then as we think about property dispositions going forward, portfolio recycling, do you still view that there's a lot more to do, or is this pretty much as we get into after the office asset sale, there's not a lot left to do on the disposition side?

[John Albright, President and CEO at CTO Realty Growth]

There's a couple that smaller properties, more stabilized, lower cap rate that we may recycle. On the acquisition side, we have something that we're working on. If that kind of works out and we close on it, then we may want to push out another property.

[RJ Milligan, Analyst at Raymond James]

Okay. Then bigger picture, John, on the structured investment side, I'm just curious if the changing rate outlook has impacted your view on investment risk or reinvestment risk as some of those investments are paid back.

[John Albright, President and CEO at CTO Realty Growth]

Yeah. I think actually the interest rate environment's going to help us as far as deal flow when we want to replace some of the structured investments. I think a lot of borrowers, developers Is banking on lower rates to refi, and when that's not going to happen, we may be in a situation where we can provide some solutions there. I think it's going to be more opportunity for us in the future rather than less.

[RJ Milligan, Analyst at Raymond James]

Great. That's it for me. Thanks, guys.

[John Albright, President and CEO at CTO Realty Growth]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Gaurav Mehta from Alliance Global Partnership. Your line is now open.

[Gaurav Mehta, Analyst at Alliance Global Partnership]

Yeah. Thank you. Good morning. I wanted to ask you on your same-property NOI guidance, 5%-6%, is that number adjusted for non-recurring items?

[Philip Mays, CFO at CTO Realty Growth]

Adjusted for.

[Gaurav Mehta, Analyst at Alliance Global Partnership]

Is that number comparable to 7%?

[Philip Mays, CFO at CTO Realty Growth]

We always take out lease term fees and unusual items like that. The first quarter, if you recall, did have some CAM true-ups, non-recurring items, that we include and we leave in, because it can happen from time to time. Those are in there.

[Gaurav Mehta, Analyst at Alliance Global Partnership]

Okay.

[Philip Mays, CFO at CTO Realty Growth]

As far as term fees and one-off items like that, we always back out of same-property NOI.

[Gaurav Mehta, Analyst at Alliance Global Partnership]

Okay. In your prepared remarks, you talked something about the bad debt expense, which seemed like it was lower in the comparable period for last year. The expectation is that bad expense should be normalized for second half of this year? That goes into same property NOI?

[Philip Mays, CFO at CTO Realty Growth]

We've generally been running around 100 basis points for bad debt, and it's generally fairly consistent. We did have just in Q3 of last year, we had a couple of tenants that were basically fully reserved who got current. We collected that, and it pushed bad debt in the third quarter down close to zero. I was just highlighting that only because it makes the third quarter, a little tougher of a comp, going forward on same-store growth. It's just highlighting that. You could see same-store growth moderates a little in the third quarter, you would know why.

[Gaurav Mehta, Analyst at Alliance Global Partnership]

Okay, understood. On the balance sheet, your leverage is 5.8x. In the remarks, you mentioned that there could be further deleveraging of the balance sheet. How should we expect that number to evolve over this year or next year?

[Philip Mays, CFO at CTO Realty Growth]

Just in the remarks, I was really just referring more to like, as our same signed, not open pipeline comes online and we get some rent bumps here on some renewals and some new leasing, just organically with the signed not open pipeline and some leasing that we're working on, it should take it down about a half a term. I was just referring to that.

[Gaurav Mehta, Analyst at Alliance Global Partnership]

Okay, understood. Thank you. That's all I had.

[Operator]

Thank you. Our next question comes from the line of John Massocca from B. Riley Securities.

[John Massocca, Analyst at B. Riley Securities]

Good morning.

[Philip Mays, CFO at CTO Realty Growth]

Morning, John.

[John Massocca, Analyst at B. Riley Securities]

Maybe sticking with kind of the same-store theme in the back half of the year, you kind of mentioned the favorable insurance renewal and property management efficiencies as being tailwinds. Do you lap those at some point here in second half, or is it really going to be kind of a tailwind through the remainder of the year?

[Philip Mays, CFO at CTO Realty Growth]

Those two items will be a tailwind for the remainder of the year. The comp gets tougher in the second half, for a couple of reasons. One, just the bad debt being basically 0% in the third quarter last year. The anchor leasing we've been doing is starting to come online. Early in the year, there really wasn't any of those rents in the prior year comparable period. As we kind of move on, and get towards the latter part of the year, you have some of those rents that had come online in the prior comparable period that will make the comp period a little tougher. We still fully expect healthy same-store growth for the remainder of the year.

[John Massocca, Analyst at B. Riley Securities]

Okay. You mentioned the anchor boxes coming out at around a 75% positive lease spread. I know when you had originally talked about kind of repositioning those assets or re-tenanting those assets, there was kind of higher lease spread was going to translate to kind of a higher CapEx spend. Is that what ended up happening? I guess, maybe how does that change the outlook for your CapEx spend or impact the outlook for your CapEx spend in kind of second half and maybe into 2027?

[Philip Mays, CFO at CTO Realty Growth]

Yeah. We've got with the 2 being sold, that leaves 9. 8 of them are leased. We have the 1 left. Those blended, we expect it's 75%, maybe even a little higher. We're just on the high end of the CapEx range we originally gave. That has not increased. I think the high end was around $15 million in total, and we'll be inside of that. The CapEx is still generally coming in line with the higher end of where we thought it would be. The spreads have just come in better. I think we'll be at 75% or potentially we may even get to 80% once we finish the last box.

[John Massocca, Analyst at B. Riley Securities]

If I think about kind of the remaining investments, the difference between what you've done year-to-date in terms of investments and kind of the pipeline or the guidance that's out there, how much of that is kind of really tangible in the pipeline, and how much of that is maybe more theoretical as you look into kind of late Q3, Q4, today?

[John Albright, President and CEO at CTO Realty Growth]

Yeah. We feel pretty lucky that we have identified some opportunities that feel like they're very realistic. Pretty much what we have is identifiable.

[John Massocca, Analyst at B. Riley Securities]

Okay. That's it for me. Thank you very much.

[John Albright, President and CEO at CTO Realty Growth]

Thanks.

[Operator]

This concludes the question-and-answer session and our call for today. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Jenna McKinney, Director of Finance
• John Albright, President and CEO
• Philip Mays, CFO

Analysts

• Matthew Erdner, Analyst at Jones
• Craig Kucera, Analyst at Lucid Capital Markets
• Jay Kornreich, Analyst at Cantor Fitzgerald
• RJ Milligan, Analyst at Raymond James
• Gaurav Mehta, Analyst at Alliance Global Partnership
• John Massocca, Analyst at B. Riley Securities