CTO Realty Growth (CTO) Q3 2026 Earnings Call Transcript

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DATE

Wednesday, Oct. 28, 2026

CALL PARTICIPANTS

• Director of Finance - Jenna McKinney
• President and Chief Executive Officer - John Albright
• Chief Financial Officer - Philip R. Mays

TAKEAWAYS

• Core FFO per Diluted Share -- $0.53 for the third quarter, representing a 10.4% increase driven by rent commencements and contributions from property acquisitions.
• AFFO per Diluted Share -- $0.55 for the quarter, growing 10% from $0.50 in the prior year comparable period.
• Leasing Volume -- 467,000 square feet of leases signed during the third quarter, including 38 new leases, renewals, and extensions.
• Comparable Cash-Rent Spread -- 7% for the 396,000 square feet of comparable retail leases executed during the quarter.
• YTD Comparable Cash-Rent Spread -- 9% across 726,000 square feet of comparable leasing activity signed during the first nine months of the year.
• Signed-Not-Open Pipeline -- $5.6 million, representing approximately 4.6% of in-place cash rent, with the majority of rent commencement expected in 2027.
• Total Portfolio Leased Occupancy -- 92.4%, reflecting a 180-basis-point decline year over year due to the acquisition of a lifestyle center with 67% occupancy.
• Same-Property Shopping Center Occupancy -- 95.8%, an increase of 90 basis points compared to Sept. 30, 2025.
• Quarterly Investment Volume -- $102.3 million at a weighted average yield of 9.1%, consisting of one retail acquisition and one structured investment.
• Zona Rosa Acquisition -- $63.3 million for a 768,000-square-foot lifestyle center in Kansas City, representing a purchase price of $82 per square foot.
• Summit Woods Crossing Acquisition -- $103.0 million for a 545,000-square-foot power center in Lee's Summit, Missouri, acquired subsequent to the end of the third quarter.
• Structured Investment Origination -- $37 million loan secured by a leasehold interest in Austin, Texas, yielding an initial cash rate of 9.75%.
• Preferred Equity Investment -- $32 million in a 10-property shopping center joint venture, yielding 17% including a 7% pay-in-kind component.
• Unsecured Credit Facility -- $1.0 billion total capacity, adding $250 million of incremental liquidity and extending the weighted average debt maturity to 4.3 years.
• Net Debt to Pro Forma Adjusted EBITDA -- 5.9x at quarter end, representing a reduction from 6.7x one year ago.
• ATM Equity Issuance -- $27.3 million in net proceeds raised through the issuance of 1.3 million shares at a weighted average gross price of $21.83.
• Alpine Income Property Trust (PINE) Income -- $2.2 million for the quarter, bringing the annualized run-rate for management fees and dividends to $9 million.
• Full-Year Core FFO Guidance -- $2.11 to $2.14 per diluted share, representing a raise from the previous range of $2.09 to $2.13.
• Full-Year AFFO Guidance -- $2.22 to $2.25 per diluted share, representing a raise from the previous low-end target of $2.21.
• Same-Property Shopping Center NOI Growth Guidance -- 5% to 6% for the full year 2026.
• Annual Investment Volume Guidance -- Approximately $472 million, increased from the previous target range of $300 million to $400 million.
• Cash Interest Rate -- 4.7% weighted average interest rate on total debt of $723 million as of Sept. 30, 2026.
• G&A Expense Guidance -- $21 million to $21.5 million for the full year 2026, revised from the previous range of $20 million to $20.2 million.

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RISKS

• Mays warned of an upcoming headwind from maturing interest rate swaps in 2027, stating, "there is 1 swap maturing it is on about a 100 million. And it rolls up about a 180 basis points."

SUMMARY

CTO Realty Growth, Inc. (NYSE:CTO) reported growth in funds from operations for the third quarter, supported by leasing activity and new property acquisitions. Management raised the full-year guidance for core earnings and investment volume following the completion of several significant transactions. The company restructured its balance sheet by closing a new unsecured credit facility and retiring its remaining secured debt. Strategic focus moved toward expansion in the Kansas City market through the acquisition of lifestyle and power center assets.

• CEO John Albright stated, "Zona Rosa gives us real room to grow," regarding the lease-up potential of the recently acquired lifestyle center.
• Management addressed all 11 vacated anchor spaces, re-leasing nine of the boxes and placing the remaining two under contract for a $20.7 million sale.
• The company proactively backfilled a movie theater space at Crossroads Town Center with a Crunch Fitness lease to drive higher foot traffic at a positive cash spread.
• CFO Philip R. Mays noted that "pretty much all of" the signed-not-open pipeline is expected to be online for the start of 2028.
• John Albright indicated the company does not view its current stock price as an appropriate level for equity issuance and will prioritize capital recycling from stabilized assets.
• The acquisition of Summit Woods Crossing added tenants including Lowe's and Best Buy, which now represent the company's two largest investment-grade tenants.

INDUSTRY GLOSSARY

• Core FFO: A non-GAAP financial measure that modifies the NAREIT definition of Funds From Operations to exclude unforecastable market- or transaction-driven non-cash items.
• AFFO: Adjusted Funds From Operations, a measure that further modifies FFO to include adjustments for non-cash revenues and expenses such as straight-line rent and non-cash compensation.
• Cash-Rent Spread: The percentage change in the rental rate of a new lease compared to the expiring lease for the same space.
• Same-Property NOI: Net Operating Income from properties owned and stabilized for the entire reporting period, allowing for a comparison of performance excluding acquisitions and dispositions.
• PIK Interest: Paid-In-Kind interest, which is interest that is added to the principal balance of a loan rather than being paid in cash.
• SNO Pipeline: Signed-not-open leases where a contract has been executed but the tenant has not yet commenced paying rent.
• ATM Program: At-the-market equity program that allows a company to sell shares directly into the secondary market at prevailing prices.
• Lifestyle Center: A shopping center or mixed-use commercial development that combines the retail functions of a shopping mall with leisure amenities.
• Power Center: An open-air shopping center that is anchored by multiple large "big box" retailers.
• Outparcel: A small area of land at the front of a shopping center or property reserved for a separate building, often a restaurant or bank branch.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the CTO Realty Growth 26 quarter 3 earnings call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question, you will need to press *11 on your telephone. You will then hear an automated message advising that your hand is raised. Withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jenna McKinney, Director of Finance. Jenna, please go ahead.

Jenna McKinney: Good morning, everyone, and thank you for joining us today for the CTO Realty Growth Third Quarter 26 Operating Results Conference Call. Participating on the call this morning are John Albright, president and chief executive officer Philip R. Mays, chief financial officer and other members of the executive team who 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 materially 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. 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: Thanks, Jenna, and good morning, everyone. The third quarter was very productive for CTO as we continued our strong leasing and investment momentum. During the quarter, we signed 467 thousand-square-foot of leases and completed $102.3 million of investment at a weighted average yield of 9.1%. That brings our 9 month totals to 833 thousand square feet of leasing and $336.5 million of investments at a weighted average yield of 9.4%. This activity drove core FFO per diluted share growth of 10.4% for the quarter and 13.8% for the 9 months. We have now addressed all 11 of our vacated anchor spaces.

And just after the quarter end, we signed approximately 75 thousand square feet of new leases at Pompano City Center and completed an additional $135.8 million of investments. Bringing year to date investments to $472 million at a weighted average yield of 9.4%. Reflecting all of this activity, we are raising our 2026 Core FFO guidance which Philip will walk through shortly. Starting with leasing, our third quarter activity included 396 thousand square feet of comparable leases at a 7% cash-rent spread. Year to date comparable leasing totals 726 thousand square feet at a 9% cash-rent spread.

Regarding the vacated anchor spaces, we addressed the last remaining box, quarter by subdividing the former comm space at Carolina Pavilion in Charlotte and signing leases with Cavenders and Second and Charles. We are pleased with how this all played out. Of the 11 spaces, 9 have been re-leased at approximately 70% positive spread. The remaining 2, as previously announced, are under contract to be sold to a national retailer for $20.7 million with closing expected in the fourth quarter. We expect these new anchors to bring more traffic to our centers and benefit the adjacent small shop space. Few other leasing highlights.

First, we signed a 55 thousand square foot lease with Crunch Fitness at Crossroads Town Center in Phoenix to replace Harkins Theaters. Although the Harkins lease runs through late 28, we had negotiated an early termination right. That led us proactively backfill the space at a positive cash spread with a use that will drive more foot traffic. We expect roughly 12 months of downtime between Harkins, vacating in early 27 and the Crunch lease commencing in 2028. Second, just after the quarter end, Amp Fitness signed a lease to expand by 19 thousand square feet at Pompano City Center bringing this immersive experience driven fitness destination to 53 thousand square feet.

An Amp affiliate also leased 56 thousand square feet for research, development, and testing of gym equipment and experiential rooms as well as office operations. This space is part of the 62 thousand square feet of unfinished, second floor shelf space we identified as upsized when we acquired the property last December. Because the space is not currently in the center square footage, the lease will increase Pompano City Center to 565 thousand square feet. Third, our outparcel program, This quarter, we signed 4 leases at multi tenant buildings in 2 outparcel developments. T Mobile at The Plaza At Rockwall and Jason's Deli Acapella Nail Spa, and Nothing Bundt Cakes at Beaver Creek in Raleigh.

Together, with the Swig and Cooper's Hawk leases signed earlier this year, we are making steady progress. We continue to expect a blended low double digit unlevered yield of about $30 million of investments across these 6 outparcels with earnings contribution beginning in 2027, with a full benefit in 2028. Turning to occupancy. Excluding Zona Rosa, leased occupancy increased to 95.7% from 95.4% last quarter. Including Zona Rosa, which was 67% leased when we acquired it, the total portfolio was 92.4% leased at September 30. Zona Rosa gives us real room to grow, which I will come back to in a moment.

At quarter end, our signed, not open pipeline was $5.6 million or about 4.6% of in place cash rent. that is down modestly from last quarter, mainly because the state of New Mexico began paying rent at our Albuquerque property in September. Though new leasing during the quarter offset most of this impact. We expect the majority of the signed-not-open pipeline to commence rent over the course of 2027. Moving to investments. On our last call, we said we expected to close at least 1 more acquisition this year, we closed 2, both in Kansas City, a new market for CTO, with more than 2.2 million people in a pro business climate.

Together, these 2 centers, both in strong local submarkets add about 1.3 million square feet to our portfolio. First, Zona Rosa, which we acquired in the third quarter for approximately $63 million or $82 per square foot, well below replacement cost. it is a top lifestyle center in Kansas City's Northland submarket with about 5.5 million annual visits and is anchored by DICK'S Sporting Goods, Barnes and Noble, Old Navy, Burlington, and DSW. Beyond the lease up opportunity, the property includes 10 acres of entitled development land about 100 thousand square feet of underutilized space we can reposition. Second, Summit Wood Crossing, which we acquired in early October for $103 million or $189 per square foot.

Also well below replacement cost. it is a 545 thousand-square-foot power center in Lee's Summit. 1 of the metro's most affluent submarket. it is 99% occupied and anchored by Lowe's, Kohl's, Best Buy, TJ Maxx, and Total Wine with a super target on the site that we do not own. With about 7.3 million annual visits, it is among the most visited shopping centers in the Kansas City Metro Area. These 2-- Acquisitions also strengthen our tenant credit, with DICK'S and Best Buy, both investment grade, becoming our 2 largest tenants.

On the structured investment side, in July, we originated $37 million loan of which $29.8 million was funded at closing. it is secured by a leasehold interest in a mixed use property in Austin, Texas, has a 2-year term, and carries a 9.75% initial cash yield. Then after quarter end, we closed a $32 million preferred equity investment in a joint venture that owns 10 shopping centers. It is fully funded at closing, has a 3-year term, and yields 17%, including 7% pay-in-kind. Our structured investment portfolio now totals approximately $260 million at a blended rate of 12.1%. Finally, during the quarter, we closed a new expanded credit facility that gives us ample capacity to fund this activity.

Bill will cover the details. In summary, we are very pleased with the first 9 months of 2026. We believe our embedded growth drivers, below market in place rents, the signed-not-open pipeline, lease up opportunities, outparcel developments, and disciplined capital recycling, positions CTO for meaningful earnings growth With that, I will turn the call over to Philip.

Philip R. Mays: Thanks, John. On this call, I will briefly highlight our quarterly results and provide an update on our balance sheet and revised full year outlook. Starting with operating results. For the third quarter, core FFO was $0.53 per diluted share, up 10.4% from $0.48 a year ago. Growth was driven primarily by leases that commenced paying rent over the past year along with contributions from our property acquisitions and structured investments. Year to date, core FFO was $1.57 per diluted share, up 13.8%. Shopping center same property NOI grew 3.8% for the quarter, and 6.2% for the year to date.

As we flagged on our last call, growth moderated as several anchors that opened in late 25 moved into the prior year comparable period. Including our few non-core properties, total same property NOI grew 2.3% for the quarter. This reflects the downtime our last significant non-core property in Albuquerque, where space vacated last December is now leased to the state of New Mexico which recently commenced paying rent as John noted. Turning to Pine. Income from our management agreement and equity investment was $2.2 million for the quarter. And our annualized run rate is now $9 million, consisting of $5.8 million of management fees and $3.2 million of dividend income. Moving to the balance sheet.

During the quarter, we closed a $1 billion unsecured credit facility, consisting of a $400 million revolver and $600 million of term loans with maturities ranging from September 2029 to March 2032. The facility added $250 million of commitments and liquidity and extended our weighted average debt maturity to 4.3 years from 1.6 years. Also during the quarter, we raised $27.3 million of net proceeds through our ATM program at an average gross price of $21.83 per share, and repaid our only secured mortgage. Our debt is now entirely unsecured.

We ended the quarter with net debt to pro forma adjusted EBITDA of 5.9x, essentially in line with last quarter and down from 6.7x a year ago, and approximately $255 million of liquidity. Total debt was $723 million at a weighted average interest rate of 4.7%. Finally, turning to guidance. We are raising our 2026 Core FFO guidance to a range of $2.11 to $2.14 per diluted share up from $2.09 to $2.13. At the midpoint, that represents approximately 14% growth over 2025. We are also raising the low end of our AFFO guidance to a new range of $2.22 to $2.25 per diluted share up from $2.21 to $2.25.

Key assumptions in our revised guidance include: shopping center same property NOI growth of 5% to 6%., investment volume, including commercial loans and structured investments of approximately $472 million, up from our prior range of $300 million to $400 million and general and administrative expenses of $21 million to $21.5 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 11 on your phone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Jay Kornreich of Cantor Fitzgerald. Your line is open.

Jay Kornreich: Hey. Thanks. Good morning. Can you talk just about the general demand fundamentals you are seeing across the portfolio? I guess, are the power centers currently landlords market where you have pricing power? And if so, is that a trend you expect to continue throughout 2027??

John Albright: Yes. Thanks, Jay. Yes, we are seeing still good activity on the leasing front. From really good, quality tenants. I would not say that it is like a mad grab for space or anything like that, but good consistent, you know, demand and the type of tenants you want.

Jay Kornreich: Okay. And then maybe just shifting to the office property in New Mexico. Just curious if there is any update there for, you know, opportunities to start marketing that asset and any updates to timing when a potential sale could happen?

John Albright: Sure. So you know, basically, State of New Mexico is now in, so that is great. You know, we are talking to the other tenant Fidelity, about kind of what their space needs are going forward. And then waiting for the new administration, the state of New Mexico, to come online, you know, next year. So, you know, basically, next year, we will kind of, you know, basically optimize the property, you know, there rather than hastily sell it when, you know, it might be leaving some easy money on the table.

Jay Kornreich: Okay. Thank you. I will hold it there. Thanks.

Operator: Thank you. Our next question comes from Matthew Erdner of Raymond James. Your line is open.

Matthew Erdner: Hey, guys. Good morning. Thanks for taking the question. I would like to touch on the 2 recent acquisitions in Kansas City. You touched a little bit on why you like the environment there. But I guess, what is the opportunity that you kind of see at Zona Rosa? Just the amount that you guys are able to bring online over the next couple of years??

John Albright: Yeah. So the property had been owned by an entity that had foreclosed on it. So there was not very much outreach on the leasing side. And so I feel like, you know, the. And, you know, the property has some very high performing tenants. So it feel, you know, we have done this many times before, and, you know, think that there is a lot of opportunity on the health and fitness side. On the entertainment side, on the restaurant side, and then also talk to hotel developers about the pad sites. And so I just, you know, really attacking on all sides and, you know, given that, you know, we bought it at a nice opportunistic current yield.

And with all that vacancy opportunity to lease up, it is-- Yeah. We are really, really excited about the opportunity there.

Matthew Erdner: Yeah. that is good to hear. And then, you know, as it relates to kind of the leasing opportunity through 2028, you know, it is about 25% of ABR right now. I guess, how much of that is attributable to Zona Rosa and kind of the newer acquisitions? And then, you know, again, just the opportunity to drive spreads higher there.

John Albright: I will let Philip address that.

Philip R. Mays: On the. You are asking on the 2028 expirations, how much is attributable to Zona Rosa? Yep. there is not too much in there. What is in there, we feel really good about. there is the JCPenney renewal at Rockwall, you know, it is a very, very low rent. So we feel good they will renew there is actually Fidelity's renewal, which is in there, which John was talking about earlier at the Albuquerque. They have recently generally rightsized, so we feel good about that. And then the other really large 1 in there is Harkins. At Crossroads, which John talked about. We have already kind of proactively released that with Crunch Fitness. Those are the larger ones in there.

After that, it is a lot of small shop. Some have, contractual extensions. Some do not. So that will be where we will kind of grow our rents is in those small shop renewals.

Matthew Erdner: Got it. that is helpful. Thank you, guys. Thanks.

Operator: Thank you. Our next question comes from Robert Stevenson of Janney Montgomery.

Robert Stevenson: How are you thinking about equity funding in the near and intermediate term with the stock now sort of sub-20 at this point?

John Albright: Yeah. I mean, obviously, we do not think the stock is at the right price. And, you know, now that we have done, you know, the investments a lot of investments this year, almost, you know, almost sort of, like, getting close to the market cap of the company. You know, we are we are not, like, you know, needing to expect that the stock price be at certain level to raise equity here. We have done enough investments. We are we are you know, looking at the recycling side. Can we get, you know, premium pricing on some of the assets that are now stabilized and slower growing? And so you probably see more of that.

So we do not we do not need to rely on know, the equity price to be at certain level.

Robert Stevenson: Okay. I guess, given that comment, John, how are higher rates impacting the demand for some of the assets that you want to sell at this point? You still seeing decent demand and the brokers think that you know, that you could achieve the pricing? Is it a situation where people have sort of pulled back waiting to see what winds up happening over the next couple of months in terms of moves, etcetera. How would you characterize that today?

John Albright: Yeah. You still have a large capital base of capital that wants to get back into the space or get into the space for the retail shopping centers. And they are going to plow through no matter kind of what. Now they will have pricing adjustments based on rates. But it is not going to inhibit the demand for sure. So the demand is there from the right capital, you know, being very core capital. And, of course, there will be a little pricing adjustment, you know, whether it is 20. Probably 25 bps, 30 bps from 6 months ago, something like that, but nothing, you know, dramatic.

Robert Stevenson: Okay. And then, Philip, what is the pace of the 5.6 million signed not open? Does not sound like crunch starts until 2028, but when do the big pieces of that $5.6 million start to hit the revenue line for you guys?

Philip R. Mays: Yeah. So actually put in our investor presentation there. We schedule it out by year, so that might be helpful. But of the 5.6 million about 3.2 comes online in 2027. And pretty much all of it is online. For 2028. So we get really the full benefit in 2028. Little over half the benefit in 2027.

Robert Stevenson: Okay. And then last 1 for me. That does not reflect the leasing at Pompano that John talked about.

Philip R. Mays: Excuse me, that happened just after the end of the quarter. And so that will be a little more incremental positive on top of what is in the signed-not-open pipe currently. Okay.

Robert Stevenson: And should we. That 3.2 in 2027, is that sort of, you know, weighted throughout the weighted fairly evenly throughout the year? Or is there like a big chunk in any specific quarters that we need to be aware of?

Philip R. Mays: Yeah. Kind of a weighted basis. it is right around the middle of the year. Okay.

Robert Stevenson: And then last 1 for me. So, the guidance today, what gets you sort of at the high end? I mean, the low end of the guidance range for both core and AFFO, is about $01 better than what you did in the third quarter. But the high end of that range is, you know, a few pennies higher than that. what is the sort of variable that gets you from the sort of low end to the high end of the guidance range for the year?

Philip R. Mays: Yeah. I mean, it is a few things. A lot of it is the sign out open, you know, rent commencement. Some of that could come online late this year. And that would bump us up. that is probably that. And, you know, there is always in the fourth quarter there is percent rent. Right? And we have a significant amount that happens in the fourth quarter So it is it is really just rent commencement dates percent rent, and where those shake out, you know, in the fourth quarter.

Robert Stevenson: Okay. Thanks, guys. Appreciate the time. Thanks.

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

Craig Kucera: Good morning, guys. I wanna circle back to Zona Rosa, which is a pretty interesting acquisition. Guess you have about 250 thousand square feet of vacancy there, and you mentioned you also had 100 thousand square feet of underutilized space. Can you are those. That. Those are independent of each other. Correct?

John Albright: The 100 thousand is part of the 52. Okay. Yeah. So it is it is in total, but there is a 100 that is just very underutilized where it sets and not really activated because there is not an anchor to really drive people back there currently. And we are we are working on finding, you know, ways to implement and activate that part of the center to get some leasing momentum for that 100 thousand specifically. But it is it is in. The 52 includes that, Craig.

Craig Kucera: Okay. that is helpful. And are you expecting a meaningful amount of CapEx to reposition this acquisition? Or is there a lot of low hanging fruit, maybe like you saw at Carolina Pavilion?

John Albright: Yeah. there is not a lot of capital needed to do. To know, basically deferred maintenance or anything. We. There definitely is deferred maintenance, but it is not a huge amount. And we are working on all that, landscaping, painting, that sort of thing. But the real capital will come, with tenants So, you know, very much revenue producing sort of capital yielding investment.

Craig Kucera: Right. That makes sense. And as far as repositioning there, is this a situation where, you know, some of the tenants paying way below market and you can, you know, kinda replace them with markets? Or is it really more what you alluded to before, I think about bringing in, like, health and fitness in a restaurant, maybe hotels on the pads.

John Albright: Yeah. it is more about activating the property to its potential. So it is the. You know, there is not any huge mark to market. it is just, you know, a lot of, vacancy opportunity. Got it. And missing uses.

Craig Kucera: Okay. That makes sense. You are changing gears with the $32 million preferred equity investment you made earlier this quarter. Are you likely to keep that whole investment or sell a portion similar to what you did at Pine for, you know, for the. Some of the higher yielding investments you have there?

John Albright: Yeah. That 1, we are really lucky to have and happy to help out on the transaction that transpired. it is a. On a portfolio that we tried to buy. And so we lost on the transaction, but we were able to do this preferred investment at a lower basis than where we were willing to buy the portfolio. So we expect that to be a hold.

Craig Kucera: Okay. And, Philip, is the swap on the 2030 term loan the only swap expiring next year?

Philip R. Mays: Yeah. there is 1 swap maturing it is on about a 100 million. And it rolls up about a 180 basis points. I cannot remember, Craig, if that is on the 2030 or the 2032 loan,, but either way, 2032 loan. And it is $100 million, and it will roll up 180 basis points. that is the only 1 we have changing in 2027. 2028, we got a couple, but they are fairly close to market. So there will not be a significant drag in 2028 from any swaps expiring.

Craig Kucera: Okay. And just 1 more for me. You mentioned the lease termination at Harkins. How much was that fee, and was that recognized in the third quarter, or will it be recognized this quarter? Or in the future?

Philip R. Mays: Yeah. There was. That was really more we just got an early termination option. So we actually just. In order to get that and have the flexibility to exercise it, you know, on timing that works with crunch coming in and limiting the downtime. We just actually just give them a little bit of break and rent. We did not get any income, and then we got that option in exchange for that break in rent. And Crunch is, you know, well underway working to get, you know, all their approvals and everything. And then we will hit that option at that most opportune time. To limit the downtime there.

So there is no kind of 1-time income, this quarter related to that.

Craig Kucera: Okay. Great. Thanks for the color.

Operator: Thank you. Our next question comes from Gaurav Mehta of Alliance Global Partners. Your line is open.

Gaurav Mehta: Thank you. Good morning. I wanted to follow-up on the $32 million loan that you guys did in Q4. Why is the yield at 17% so much higher than I guess, some of the other loans that you have done in the past?

John Albright: Just because the complexity of the transaction, you know, it was fast moving, needed to be done by a date certain, you know, it gave them some flexibility on, you know, when they can kind of repay us, you know, expect it to be more of a 2-year duration sort of investment. So it was just really you know, they had to have the capital by a certain time and did not have a lot of time to go shop around. So we. Because we, as I mentioned before, tried to acquire the portfolio, we had-- already underwritten it. Okay.

And if they went out to other people that would need time to underwrite it, it would be impossible for them to have something closed and the timing they needed to have closed.

Gaurav Mehta: Second question, your commercial loan investment, seem like they are 14% of undepreciated assets. Can you remind us what the target is for the loan investment portfolio?

John Albright: Yeah. I mean, this is basically the level you know, 15%. I think we have we have mentioned before. So, you know, I do not anticipate that is going higher than the level where it is right now.

Gaurav Mehta: Alright. Thank you. that is all I have. Thank you.

Operator: Thank you. Our next question comes from John Massocca of B. Riley Securities. Your line is open.

John Massocca: Good morning. Maybe just give us some moving pieces clearly happening subsequent to quarter end. And your outlook on the capital markets, how are you thinking about leverage currently? And I guess you mentioned it a little bit to 1 of the earlier questions, but, you know, did that kinda set up for some more maybe systematic dispositions next year, or are you kinda happy at this level and are you more opportunistic with sales?

Philip R. Mays: Yeah. I will take the leverage piece, John. You know, at the end of the quarter, we were a little under 6 times. With all that activity, I think we go up to maybe 6.5. Times debt to EBITDA. Then keep in mind, we have a really robust sign out open pipeline. We have these pads. I am not going to take it down, you know, half a turn or anything, but they will incrementally bring it down, you know, point 2 or so. Right? So we would be in the low sixes. So it is a level we are comfortable with. But, you know, that said, we will be.

We can always look to recycle you know, depending on the opportunities we are seeing. On the market side, I will let John answer.

John Albright: Yeah. I mean, I think, as I mentioned before, we will opportunistically recycle if we get the right pricing for some of the assets. So I expect something to happen, in the next 6 months on the recycling side. But. Yep. So expect a little bit of that.

John Massocca: And then on the Summit Wood transaction, anything to be aware of know, that could be kind of additive there, either kind of, you know, re tenanting or releasing, or is it just kind of a very attractive day 1 yield for the quality of asset you purchased?

John Albright: Yeah. I would say it is the latter that, you know, is a really high quality property with solid tenant quality, but there are very below market leases on that on that property. The Kohl's and the Lowe's are you know, really, low rent. So almost sort of like a covered land play, if you will. But, yeah, we like the solid nature of the asset.

John Massocca: Okay. And then on Pompano City Center, you know, you are kind of adding square footage with the new tenant. Is there any more opportunities for that with some of the second floor space if you can activate it? Or is that kinda gonna be fully utilized post that lease up?

John Albright: No. We still have room to go there. there is still opportunity there on the leasing side, and we are getting really good traction. So we are excited about the runway at Pompano. So the AMP expansion is gonna do a lot for just driving more energy there. And we are taking out their taking over corridor space. So, you know, expenses that were. That we were paying on sort of dead space, you know, that is gonna go away. So it is all, you know, kind of lining up, you know, really well for us.

John Massocca: And, I mean, how much more square footage could kinda be added either as a, you know, quantum of what AMP is doing or just absolute terms?

Philip R. Mays: No. So the lease at the end of the quarter was low nineties percent. it is, like, 92% or 93%. So there is a lot of runway just there, and that is on the existing square feet. AMP took the vast majority of that unfinished space and for lack of a better way to describe it, it was, like, in enclosed structured parking. I mean. And they took 55 thousand square feet, and that space was, I think, right around 60 thousand square feet. We had underwritten that at zero. And then when we. As-- when we tend to do that to be conservative on our underwriting, John and our head of leasing take it very personal.

And they went out and found a creative use for it there. So that unfinished space now is largely filled with AMP. But we still have a lot of runway just on the property itself because it is relatively a relative basis, low leased.

John Massocca: I appreciate all that color. that is it for me. Thank you.

Operator: Thank you. I am showing no further questions at this time. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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