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 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 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 your speaker today, Chief Financial Officer, Matt Partridge. Please go ahead. Good morning, everyone. Thank you for joining us today for CTO Realty Growth Third Quarter 2023 Operating Results conference call. With me today is our Chief Executive Officer 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. 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 sq ft, including approximately 26,000 sq ft 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. For the quarter, our comparable rent spreads were essentially flat, down 0.4%, largely due to the lower rent from the food hall space. When removing the impact of this specific lease, we grew comparable rents 11.4%, most notably benefiting from the solid growth in rents at Beaver Creek Crossing outside of Raleigh and the Collection at Forsyth near Atlanta. Year-to-date, we've signed approximately 400,000 sq ft of leases at an average rent of $24.57 per sq ft. Comparable rent spreads for leases signed this year increased 4.6%, with many of our larger properties experiencing the highest growth rates. Crossroads Towne Center near Phoenix, Legacy North, located just outside of Dallas, Beaver Creek Crossing, Collection at Forsyth, and our newest investment, Plaza at Rockwall, which is also in the Dallas MSA, all had year-to-date comparable rent spreads above 7%. With all this leasing activity, our signed but not open pipeline now represents 3.2% of prospective occupancy pickup and 5% of existing quarter end portfolio cash base rents. Subsequent to quarter, I'm happy to announce we've signed a lease with a financial institution to lease our vacant 7,800 sq ft out parcel at Ashford Lane. This out parcel was vacant at the time of acquisition and was one of our key remaining vacancies at this property. With this lease signing, Ashford Lane is now on a path to be more than 90% leased by year-end. As we discussed during last quarter's call, we anticipated heavier disposition activity during the back half of the year as a way to bring down leverage and be in a position to make opportunistic investments. During the third quarter, we sold two properties for $20.9 million at a weighted average exit cap rate of 6.9%, generating gains on sales of $2.5 million. One of the properties sold was a Del Taco restaurant located on an out parcel in Crossroads Town Center, and the other was a 64,000 sq ft single-tenant office building leased to General Dynamics. Year-to-date, through the first nine months of the year, we've sold three properties for $22.9 million at a weighted average exit cap rate of 6.7%, generating gains of sales of $3.3 million. Following quarter end, we also announced we've completed the sale of Westcliff Shopping Center for $14.8 million and exit cap rate of 5.2%. Until recently, it had been a challenge to generate leasing momentum at this older neighborhood shopping center. So given the recent leasing activity and expected Albertsons credit change, we thought it was a good time to monetize. On the acquisition and investment side of our business, it was a relatively quiet quarter. However, we did purchase a 10.6-acre land parcel adjacent to the Collection at Forsyth for $4.3 million. This was a unique opportunity to grow our investment in Collection, which has experienced strong performance since we acquired the property at the end of 2022. Controlling the use of this land ensures that it's complementary to our overall plans for the property, and we've already had strong interest from tenants either looking to directly acquire the land for their own use or looking to lease a to-be-built space. Year-to-date, we've invested $80 million into four retail properties, this most recent land acquisition, and one $15 million structured finance investment. In aggregate, we've invested at a blended going-in cash yield of 7.7%. Going forward, while we're disappointed by WeWork's decision to default on their obligations, which negatively impacts our implied fourth quarter of 2023 and first quarter of 2024 forecasted performance, this wasn't necessarily a surprise, and we're seeking all available remedies. From a transaction perspective, we will continue to prioritize selling smaller, non-core assets to either repay floating rate debt or for redeployment into attractive investment opportunities. Operationally, we're optimistic we'll be able to continue our leasing momentum. Business fundamentals for retail and mixed-use properties still remain relatively strong for attractive supply-demand dynamics and what have been resilient retail sales. With that, I'll hand the call back over to Matt. Thanks, John. Starting with an overview of our portfolio, we ended the quarter with 23 properties, totaling 4.1 million sq ft of leasable space, located in nine states and 14 markets. At quarter-end, portfolio occupancy was 90%, and portfolio leased occupancy was 93%. As John mentioned, our signed-but-not-open, or SNO pipeline, continues to grow, representing nearly $4 million of incremental future base rent. Within our SNO pipeline, more than half of future rents are related to space that was vacant at the time of acquisition. So the benefit from these new leases is not only the addition of base rent, but also the reimbursement income that comes from tenants paying their pro rata share of common area maintenance, insurance, and real estate taxes that the company has previously absorbed as non-reimbursable operating expenses. Earnings for the third quarter of 2023 were better than forecasted, with Core FFO per share results accelerating for the fourth quarter in a row. Core FFO for the third quarter of 2023 was $0.47 per share, which was unchanged when compared to the third quarter of 2022, and AFFO decreased 2% to $0.48 per share when compared to the same period of 2022. These results are especially notable given the year-over-year impact of higher interest rates and some of the tenant credit issues impacting our 2023 results that we've discussed on prior calls. Breaking down the quarterly results further, total revenues increased by over 23% to $28 million. This increase is largely driven by the full period impact of our Q4 2022 and year-to-date 2023 acquisitions, such as West Broad Village, Collection at Forsyth, Plaza at Rockwall, and Exchange at Gwinnett Phase Two, as well as the positive comparable same-property net operating income increases at Exchange at Gwinnett Phase One, Westcliff Shopping Center, Price Plaza, and all of our single-tenant properties. These positive gains were partially offset by decreases at some of our properties where we have credit loss or tenants in transition, such as Legacy North, Beaver Creek Crossing, Ashford Lane, and Crossroads Towne Center, as well as the full period impact of the last 12 months of dispositions. Given the meaningful amount of transaction activity we've had over the past 12 months, and the fact that our same-property NOI calculation only includes properties we've owned for the entirety of the current period and the comparable prior period, our third quarter and year-to-date same-property NOI results do not include four of our largest investments, which are Collection at Forsyth, West Broad Village, Madison Yards, and Plaza at Rockwall, and therefore, are not completely representative of the operating trends of our overall portfolio. That being said, our same-property NOI for the quarter was down 4.5%, given the dynamics I just discussed. As we round out the quarter-over-quarter comparisons, G&A expenses were up year-over-year due to overall organizational growth, and interest expense increased due to higher rates and a higher overall debt balance as compared to this time last year. Per our announcement in August, we paid a third quarter regular cash dividend of $0.38 per share. This represents a Q3 2023 AFFO payout ratio of 79% and a very attractive current annualized yield of approximately 9.5%. Shifting to the balance sheet, at the end of the third quarter, our net debt to total enterprise value was 54%, and our net debt to pro forma EBITDA decreased slightly quarter over quarter to 7.8 x. We ended the quarter with total liquidity of more than $110 million, which includes cash, restricted cash, and undrawn commitments on our revolving credit facility. With respect to the capital markets, we were opportunistic in the third quarter, repurchasing over 6,000 shares of our Series A preferred stock at an average price of $18.52 per share. We also put in place $160 million in forward-starting interest rate swaps to hedge against potentially higher future interest rates when our existing in-place interest rate swaps expire. More specifically, the $160 million of new forward starting SOFR swaps represent approximately 60% of our existing term loan rollover exposure, and their start dates are laddered beginning in 2026, 2027, and 2028, with five-year durations that hedge against floating interest rates through 2031, 2032, and 2033. While the rates are slightly different by tranche and the effect of all-in rates would be in the mid-fives after accounting for the fixed swap rate, current spread, and SOFR adjustment factor in our existing debt agreement. The origination of these swaps is not meant to be a bet against the forward yield curve over the next 10 years, but instead, a risk-adjusted way to lock in what we believe are attractive long-term interest rates, and match those rates with our existing and future long-term investments. From a guidance perspective, we are increasing our 2023 Core FFO and AFFO earnings guidance to take into account our third quarter results and go forward expectations regarding investments, dispositions, capital markets activities, and property operations. For the full year 2023, we've raised the bottom end and lowered the top end of our investment and disposition guidance, and we now anticipate investing between $95 million and $100 million at an initial yield of approximately 7.7%, and we're now forecasting to sell between $38 million and $65 million of assets during 2023 at an exit cap rate between 6.15% and 6.75%. While we are forecasting stronger quarter-over-quarter increases in same-property NOI for the fourth quarter, we have adjusted down our full year forecast for same-property NOI growth and forecasted year-end lease occupancy, given the impact of WeWork's non-payment and default, as well as the fact we are selling properties that are 100% leased. However, given the strength of our third quarter results, momentum at many of our more recent acquisitions and improved expense controls, we've increased the midpoint of our Core FFO and AFFO guidance ranges by nearly 5%, with an $0.08 per share increase to the bottom end of the ranges and a $0.07 per share increase to the top end. Overall, we had a solid quarter of execution, and we continued to build leasing momentum and benefit from the strength of our Sun Belt-focused portfolio. We're taking a cautious approach as we move towards the end of the year, given the uncertainty and volatility in the world today, but we're optimistic we can continue to create long-term value for our shareholders. With that, I'll now turn the call back to the operator to open the line for questions. Thank you. At this time, we'll conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for our first question. Our first question comes from Rob Stevenson with Janney Montgomery Scott. Your line is open. Good morning, guys. Matt, how much was the prior rent on the food hall, and versus the new? Is that going to be open for any meaningful part of fourth quarter, or for modeling purposes, should we just assume the contribution basically starts in the first quarter? Good morning, Rob. The rent's about 25% lower on the food hall replacement tenant. The food hall was paying $51, and then the new tenant's paying obviously a little bit less. I would assume for modeling purposes, they don't rent commence and start paying rent until January 1. We're hopeful they'll get open in December, but you know, it's a fluid process, obviously. Okay. And then similarly, did WeWork make its September payment, or was August their last payment? And how much should we be thinking about that as a month? August was their last payment. It's about $240,000 a month. So we lost $240,000 for September, and then obviously we're losing that each month in Q4 and Q1 of next year. Okay. You know, you've got the food hall, you know, wasn't contributing, basically anything in the third quarter. You did get two of the three WeWork payments. Can you sort of... What are the other sort of adjustments that we need to be thinking about? If I walk to the fourth quarter core FFO guidance, you know, you're $1.28 year to date. The low end of your guidance is $1.58. At the low end, you're $0.30, if I'm doing my math correctly, and at the high end, $0.34 for the fourth quarter versus a $0.47. What's the other adjustments that we need to be thinking about there on a significant basis? Yeah, there's a decent amount of percentage rent in the third quarter that won't be in the fourth quarter, in part because one of the tenants who pays a significant amount of percentage rent, they have a fiscal year end in August, and so the sort of build-up resets in September. And then, obviously, we're losing WeWork. We've had a few other tenants who didn't renew, and so they're going to be coming out of cash flow going forward. We sold the Westcliff property, and so, obviously, that's sitting in restricted cash till we close out the reverse 1031 that goes in, too. So there's a bunch of different items. To my prepared comments, I would say we are being a little bit conservative because some of the rent start dates, we'll see if the tenants get there. You know, with the state of the world today, we're not sure if we're going to lose anybody else, but so we're being cautious with the fourth quarter, so I would say there is upside to our fourth quarter implied guidance. Okay, that's helpful. And then, John, what do you plan to do with the land that you bought at Forsyth? And is that entitled? Yeah, the land has very flexible commercial zoning, not residential, but commercial. It was part of the original plan when Cousins Properties was developing this, you know, 20 some odd years ago. When we bought Collection, it was already under contract with a spa operator, who was going to build, like, a destination spa sort of thing. We just kept touch base with Cousins, and when they fell out of contract, we jumped in. There is a dynamic amount of interest in that parcel, that size parcel from single users, but it could be multiple users. We wanted to, in effect, control our adjacent land, and it's going to be a benefit to our property to make sure that the use is complementary to Collection. So we're pretty excited about the opportunity there. The timeframe for that, is that, you know, a few years out? How, you know, soon would you be thinking that you'd wind up having some sort of decision as to what's going to go in there and start moving dirt around? So ideally, we would, you know, ground lease it to one or two users. But as you know, we don't like to, you know, spend a lot of development money. But we're already having some dialogue with tenants, and a lot of them want to purchase the land rather than doing a lease structure. So we're working through that. But for you know, modeling purposes, it takes, you know, a long time and so forth. I would say, kind of, end of fourth quarter, you know, next year would be kind of, you know, We'd probably have, you know, something, something figured out there for sure. Okay, that's helpful. And then last one for me. John, how are you and the board thinking about capital deployment and the sort of trade-off between making a $15 million first mortgage during the quarter and buying back stock at, you know, $15-$16? How are you sort of, balancing that and thinking about that going forward in terms of capital uses? Yeah. So I mean, obviously, we find the stock very, you know, and the preferred very attractive here. So we certainly discuss that every quarter. But we are hopeful to find some deployment and some opportunities, and where we think that the pricing right now, you know, isn't as favorable as you might expect, given the macroeconomic backdrop. And so we're waiting to, you know, kind of find that you have good opportunity to reinvest in investments. But you know, we're being patient, so we're at... So at the same time, we'll take advantage of, you know, depressed stock prices, but waiting for, you know, more of an investment opportunity. Okay. I guess, as a follow-up to that, Matt, are you guys getting any benefit from the preferred in terms of credit pricing, or is it basically just being treated as debt? It is being treated as equity from a leverage ratio perspective, but obviously the fixed coupon payment gets picked up in our fixed charge coverage ratio, so it depends on which covenant we're talking about within the facility agreement on how it gets treated. Okay, so there is some sort of, you know, trade-off by buying that back versus equity, versus the common equity, I should say. That's correct. Okay. From a leverage ratio perspective, yes. Okay. All right, guys. Thanks. I appreciate the time. Have a great weekend. Thanks, Rob. Thanks, you too. One moment for our next question. Our next question comes from Matthew Erdner with Jones Trading. Your line is open. Hey, guys. Morning, and thanks for taking the question. What kind of opportunities are you seeing the most of right now? Is it land financing, or just physical properties themselves? And I guess, what are you looking at the hardest at the moment? Yeah, I mean, we're not really seeing a lot of good opportunities right now. It's kind of a quiet market. People that want to sell assets don't think that this is a great time to be selling an asset. And so we're waiting for, you know, some of the sellers that need to sell an asset, whether they have debt maturities or they have a fund life issue or something like that. So, you know, the market's fairly quiet right now. We're not looking to buy additional land. The 10 acres next to Collection was unique in expanding the campus and controlling the site. But, you know, on the financing side, we were not really searching out, you know, financing opportunities. If they come to us, we'll certainly consider them, and it would be more... If we do a financing deal, we'll probably recycle out of some of our existing investments, and so just keep, keep the size neutral. But yeah, we, we expect probably first quarter, you know, there'll be better opportunities out there on the investment side, and so we're being patient. Gotcha, thanks. And then, in terms of tenant recycling, and ones that didn't renew, could you talk about the leasing activity and what kind of tenants are looking to go into these properties? Yeah, I mean, we're having still good leasing activity, especially on our newer acquisitions at West Broad and Collection and Ashford Lane. And it's, you know, it's really a little bit trying to kind of get the right mix of tenants on some of these properties, as we've done a lot of the heavy lease-up. And so, you know, for instance, soft goods want to be next to soft goods, and so tenants basically, you know, don't want to commit until the other tenant commits, and so we're playing that dance a little bit, but the activity has been very good. And then Legacy, we've seen an uptick of activity on the WeWork space, which has been great to see. We were working with a fitness tenant for about six months, who wanted to take all the space, and it would have been fantastic use for the property, and it just was the economics of the deal, given how much it would cost to do the build-out. We thought, you know, it just didn't really make sense, so we terminated those conversations, and now we've picked up conversations on regular way tenants, and that activity has been very, very active in the last 45 days. So we're hopeful there. That's helpful. Thank you, guys. Our next question comes from RJ Milligan with Raymond James. Your line is open. Hey, good morning, guys. So in the quarter for the two properties that were sold, a pretty low cap rate, especially given the interest rate environment. I'm just curious when those deals were struck and who were the buyers? So on, I'll start with General Dynamics, the office building. You know, that was more of a syndicator, and that's where we're seeing a lot of office buyer interest is from groups that are, you know, syndicating out equity and looking for attractive, attractive, you know, low replacement cost properties with good yield and good credit. On Westcliff, the low cap rate is a little bit, you know, a little bit misdirected in that there's a lot of leases we did recently, but those leases don't come online until next year. So the cap rate does go up next year. But that was a value add group that was local to that asset. Gotcha. Thanks. And then, can you talk about the decision to buy back some preferreds in the quarter versus buying back stock, and then the thought process about, you know, either buying back preferreds or stock going forward? Yeah, I mean, we have set rates or set prices on both, where we find those to be attractive on the preferred, you know, buying at the discounts, the liquidation preference. You know, we find that very, very attractive and a meaningful pickup for our NAV for our shareholders. So it's a way to buy your, you know, somewhat your liabilities at a big discount. And then the stock, obviously, where we're trading at, you know, high nines dividend yield and, you know, way below replacement our NAV. We obviously have a set price there that we will, you know, be very active in the buyback program if the stock continues to be at certain prices. RJ, just to expand on John's comments, you know, these are facilitated through 10b5-1 plans, so it's not like we're resetting the price all the time. It's established at a point in time, and then it stays in place going forward under the program. Gotcha. And then just one more question on sort of the broader environment, and you guys talked about this in your comments about the time to get to rent commencement. And I'm just curious what you're seeing overall in the sector. Is it taking longer? And I think what we've been hearing from the peers is that the time from signing a lease to getting open is taking longer, and I'm just curious what's driving that. Yeah, that's, that's been the case for some time now, so I don't think that's a new, a new element. I would say that the construction costs have not come down. We're working with a prospective tenant right now, obviously several prospective tenants, but one that I had a meeting with yesterday, where we brought in a contractor to discuss, you know, construction costs. And, you know, the build-out of some of the space is, you know, 2x what it was five years ago, and the costs are not coming down as much as you would think with, you know, activity kind of slowing. So you're still dealing with elevated construction costs, TI costs, and the timing, you know, contractors are still busy. So, you know, timing is. If you go from a discussion with a tenant right now on signing a lease, you know, you're probably not going to be open for a year. So it's, you know, frustrating, but something we just have to work through. Okay, thanks. That's it for me. Thank you. That concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.