B.Riley analyst John Massocca reiterated a Buy rating and $22.50 price target on CTO Realty Group (NYSE: CTO)

The analyst comments "Looking towards CTO Realty Growth’s (CTO — Buy, $22.50 PT) upcoming 3Q24 earnings, we already have clarity on two aspects of the REIT’s business activity during the quarter. Namely, CTO preannounced investment and capital markets activity, with the latter including the issuance of 6.9M shares via its ATM at $18.63/sh for net proceeds of $125.7M and the closing of a new five-year $100M term loan. While much of the investments were already known at the time of our last note on the REIT, this capital markets activity is additive to our model and also adds greater certainty to 3Q24 earnings expectations—note our core FFO/sh and AFFO/sh are slightly above consensus—as well as the broader CTO story. Furthermore, while the equity issuance was slightly dilutive to estimates vs. our prior model, it meaningfully reduced the REIT’s leverage outlook, which we see as a positive for valuation due to CTO sitting above the leverage levels investors typically favor. Capital raising activity also extended the REIT’s liquidity runway for investments, which had been meaningfully reduced by CTO’s robust activity during 3Q, when the REIT completed $191.3M of investments vs. $18.0M of dispositions. With significant liquidity now available and CTO’s cost of capital somewhat improved, we see future investments as a catalyst for the REIT heading towards FY25, especially in light of the 9.1% average yield on investment activity YTD in FY24. Operationally, we would also be looking for a timeline for certain value-adding projects and the closing of the gap between physical and leased occupancy, which has the potential for up to $5.7M of cash ABR upside. Lastly, these catalysts do not appear to be reflected in CTO’s valuation, with the REIT trading at an 8.1% implied cap rate and 31.9%/33.1% 2024E/2025E core FFO/sh multiple discounts vs. shopping center peers. We therefore reiterate our Buy rating and $22.50 PT."

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Shares of CTO Realty Group closed at $19.72 yesterday.