CTO Realty Growth, Inc. (CTO) stock intrinsic value fair value estimate & owner earnings analysis

CTO Realty Growth owns 17 shopping centers and 4 other income properties, mostly in Georgia (about 36% of base rent), Florida (25%) and North Carolina (15%), and makes some commercial loans. Annualized base rent is roughly $106 million and the average remaining lease term was 5.0 years at the end of 2025. Its shares are worth what the properties earn after upkeep, less what is owed to lenders and to preferred shareholders. How we measured earnings. We start with operating cash flow, remove year-to-year swings in receivables, payables and prepaid items, subtract stock compensation as a real cost, and subtract the upkeep portion of property improvements (about $11 million in 2025; the part of spending that scales with revenue growth is treated as growth spending). Purchases of new properties are treated as growth and are not deducted. On that basis, earnings per share were $1.33 in 2023, $1.64 in 2024 and $1.78 in 2025. Because the company borrows, we then add back the cash interest it pays ($26.3 million in 2025) to see what the properties produce before lenders: $2.29, $2.47 and $2.59 per share. We anchored on the average of 2024 and 2025, $2.53 per share or about $82 million a year, because the company issued a large block of new shares in 2024 (diluted shares went from 25.4 million to 32.3 million) and bought $145 million of centers in 2025, so 2023 describes a smaller business. The 2024 operating cash flow was restated in the latest annual report from $69.4 million to $59.9 million after loan-reserve cash was reclassified to investing, and we used the restated figure. We treated increases in other assets (rent receivables and capitalized leasing costs) as timing, which flatters earnings slightly; the bear case's higher upkeep offsets this. Depreciation of about $60 million a year is far above the $15 million spent on improvements, so we let cash flow fade in the base and bear cases after year 10 instead of assuming buildings last forever. Growth credited. Earnings per share grew 8.8% in 2025 and cash flow before lenders per share grew 5.0%; our first-year growth for the base case is 3%, below both. The specific reason for any lift is the full-year effect of Ashley Park and Pompano Citi Center, the two centers bought in 2025 for $145.1 million, which are already owned and paid for; first-quarter 2026 revenue of $41.2 million, up 15% from a year earlier, points the same way. We did not credit further acquisitions, since buying property with new shares or borrowed money does not by itself raise value per share, and we did not credit rent increases or leasing gains because the filings do not give us evidence of escalator terms or renewal spreads that we can rely on. Base case: about $84.8 million a year (roughly $2.61 per share) held flat for 10 years, then declining 2% a year. The properties are worth about $1,204 million. The company owes about $639 million (roughly $652 million of borrowings after the first-quarter 2026 increase to $649.5 million of carrying value, less about $13 million because the 2028 to 2030 term loans are fixed by interest rate swaps at 4.2% to 5.2%, below a 6% cost) plus $118 million of 6.375% preferred stock (4.7 million shares at $25). The difference is about $447 million, or $13.77 per share on 32.5 million diluted shares. Bear case: the contracted base rent from existing leases falls from $101.4 million in 2026 to $52.3 million in 2030 as leases expire, and Georgia alone is 36% of rent. We assume re-leasing is slower and at lower net rent, and that improvements spending returns to its 2023 level of $22.7 million instead of the $15.2 million spent in 2025. Cash flow before lenders starts at about $74.8 million, declines 2% a year for 10 years, then fades 4% a year. The properties are worth about $843 million; the company owes about $770 million ($652 million of borrowings with no credit for cheap fixed rates, plus $118 million of preferred). The difference is about $73 million, or $2.24 per share. Even here cash flow far exceeds annual interest of roughly $28 million, but leverage leaves very little cushion for shareholders. Bull case: the 2025 purchases and first-quarter momentum hold, and cash flow before lenders reaches about $88 million (5% above 2025's $83.7 million, matching last year's growth rate), held for 10 years, then fading 1% a year because land, about 39% of the 2025 purchase price, keeps earning rent. The properties are worth about $1,343 million; the company owes about $757 million; the difference is about $586 million, or $18.03 per share. Debt. The main event is January 31, 2027, when the credit facility ($151 million drawn at year-end) and the $100 million 2027 term loan mature, with a one-year extension option; $149 million of the $300 million facility was undrawn at year-end. The 2027 term loan's swap at 2.8% all-in ends then, adding roughly $2.5 million a year of interest on that piece. Other maturities are $100 million in 2028, $125 million in 2029 and $125 million in 2030. The weighted average interest rate was 4.33% at year-end. We tested our first-year assumption against these facts and it holds: the refinancing cost is small next to cash flow before lenders, but the amount due within about four months is large and a failed or expensive refinancing is the main way shareholders could be left with little. What would make this wrong: a refinancing on materially worse terms or one that requires selling shares at a discount; retail tenants failing to renew; improvements spending that keeps rising toward the 2023 level; or the additional borrowing in the first quarter of 2026 not producing matching earnings. Upside not counted: the anchor does not include a full year of first-quarter 2026 purchases. The most recent quarterly information available to us is the first quarter of 2026. Change since our last estimate. In August we estimated $10.80, $16.42 and $22.10 by capitalizing cash after interest and preferred dividends at 10.5% to 12%. We now value the properties themselves at a flat 6% and then subtract the debt and the preferred stock explicitly. That makes the result far more sensitive to leverage and the 2027 maturity: the bear case falls sharply, the base case moves lower, and the bull case moves lower more modestly. The margin-of-safety price of $8.25 is about 40% below the base case, reflecting leverage, the near-term refinancing and dependence on retail tenants.