CTO

CTO Realty Growth ($CTO) Executives Buy Shares En Masse Day After Short Attack... Is 8.89% Dividend an Opportunity or Trap?

06/26/2025 23:04

CTO Realty Growth ($CTO) is sending intriguing signals that investors should closely examine. Following a short-seller attack, management's coordinated stock purchases have suddenly thrust this small-cap REIT into the spotlight. CTO Realty Growth is a diversified real estate investment trust headquartered in Winter Park, Florida, primarily owning and operating retail properties in high-growth Southeast and Southwest U.S. markets. The company's portfolio includes major shopping centers like Carolina Pavilion, Millennia Crossing, and Lake Brandon Village, while also serving as external manager for Alpine Income Property Trust (NYSE: PINE). The dramatic sequence of events between June 25-26 demands investor attention. Wolfpack Research published a short report alleging financial misconduct at CTO, triggering a sharp stock decline. The very next day, CEO John Albright and three other executives simultaneously purchased company shares—a move that appears far from coincidental and signals strong management confidence. CEO Albright's trading pattern is particularly telling. After selling 29,488 shares at $20.71 per share for $610,578 in November 2024, he reversed course on June 26, purchasing 3,800 shares at $17.05 for $64,808. This shift from selling to buying within seven months suggests a significant change in his outlook on the company's prospects. Director George Brokaw ($33,880), SVP Daniel Smith ($17,001), and SVP Philip Mays ($17,290) joined the buying activity the same day. The short report's core allegations center on financial reporting reliability and dividend sustainability concerns. Wolfpack Research specifically questioned CTO's practice of issuing shares to cover a $38 million dividend shortfall since becoming a REIT in 2021. However, this represents a common capital-raising strategy among growing REITs. The actual financial picture presents a mixed narrative. CTO reported quarterly revenue of $35.81 million, up 27.3% year-over-year and beating analyst expectations. Operating cash flow remains healthy at $67.9 million. However, the company shows net losses (-$13.05 million) and high leverage with a debt-to-equity ratio of 101%. While the 8.89% dividend yield appears attractive, the payout ratio significantly exceeds earnings, raising sustainability questions. Nevertheless, CTO's business fundamentals show strength. Portfolio occupancy stands at 95.8%, lease spreads reached 12%, and signed but not yet opened leases are expected to contribute $6.5 million in additional rental income starting in 2025. Core FFO increased 6% year-over-year, and same-property NOI grew 6.3%. Investors must weigh several critical factors. Positively, management's coordinated buying demonstrates strong confidence in the company's prospects. The CEO's decision to purchase shares with his own money immediately after a short attack directly contradicts financial misconduct allegations. Additionally, the high dividend yield and growing rental business offer appeal. However, risks remain substantial. High leverage could amplify interest expense burdens if rates rise, while the retail real estate sector faces structural transformation risks. The current ratio of 0.73 suggests potential short-term liquidity pressure. Investment timing and perspective prove crucial. With shares declining from the $19 range to $17 following the short attack, management's purchases may signal an opportunity near the bottom. The price-to-book ratio of 0.95 suggests attractive valuation near book value. Near-term catalysts include the company's official response to the short report and next quarter's earnings release. Management's purchase prices around $17 likely establish short-term support levels. Long-term success will depend on dividend sustainability and leverage management capabilities. For investors seeking high dividends and willing to accept moderate risk, current levels merit consideration. However, position sizing should remain under 5% of portfolio, with preparation for potential dividend cuts and price volatility. Whether management's buying represents genuine confidence or mere market response will be determined by upcoming quarterly results.