This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Greetings. Welcome to the Generation Income Property Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Emily Cusmano, Chief of Staff. Thank you. You may begin.
spk04: Thank you, and good morning, everyone. I am joined today by David Sobelman, Chief Executive Officer, and Allison Davies, Chief Financial Officer. David will provide an overview of the company's growth strategy, business, and capital markets activities, second quarter highlights, and subsequent events to date. Allison will review our quarterly financial results. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities law. Statements that are not historical facts such as statements about our expected acquisitions or dispositions are considered forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including a report on Form 10-Q. In addition, Certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release for definitions, GAAP reconciliations, and an explanation of why we believe such non-GAAP financial measures are useful to investors. With that, I will now turn the call over to our Chief Executive Officer, David Sobelman.
spk02: Thank you, Emily, and good morning, everyone. For the past several quarters, we have been reporting to our shareholders and the overall market that fundamental financial dynamics were forcing us to be disciplined and patient as it related to our acquisition strategies. While it wasn't always easy to continually adhere to those principles, we're happy to report that as of August 10th, 2023, Generation Income Properties has almost doubled its portfolio size with the purchase of a 13 property, 202,000 square foot, $42 million single tenant net lease acquisition that perfectly fits the investment thesis that we have laid out for our shareholders. The cap rate for this transaction was 7.55% and the portfolio was financed with approximately $21 million in mortgage debt, $9 million in cash, and $12 million in newly issued redeemable preferred shares. This morning, we released earnings for the second quarter of 2023, as well as filed a press release and an 8K outlining the transaction in which I referenced. There are many positive attributes of this transaction that we feel need to be highlighted. But first, I want to publicly thank the seller, Motive, Inc., a New York Stock Exchange listed net lease REIT, and its CEO, Aaron Halfacre, and Motive's board of directors and its team, who have epitomized professionalism throughout this process. The portfolio is 76% investment grade tenancy or its equivalent, inclusive of 11 national retailer credit tenanted assets and two office assets, one GSA occupied and guaranteed building in California, as well as a mission critical property in the Orlando, Florida market, which is fully occupied with mandated attendance by an international engineering company, EXP, which services amusement parks and entertainment clients, hence the reason for their major Orlando presence. Immediately following our recent portfolio acquisition, our weighted average remaining lease term is now approximately 5.2 years, reflecting our short-term lease thesis. By adding these high-quality properties to our portfolio, We increased our retail asset distribution to 55% and achieved one of our near-term goals of being landlords to over $100 million in gross asset value. We have always said that being a small-cap net lease REIT allows each accretive transaction the opportunity to provide us with meaningful external growth. However, The GIPR team has taken that philosophy a step further and increased the property count of our company by 2X with one transaction. We also accomplished this feat in a very challenging market where most companies are struggling to find opportunities of this magnitude for their respective portfolios. One of the core values at GIPR is being relational, and this transaction is proof that it has served all parties. most importantly our shareholders, very well. The fact that two small public net lease REITs developed a relationship over time and found a way to work with each other, especially in a down market, is a testament to the motivation of how that relational core value has, well, value. Aaron and I want the best for our respective shareholders, and we found a way to identify a transaction, negotiate with fair terms, and execute in this market, which is a telltale sign that we can be creative, responsive, and to emphasize this word, patient, when the right opportunities are identified. Generation Income Properties now has 26 assets in 13 states, and while we're not providing going forward guidance, we do believe that the market may be turning in our favor in order to allow us to continue our external growth plans. While the positive impact of the acquisition is clear for our company's portfolio metrics, we believe this transaction shows shareholders and the market alike that we are focused on growth for the company and have the ability to execute large transactions. As the wider market is continuing to experience challenges, we believe this is just the beginning of a greater buying opportunity and will continue to focus on acquiring shorter-term, high-quality assets to our portfolio. Being a small-cap net lease REIT has its challenges, but this acquisition is a transformative deal for a company of our size, and we're pleased to be able to show the market that we have the ability to source, underwrite, and execute transformative deals, even amidst market uncertainty. With that good news, I turn the call over to Allison Davies, GIPR CFO.
spk05: Thank you, David. In addition to announcing our new portfolio acquisition this morning, we also issued a press release announcing our financial and operating results for the quarter. Total revenue from operations was $1.3 million during the quarter, which represents a slight year-over-year decrease, driven by our one tenant vacancy and one of our two Norfolk, Virginia properties. Operating expenses for the quarter ended were $2 million, remaining flat as compared to the same period last year. as we continue to focus on reducing operating expenses in this rising interest rate environment. Net operating income was $1 million, as compared to $1.1 million during the same period last year, also due to our one-tenant vacancy. Net loss attributable to common stockholders for the quarter was $881,000, as compared to $1 million for the same period last year, which is directly related to the loss when debt extinguishment occurred in April of 22, related to our portfolio refinance. Core ASFO was a loss of $33,000 as compared to income of $36,000 for the same period last year. The core ASFO decrease is also directly attributable to our one tenant vacancy. We believe our balance sheet is also in a good position to continue to withstand the market uncertainty specific to commercial real estate that we're experiencing. We have a healthy cash balance and our next mortgage debt maturity isn't until 2024. With that, I'll turn it back over to David.
spk02: Thank you, Allison. With that, please open the call for questions.
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for your questions. Our first questions come from the line of Michael Diana with Maxim Group. Please proceed with your question.
spk03: All right. Good morning. Congratulations.
spk01: Thank you, Michael.
spk03: Now, I think it says in the release that it closed on August 10th. Does that mean you own these properties now?
spk01: That's correct. We currently own them.
spk03: Okay. Okay. So they'll produce income immediately then, right?
spk01: That's exactly right.
spk03: Right. Okay. And what's the prospect given this of – of the dividend of the earnings from the accretion here covering the dividend?
spk05: Hey, Michael. This is Allison. I can take that. We are still working on that. While we still won't cover our dividends after this transaction, we are confident with our continued growth. We'll anticipate being able to in the near term. Certainly, this is progress.
spk03: Okay, great. So I think David referred to, you think this could be the beginning of a buying opportunity. So given the size of this deal, do you have the management capacity to pursue other transactions pretty quickly or is there going to be a digestion period?
spk01: Yeah, we feel like our management team and Just the way that we overall operate, which is in a fairly frugal manner, is going to allow us to increase the number of assets that we have in our portfolio with our current infrastructure. So we feel like we can continue to grow without adding any staff or incurring meaningful additional expenses.
spk03: Okay. That's great. So we look forward to the next one. Okay, congratulations.
spk01: Thank you, Michael.
spk00: Thank you. There are no further questions at this time. I would like to turn the floor back over to David Sobelman for any closing comments.
spk02: Just thank you, everyone, and have a great week.
spk00: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Disclaimer