Alpine Income Property Trust, Inc.

Q3 2021 Earnings Conference Call


spk_0: morning everyone and welcome to the alpine income property trust third quarter twenty twenty one earnings conference call participants will be in a listen only mode should you need assistance policing or conference specialist by pressing the starkey sarah by zero after nice presentation there will be an opportunity to ask questions to ask a question in a press thousand and one to withdraw your questions you may presto and to this is no today's event is being recorded at the time i like to turn the comets however to john bright president since ceo sir please go ahead
spk_1: good morning everyone is a he for joining us today for the alpine income property trust third quarter two thousand twenty one operating results converts goals with me as matt partridge our chief financial officer before it began altered our to match provide a customary disclosures regarding today's call that six yards a like to remind everyone that many of our comments today are considered forward looking statements under federal securities was the company the actual future results may diverse
spk_2: significantly from the matters discussed with forward looking statements and we undertake no duty to update these statements sectors interested to cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's form ten k forms and to and other fcc filings and you can find our se si reports and are
spk_1: earnings release which contained reconciliation for non gap financial measures we used on our website at alpine read dot com with that are now trying to call back over to jump thanks man this is another solid quarter of execution as we found a number of attractive acquisition opportunities in the markets and made progress on several notable initiative we continued our consistent acquisition place during the quarter acquiring fifty five point four million of high quality at least properties and a weighted average going and cap raid at six point eight percent we close on a new eighty million dollar term loan with initial picks rate of one point eight three percent with existing and new thank you relationships to give us additional liquidity to find our investment activities to the balance of to two thousand twenty one two thousand twenty two and i'm excited and now so we entered into a new store development leads with a well known national browser to develop a store on an undeveloped parcel as one of our exist seen properties in jacksonville florida or acquisition activities in the quarter were once again focus on well located properties exhibit strong rules say fundamentals that are occupied by high quality national brands operate well performing retail sectors during the quarter we acquired nike property spread across twelve different states six of which are new to our
spk_3: portfolio
spk_1: our new acquisitions include fourteen tennis operating and while sectors and we made a concerted effort to increase our exposure to the same high performing tenants in our portfolio such as and eleven walmart at home hobby lobby advance auto parts dollar tree in family dollar we also added a number of high quality ten as which we take an excellent ten adverse the credit quality and include notable brands such as a riley auto parts harbor freight valero tractor supply in camping world today we've acquired forty two nepalese properties for nearly a hundred and fifty nine million dollars and a weighted average going and casts his cap or age of seven point two percent in a weighted average remaining late term and acquisition of eight years our portfolio continues to be one hundred percent pain in the properties continued be hundred percent oxide in as the into the quarter consisted of eighty nine properties totally two point seven million square feet with tenants operate and twenty five sectors within forty eight states are top ten as include wells fargo felt ingrained vacations at home hobby lobby dollar general walmart and walgreens as we'd run the portfolio been able to meaningfully increase the diversity martinez geographic and sector exposures and since the beginning of the year with be nearly doubled the number of properties a number of tennis and a portfolio without of or size of point that we no longer have a as exposure about ten percent and our largest sector exposures below thirteen percent both of which are trans weeks back to continue as we execute on her disposition plans and he grows of overall portfolio speaking of are just efforts would continue work towards the cell of our office properties position the company as one hundred percent retail focus we're currently under contract the cell with whole grain vacation properties and we are in the process of discussions with interested parties to sell the wells fargo property in hillsboro organs while we do expect the disposition of these properties to be partially dilutive tar earnings we as has paid will have similar metrics regarding our investment grade ten as the and credit rating retail exposure following a cell redeployment of the disposition proceeds increase portfolio diversity you are replacing these properties with a number of new tenants sector exposures a geographic locations in a better weighted average least from given that it off it's properties of a combine remaining weighted average least or with approximately four point five years also highlights that we just sell or outback steakhouse and hundreds bill north carolina during the third quarter for fire and a half exit caf rate which we believe as reference points as to the quality of our portfolio with that old now turn the call over to mass to talk about our performance in a quarter capital markets activities in and reese guidance thanks john total revenues for the third quarter twenty twenty one increase sixty percent of the third quarter twenty twenty eight point two million general and administrative expenses as percentage of revenues which include the management see of our external manager ctrl key growth decrease by more than two hundred and seventy basis points when compared to the second quarter of two
spk_2: twenty one and by more than five hundred basis points when compared year over year to the third quarter of twenty twenty continuing are improving organizational skills the third quarter twenty twenty one both funds from operations and adjusted france or operations were four point eight million or thirty seven cents per share ssl and episode per share growth of the third quarter of twenty twenty one where five point seven percent and eight point eight percent respectively when compared to the third quarter twenty twenty or as i found the second quarter was part
spk_1: that of really impacted by approximately twenty three thousand dollars from the repayment of different rent related to the previously disclosed rent to furrow agreements we only have one tenant making repayments under a previously agreed to rent to for agreements related to the covered nineteen pandemic and these payments are scheduled to a curfew the second quarter twenty twenty two
spk_2: year to date africa was a dollar fifteen per share and africa with the dollar eighteen per share representing year over year per share for out of thirty four percent and seventy one percent respectively when compared to the first nine months of twenty twenty for the third quarter twenty twenty one the company paid cash dividend of twenty five and a half cents per share on september thirtieth the stockholders record on september ninth is represents a quarterly pair ratio of sixty nine percent of apatow per share and a half over share an annual i feel of approximately five point four percent a third quarter given and marks the festival an increased by the company society oh in late two thousand and nineteen or fourth consecutive increase in a more than two percent increase over our second quarter twenty twenty one quarterly dividend here today to the first three quarters of twenty twenty one the company has paid seventy four and a half cents per share in cash dividend the dividends represent a year to a cash payout ratio of sixty five percent of a half hour per share and sixty three percent of an overture we anticipate announced their quarterly cast tom and soft event for the fourth quarter towards the end of november
spk_1: it's john reference that the beginning of it's prepared remarks we completed a new eighty million dollar term one on september thirtieth and initial interest rate of one point eight three percent which we used to reduce the outstanding balance of our revolving and secured credit facility extend our set maturity profile and bring in three new banking partners as with our first term loan earlier in the years this new term on helps brought her access to capital and lock and longer term debt and an attractive rates the new eighty million dollar unsecured term long as the charm of more than five years with maturity date in january twenty twenty seven
spk_2: we now have more than one hundred and thirty million dollars liquidity from cash and i'm john revolver capacity son's teacher acquisitions which is in addition to the proceeds expected from the office property sales discussed earlier given the current perspective liquidity the company we were not active on our eighty and equity program during the third quarter however as we previously announced we did issue an additional fifty five thousand opie p and it's to close out our inaugural opie and a transaction and acquire one remaining property that was part of it's and property diversified portfolio opie unit issuance was completed at eighteen dollars and eighty five cents per share the same per share values the previously issued four hundred and twenty five thousand opiates total debt as of september thirtieth was one hundred ninety one point five million in total cash and research to cast with seven point three million that's that's a total enterprise value a quarter and was approximately forty four percent more that that the perform even i was approximately six point nine times heading towards the end of twenty twenty one and as we prepare for twenty twenty two or balance sheet continue to be well positioned execute on our acquisition pipeline and support our future operating activities and consideration of our capital markets activities third quarter performance and other substance to civic the fourth quarter we get increase or points twenty one for euro zone episode guidance for the full your of twenty twenty one or apatow guidance is now one dollar and forty seven cents to one dollar fifty cents per diluted share an effort though guidance is now one dollar the a cab to one dollar fifty one cents per diluted share with that i want to thank our shareholders banking relationships and other business partners for the continued support and i'll turn to call back of your job or is closing remarks
spk_1: thanks man we're about a month away from our two year anniversary as a public company i'm excited about the progress we've made in a relatively short period of time we build a high quality portfolio deliver consistent execution meaningfully grown are dividends or in the first two years while we have a lot of work ahead of us i'm confident we'll be able to continue to execute are discipline events with strategy and drive further value for shareholders thank you all for your time and support of that time will open it up for questions operator
spk_0: ladies and gentlemen time will begin the question and answer session ask a question you may press nine and run using a as and telephone the rising a speaker phone with us you please take up your handset before pressing the keys dimitar questions you may press star and to again that stein and run ask a question and thousand or whatever it is some of the roster i first question tonight comes from obscene and said from the any presents depression
spk_4: good morning guys
spk_5: john
spk_1: how can we disagree about the timing of the sale of the off his assets is you know is the help think it's under contract is that likely to be and a fourth quarter or these posts like likely just sort of drifted to the first quarter yeah so thanks rob so hilton definitely would be scheduled to close before the end of year the contract terms or wells fargo would be one that you could be into the year but could be kind of first part of of next year or wells say is a little bit more complicated because there's redevelopment potential in different sectors and so people are really digging in on the redevelopment side
spk_5: so it's a dm everything's fairly easy about the the property in the lease bernier one's looking at the redevelop potential okay and then i guess on that same thing mad i mean given that
spk_1: oh that there's going to wind up being some dilution here main in your guidance what are you assuming that they'd helton closes is that like basically the tail end of the fourth quarter and it doesn't really have any material impact on the fourth quarter were like early december how is that sort of factors into your guidance
spk_6: there are guidance contemplate the late november or early that summer clothes so how can forget about two out of the three months of cash flow of
spk_7: and then basically something
spk_5: get almost all of the cash flow off of well spells correct okay i'm in terms of the acquisition pipeline that you're looking at the day help figures that and then are there any meaningful tenet exposures in a pipeline
spk_1: one that would immediately jump into your top ten or where they exposure goes from the men miss one or two percent and up to ten percent or anything like that now there's nothing now won't be about the the the pipeline gather the pipeline is fairly strong and we we want to be yeah and because of the in the whole industry the rules is usually know there's a crutch for your and closings because of that figure out there are not can thirty one federal government taxes in so that's causing
spk_5: incredible amount of transaction volume crime into the into the year so we're trying to get in front of that wave much that we can but as far as the composition there's no nothing kind of abnormal about kind of what you been seen as as we add new credits and and diversify more ills
spk_1: be more the same okay so assuming you know that wells and held in are gone year and then that would mean that at home and hobby lobby would jump up to be your top two hundred said probably roughly somewhere around eight and a half percent of analyze base random my thinking about that correctly
spk_5: i mean as we stand right now but i won't be surprised if it's something else jumped up if we added on to the to another credit that just because we're so small those things gonna move around fairly easy and then last one for me judge you can increase the dividend by have a pannier to set the two percent how much to depending sale of the office assets and the dilution there
spk_1: influence increase in other words if you work in a have the delusion from the office sales on a temporary basis with this dividend increase likely been higher score is the board sort of thinking that given where you are today and the perry shows that are to percentage increase is how we should be thinking about things going forward on the dividend he had a good seat you know april finally moving it up and we're given our local payout ratio of course he'll be have a natural pressure to go up butter
spk_8: i hear that that's why i think about not not a thing is dramatic change from from their office buildings on
spk_0: thank you guys
spk_9: thanks
spk_1: and as crushing comes from rascal garden some compared with your question good morning guys can talk about it there's any other out partial development opportunities in the portfolio and as this particular when you doing this quarter of with to the all time pop group yes it is really the old time pottery and look i'm sure there's other opportunities in the in the portfolio that that one really oh
spk_9: because of bug eyed during covert and in when all time pottery went into bankruptcy we kind of women too
spk_1: the of became a lot more of forward thinking on that particular asad and engage brokers and that's that's the outcome so are given that deal everything else not portfolios on sully pay now he other not any kind of redevelopment yeah analysis we're doing right now so so i'm sure there are other opportunities and mean that's how come the our focus has been on really good real estate and we we love it when there's a were buying a large parcel that have one store where there are there is that are optionality the future but not right now
spk_9: yes it is in when you get that wells fargo potential redevelopment is that maybe and out partial development where that we developed and the existing assets
spk_1: but no the the entire side so it's a it's a large side game in hillsboro hillsborough is a very strong market specially with kobe everyone live in portland coming into this market yeah intel with the fab five plan to have nike's heck or so not only from the residential so i'd from doing intensive multifamily side but you're seen data centers of a real world one of the markets in the data center world that there's there's power power supply right now the other our data center markets a power supplies is very limited so you're saying the all kinds of different uses a potential
spk_10: that his hands and which hundred calibrate or models for next year so and we can you help us in any way on the a as expected cap rates for the at the office assets totals that he may be under contract with when he can't disclose of get that one before it of blended to how she we think about modeling is a caffrey for disposition to the office
spk_0: you know is it somewhat consistent with how we talk about this when we cast started the process ear that that the cap rates are kind of in the in the seventh whether it's here go low marriage or or even that high or whatever
spk_1: i you know it it depends that the one thing yeah think about his we were young retaining the property little longer to have a lot of your cash or coming from it
spk_2: so here that is that would basically be i it's a in them in mid seventies would be kind of a good measure to to think about the properties
spk_1: that it thinks like this honest question comes home the regain some raymond james prisoner with your question a good morning hours so can cafritz sit down a little bit in the quarter obviously we've been hearing that dishes and compression across the sector and josh schwerin he give a sort of an update as to what you're seeing in the market more broadly and then expectations for activity in the fourth quarters we reluctant into twenty two and then in the fourth quarter do you expect the normal rush that we've seen stuart lee years as sellers look don't get transactions done before the as the year yeah so i mean definitely there's a lot of the capital pursuing these acquisition so you can assume that the oh that's been more now by the the lower cap or a somewhat yeah oh that would honestly mean he has a the portfolio that we have here as demonstrated by selling an outback in north carolina five and half cap we would never been a buyer of than at a fireman have kept so we're we're also seeing the opportunity to to sell us certain property like that bite to eat i would say that the oh as as we focus were were pleasantly surprised that were able to find opportunities he a good quality tenants good quality locations without giving up too much on the caf time so you know i won't say the oh of for this last quarter i would say that the the cameras are going to move down from what we just blended to
spk_9: we're seeing something somewhat consistent in i think get a girl a your question alarm the other the amount of volume on acquisitions i think if you're a seller of assets job
spk_1: the it's almost getting too late to have a closing by the end of the year given just the infrastructure on title company survey environmental property condition reports so i think you're here you're going to see that a lot of things are going to move into the first quarter just as a industry
spk_9: observations
spk_1: and then so already for the year i see cost one hundred sixty my gosh acquisitions which which to put you over two hundred million dollars for the year is and in and out there was a big second quarter of this year is there anything or a reason why that can't be replicated next year is there or their concerns about caffrey compression or just and and i think of guidance but i'm chance against what were the components in this year that may not that may prevent you from doing the same biomes it's when you do i think as think were pretty pretty bullish about next year as a girl
spk_2: i think that pressure on on our the competition will probably relax a bit after the new year i and i'm i'm pretty confident we'll be allowed to do the same are not more of volume for next year
spk_1: the mls questions for man on the leverage levels and in the quarter and six ninety just talk about how you expect that to trans as fourth quarter and as begins to twenty shipped
spk_11: yeah i mean obviously weeks we've been pretty consistent and saying over the long run we want to be closer to that six times net that to even a level from a leverage perspective
spk_12: ah we ended at six nine as he noted which were comfortable as
spk_0: the fixers coverage ratio seven times on a run right it's it's about six times so
spk_13: went without pressure from a castle perspective and as we've talked about it the leverage on move around as will her up and and raise capital and ran back down okay great success
spk_1: thank you an honest question comes from michael gorman from beatty i g presented with your question yeah thanks good morning guys lot of my questions have an answer britain was wondering if you to talk about i think you've mentioned in the past seen some opportunities in the equity markets taking some shorter least duration mean comfortable that i'm just wondering if you're seeing any shifts with some of the inflation talk if there's more competition i'm at that shorter end of the least duration were there may be some resets come sooner than later is is there more competition in that property type and that products i'm gonna pass the yeah there definitely is more a competition their mean that definitely is to me the sweet spot where you wanna be with inflation in and all those kind of for sergio wanna you wanna have an opportunity to to have that senate can i come up for renewal we've been we've been seen as all across the rules said industry issue is you guys know very well that's yeah you can build these properties for the bases with them buying them and the tenants over the year
spk_13: years have have a soda and able to get a fairly good deal on the the rental rates i can't be replicated so sticky notes of the tenants to the property that he with the inflation factors in construction costs and labor is this a more enhanced so that as just definitely a sweet spot and and because a lot of the buyers are still yeah maybe mom and pop with leverage the they still were like hands
spk_1: k compete with the shorter duration because they need the efficient leverage so we're not that is selling guess there is a little more competition but it's not like it's it's a stone not a good opportunity okay great and the maybe sort of a similar vein when you think about inflation pressures and maybe some of the shortages that we've heard about how did you approach to build suit opportunity in jacksonville in terms of underwriting it in terms of laying up the contracts with the tenants out how is that structured sir
spk_13: when you think about building in this type of environment
spk_14: yeah so the so the the structure is is such that you know with
spk_13: that if we don't get the the building costs and line guaranteed max and so forth yeah we can get out of the deal so there's protection there so we certainly weren't
spk_14: bind ourselves to some sort of lease and delivery without making sure that the cost equation isn't nailed down
spk_1: i agree and and his last one for me man on the capital structure side of he mentioned with the asset sales
spk_2: a lot of equity coming into the balance sheet of next couple of quarters
spk_1: and he balance you know that the sun's coming in and obviously the need to redeploy that with also the tapping the equity markets and the enslaved benefits that come in from increasing the market cap an increasing the average daily volume
spk_2: how should we think about your approach to the equity markets as you go through these assets sales
spk_13: yeah i mean in general are obviously we want to grow the equity market cap and trade more liquidity for shareholders and more float
spk_15: i think everybody would like to see that we want to be opportunistic with stocks were very sensitive to making sure that we
spk_0: targets your to capital for existing shareholders was still trying to balance out free and new shareholders and and increasing the demand for the stock so we try to strike a balance there obviously we have the a t m which which helps us be pretty efficient in terms of accessing as equity capital markets on a mass funding basis
spk_16: such as how generally think about it but we're we're going to try to be optimistic and try to balance of constituencies in the effort on the of what he said
spk_9: okay great thanks as
spk_1: exit our next question comes from right from the rally securities presented with your question yeah thanks morning guys one to talk about the next six months or so can you talk about the pipeline that you're evaluating and sort of where you're seeing the best risk adjusted returns from a category prospectus ah seen as big as a good question i mean i think we're seeing the oh really okay it's really good risk adjusted returns based on a little though that shorter duration where were picking now a very strong role say locations
spk_17: yeah i would say that we've we've we've done by the or even a and unfavored category that we won't mind that category you know that tenant kind of not renewing sort of situation so i'd say it's it's it's a little bit harder to kind of to say one category where seen better better return opportunities in or it doesn't return that i guess as really
spk_1: i'm deal is the have seen the have been making sure you're getting good real estate and whether that disorderly ceraceous is really driving that opportunity for us but the are like all the tennis
spk_18: neo seem to be doing very very well and so it's a
spk_9: enough is certainly there was a category that oh isn't doing well with only be involved of as is really to get a thrill of like the whole time potter's scenario
spk_19: got it know i guess then
spk_2: does the concept the buying investment grade and they be paying for that little the more vs anonymous maybe become less important when the economy strengthening and you're you're looking a little bit more poor real estate and and may be happy if i'm as a tenant leaves after a couple years
spk_1: what will still be involved in a in embezzle grade side of as to keep that that that ratio fairly decent because it's important for of portfolio composition
spk_20: okay fair enough i one more for me
spk_0: just on back to the development in jacksonville can you give us some metrics or some thoughts around the be how meaningful that might be from an investment our task or perspective to to pine ones that are properties constructed created mass
spk_1: i mean we've we've disclose that it's about a twenty three thousand square foot building and so he had at eyes the grocery it's aggressor so you can throw a per square foot number on there and and kind of triangulate to an overall value and then i would say that you should expect us to d targeting some sort of
spk_0: brad above and beyond where it with train the market obviously because we're taking the development risk so this should be pretty creative the overall ratings on are unripe this is once again it go

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