Alpine Income Property Trust, Inc.

Good day and thank you for standing by. Welcome to the Alpine Q2 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jenna McKinney. Please go ahead.

Thank you. Joining me in participating on the call this morning are John Ulbright, president and CEO, Phillip Mays, CFO, and other members of the executive team that will be available to answer questions during the call. As a reminder, many of our comments there consider forward-looking statements under federal security laws. The company's actual future results may differ significantly from the matters discussed in the forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other FTC filings. You can find our FTC reports, earnings release, and both recent investor presentations, which contain reconciliations of the non-GAAP financial measures we use on our website at .alltimerate.com. With that, I will turn the call over to John.

Thank you, Jen. And good morning, everyone. We were pleased to report FFO for share growth .3% in the quarter and .8% -to-day compared to the same period last year. Discerning for us was driven by our investment activity over the last year. We remain focused on our barbell investment strategy, preparing higher yielding acquisitions supported by quality tenants and solid real estate fundamentals with select investment grade tenants to maintain a diversified and balanced portfolio that delivers favorable risk-adjusted returns. Maintaining this plan and adhering to our underwriting criteria, we did not complete any additional property acquisitions this quarter, following a busy first quarter in which we closed $39.7 million of property acquisitions at a weighted average initial yield of 8.6%. However, we are actively pursuing multiple interesting investment opportunities and anticipate some closing in the second half of the year. Turning to property dispositions during the quarter, we sold five net lease properties for $16.5 million and weighted average exit cap of 7.9%. These sales included two Walgreens, a Dollar Tree, Verizon, and Old Time Pottery. We have now reduced our Walgreens exposure over the past year by 500 basis points to 7% of ADR and have moved it from our largest tenant concentration a year ago to currently our fifth largest. Further, we continue to make progress on our recently vacated properties. The theater of Reno is under contract to be sold and we are actively negotiating the potential sale of our Long Island property previously leased by Party City. On the commercial loan front, this quarter we provided seller financing in conjunction with our Old Time Pottery disposition and originated one first mortgage loan. Combined, these loans totaled $6.6 million and were fully funded at closing with a weighted average initial yield of 9.8%. This brings our -to-date loan closings to $46.2 million with a weighted average initial yield of 9.1%. The ability to originate select commercial loans is another tool in our disposal to further diversify our income streams and deploy capital at attractive returns. Further, the linear relationships we have cultivated are generating some unique loan investment opportunities. We are actively underwriting several high-yielding loans backed by high-quality sponsors with strong credit metrics and real estate fundamentals and expect one or two of these transactions to close in the back half of the year. Moving to our property portfolio, as of the quarter end, our portfolio consists of 129 properties totaling 3.9 million square feet across 34 states and was .2% occupied. Our top two tests are investment-grade, day-exporting goods, and loans that together represent 20% of the portfolio ABR. More broadly, 51% of our portfolio ABR is derived from investment-grade rated tests. Notably, our weighted average remaining lease term now stands at 8.9 years, up from 6.6 years just a year ago. Lastly, a couple of specific tenant updates. Bass Pro Shops completed its full renovation of approximately 66,000 square foot building located on nine acres in Minnesota. This properly formally leased to Camping World was assigned to Bass Pro Shops and we amended the lease to a new 20-year initial lease term. This was a new lease term, which commenced upon their opening in Mid-Bay. Additionally, at-home file for Bank of San June, however, both of our properties leased at-home, paid rent in July, and neither were on the initial closure list. With that, I'll turn the call over to Phil.

Thanks, John. Beginning with financial results. Before the quarter, total revenue was $14.9 million, including lease income of $12 million and interest income from commercial loans of $2.7 million. FFO and AFO over the quarter were both 44 cents per bill of the share, representing .3% growth over the comparable quarter of the prior year. Year to date, total revenue was $29.1 million, including lease income of $23.8 million and interest income from commercial loans of $5 million. FFO and AFO year to date were both 88 cents per share, representing .8% and .5% growth respectively over the comparable period of the prior year. Consistent with the prior quarter, given the relative attractive valuation of times common shares, we continue to opportunistically repurchase shares. During this quarter, we repurchased approximately 273,000 common shares for $4.3 billion and an average price of $15.81 per share. And year to date, we have now repurchased approximately 546,000 shares for $8.8 million at an average price of $15.07 per share. With regards to our common dividend, as previously announced, during this first quarter, we increased our quarterly cash dividend to 28.5 cents per share and maintained that rate in the second quarter, providing a current attractive dividend yield close to 8%. Even with this increase, our dividend remains well covered at approximately a FFO payout ratio of 65%. Moving to the balance sheet. We ended the quarter with NetZest's program adjusted EBITDA at 8.1 times and $57 million of liquidity, consisting of approximately $9 million of cash available for use and $48 million available under our revolving credit facility. However, with inputting main commitments, the available capacity of our revolving credit facility can expand an additional $49 million as we acquire properties, providing total potential liquidity of almost $100 million. A quick note on the $2.8 million of non-cash impairment charges recorded this quarter. This amount includes non-cash impairment charges related to our two largest vacant properties, a theater located in Reno and a former party city located on Long Island. Given the interesting investment opportunities we are seeing, we have determined it's more likely we will simply sell these properties and redeploy these approaches as opposed to incurring the interim curing costs and capital that would be required to retain and release them. We ended the quarter with portfolio wide in place annual base rent of $45.3 million on a straight line basis. As a reminder, this includes approximately $3.8 million of straight line rent related to three single tenant restaurant properties acquired in 2024 through self-leaseback transactions. Under GAAP, the specific self-leaseback transactions are accounted for as financing. Accordingly, we are currently recognizing on an annual basis approximately $2.6 million of GAAP interest income in our segment of operations as opposed to $3.8 million of straight line rent income from these properties. Now, starting to guidance. We are reaffirming both our FFO and AFFO guidance range of $1.74 to $1.77 per diluted share for the full year of 2025. The assumptions underlying our guidance remain largely unchanged except for investment volume which we are increasing by $30 million to a new range of $100 million to $130 million for the year. A final note about earnings. A few days after quarter end, our construction loan for public land development in Charlotte, North Carolina with an outstanding balance of $25.5 million and a yield of .5% was fully repaid. Accordingly, our interest income from commercial loans will decrease until either draw out existing loans and our new loans are funded. With that operator, please open the call to questions.

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster. Our first question is gonna come from the line of Matthew Edner with Jones Trading. Your line is open. Please go ahead.

Hey, good morning guys. Thanks for taking the question. With the given increase to the investment guidance and the opportunities that you guys kind of mentioned within the loan book, how should we kind of look at investments for the remainder of the year? Is it still kind of along those 50-50 lines between properties and loans? Any help there would be great. Thank you.

Hey, John, sorry I'm at a loud air port but I'll take the first part there. We're seeing right now pretty active on both acquisition front and loan front but I would say that more the structured loan investment activity seems to be closer to happening than the acquisitions. So we're hopeful that in the next 60 days we're gonna have some activity here on the structured loan investments that we're very excited about. Now on the acquisition side, we're pursuing things but it's pretty competitive as you know and so I'm less sure about the timing of those investments.

Got it, that's helpful there. And then as a follow up to that, with these loans as they kind of come in and pay off, I know that you don't have any maturities for the remainder of the year but if you were to experience any early payoffs, should we expect that those are gonna go towards paying down the credit facility rather than reinvestment?

Yeah, I mean just like Phil had mentioned as far as on the public's loan in Charlotte, that basically paid off and went to pay down the facility. We're working really hard to sell the party city and the theater in Reno and of course that would go to pay down the facility as well but as we see these structured finance investments, we'll make those and if we need to, we'll either sell off something or sell an asset and just keep the leverage reasonable.

Got it, thank you guys, I appreciate it.

Thank you and we'll move on to our next question. Our next question is gonna come from the line of RJ Milligan with Raymond James. Your line is open, please go ahead.

Hey,

good morning guys. Two questions for Phil. Just curious, with the public's payoff in July, what's gonna be the quarterly AFO impact on that?

Yeah RJ, so with 25.5 million, it was nearly 9.5%, it'll go to pay down the line, the variable portion of the line which is around six. So it's around 300 basis point, little more spread. Impact, couple hundred grand a quarter or just kind of full penny, a little bit more than a full penny a quarter.

Okay and then Phil, a second question is, just in terms of, we've seen quite a few other REITs go out and issue debt or get term loans. I'm curious where you think the market is today for PINE in terms of doing a term loan?

Yeah, so PINE would go do a five year term loan now with the banks and swap it, it would be around five. All

in. Okay, I think that's it for me guys.

All right, thanks. Thank you and one moment for our next question. Our next question is gonna come from the line of Michael Goldsmith with UBS. Your line is open, please go ahead.

Good morning, thanks a lot for taking my questions. Just first on Walgreens, you continue to pare down your exposure there. So can you just talk a little bit about what the market is like for Walgreens as well as at home? Who are the potential buyers? What sort of cap rates are we looking at there and just the overall level of interest in boxes from those two tenants, thanks.

Thanks, Michael. Yeah, so in general, the market is fairly active. So as we see reasonable pricing, we'll keep moving through the Walgreens and we're actually working on a couple more sales. But the pricing just obviously depends on location, of course, and your lease term. But the cap rates can be anywhere from high sevens to early tens or elevens, just depending on again, location and quality. And we're seeing basically people that, a lot of high net worth people buying Walgreens are saying, okay, I'm gonna take the rest of the term and get good yield and then it's a great location or a good location and I know another tenant's gonna want it because these are corners and drive throughs. So they're not really worried about knowing exactly who's gonna backfill it, just knowing that on a macro sense it's a good investment. So they're fairly active market on the Walgreens side. Like at homes, you're seeing users that wanna get these big box positions. And as you know, most of the at homes are low rent payers. So a lot of these are in the money as far as market rates versus what at homes paying. And so it's really, as big boxes become less available there's fair amount of people, again, if it's a good location, good market that people are interested in taking those down and either redeveloping them or their users that will take the box are split up. Hope that's helpful.

No, John, that was particularly helpful. Thanks for that. And just as a follow-up, right? Like you got the loan repaid, it was a bit of a slower deployment of capital quarter after a busy first quarter. And then you were also a share repurchaser. So just as you think about how you want to allocate your capital going forward, it sounds like the pipeline is building and the acquisitions will be, and loans will be a focus going forward, which is, can you talk about just the balance between all the different options as well as reducing leverage and just how you're thinking through all of that? Thank you.

Yeah, sure. Look, we are seeing more opportunities, very interesting opportunities, good sponsors. And unfortunately, the deals are taking a little bit longer. So we didn't get one in the quarter. One we were very hopeful to get in the quarter, but they're actually discussing with the tenant about expanding and it's gonna take a little while for them to go through real estate committee and all that kind of stuff. So unfortunately, that didn't happen in the quarter, but hopefully this quarter will. But we'll keep on selling through some of the credits that we don't like going forward. And maybe a little bit of selling assets and paying down debt, which as Phil mentioned on the loan repayment, there's obviously a little bit of hit to earnings, but given that we're such a low multiple stock, we're not worried about kind of managing that. We just wanna do the right thing. And we are very optimistic about the acquisitions and loan investments in front of us, which we think will be very accretive to the company. And we'll be eventually reflected in the stock price, we hope, but I think we'll be fairly active this quarter. So we're pretty excited about the opportunities that we see.

Thanks, Greg. Good luck in the back half and safe travels.

Thanks,

appreciate it.

Thank you, and one moment for our next question. And our next question is gonna come from the line of Westlake Holiday with Baird. Your line is open, please go ahead.

Hey, good morning, guys. Can we look at the at-homes, the ones that you have currently operating? Would those be better productivity sites for them? Do you have any insight into that?

Yeah, so they are. So we don't expect them to reject these whatsoever. They have good operations, so good locations. So don't see that. And actually we have people that are more interested in them being gone than being there. So we'll monitor it, but so far so good.

Okay, and then how does the watch list look going forward after at-home?

After at-home, I mean, it's not, we've been, as you know, very proactive in the last couple of years of pruning through different credits. And it's just really not very deep. We've kind of taken the hits where it's happened. So there's not really anything that kind of keeps us up at night, if you will.

Okay, and then you mentioned looking to sell the two vacant assets. Would those both be in the held for sale bucket? And any insight into how much, I guess, probably have a little bit of negative NOI from those assets? What would the drag be?

Sure, I'll let Phil talk about the counting of that.

Yeah, so these are classified as held for sale. I was just on the call, kind of giving you a heads up that we're kind of more likely, I think at this point, to just avoid the carry cause and move on with the interesting investment opportunities we're seeing. There's not a big negative drag on those. It's just kind of the...

I mean, you got real estate taxes insurers probably miss. So it's not huge, but it's definitely not fun. So once those are sold and you're paying down your leverage, it's quickly a creative. Yeah,

okay, thanks guys.

Thank you, and one moment as we move on to our next question. And our next question is gonna come from the line of Guruav Mehta with Alliance Global Partners. Your line is open, please go ahead.

Thank you, good morning. I wanted to go back to the acquisition market and wanted to get some more color on what kind of properties you're targeting. Are you looking for investment grade properties that longer lease terms or are you kind of open to that? What are you seeing in the market?

Yeah, I mean, we're definitely doing the barbell approach as we mentioned in the call that we're looking for investment grade, longer duration leases or at least good locations where we think we can do an extended and blend after acquiring a property. And then basically coupling that with the kind of higher return yielding sort of investment. So we're pursuing on both sides and we feel like we'll get something done here for sure this quarter. But yeah, that in general is like we're going for a higher quality on the acquisition side to couple that with the loan investment side.

Okay, and then second question on the balance sheet, your leverage was 8.1 times as of 2Q. Can you provide some more color on how you think about the leverage and where you guys are targeting that number?

Yeah, I mean, as we're selling assets that will come down and it would have come down in the quarter if the loan payoff happened in the quarter but it happened a day after. So we can easily manage that on the leverage side and obviously buying back stock accretively on earnings and accretively on NAV drives up the leverage a little bit but it's the right thing to do. And we have nice free cash flow so we use that to keep leverage in check as well. But looking for the opportunities to make investments that would basically tick up the leverage a little bit but then quickly sell through the Walgreens to bring it back down. So just appropriately managing the balance sheet.

Okay, and then maybe last year on the Walgreens, you obviously brought down that exposure. Weird to think that that target number is for you guys as far as how much ABR you're getting from Walgreens.

And Phil?

At

the end of the quarter, you're asking about Walgreens, it's down to about seven. I think it's actually just a little under like 6.6, 6.6, .7% of ABR is where it currently stands. What's our target? Target, I think we'd like to get it down below 5%.

Okay, thank you, that's all I had.

Great, thank you.

Thank you, one moment as we move on to our next question. And our next question is gonna come from the line of Craig Kucera with Lucid Capital Market. Your line is open, please go ahead.

Yeah, thanks, good morning guys. John, I think earlier this year you were seeing some compression on structured financial yields versus last year. Is that still the situation today?

No, most interesting thing you would think that the banks would be back at it and it would be competitive, but all of a sudden, we're talking to very high quality sponsors with very high quality projects, or said that the banks are shrinking again, at least for the activities that these folks are taking on. And so we're seeing yields being as good or even maybe better on some certain situations. And so luckily we're back to a target rich environment.

Got it, that makes sense. And Phil, I just wanna go back to the guidance, particularly as relates to the investment guidance, increasing 30 million, is that basically just saying, hey, we got back 27, $28 million and we're gonna redeploy that, or are you lifting like the total amount or the net amount by 30 million versus the prior guide?

Yeah, so we did get the 25 million back and I think just with the interesting opportunities we're seeing in particular on the loan side, we think later in the year, we can get that redeployed. So that was kind of the real reason for the tech up.

Okay, just wanted to double check there. And just one more for me, you've got the Bass Pro Shops lease taking occupancy here in the third quarter. Was there any lift in that lease or any change?

Yeah, there was. The rent rolled up about $40,000, $50,000 a quarter or a month and almost half a million a year. Okay. And then additionally, the lease term that was remaining prior to that assignment was less than 10 years and now it's 20 years.

Got it, thanks.

Thank you and one moment for our next question. Our next question is gonna come from the line of John Misilka with the Riley Securities. Your line is open, please go ahead.

Morning, everyone. So we're looking at the loan portfolio again. I know it wasn't a particularly early prepayment, but do any of the other loans have kind of early repayment options? Could that be kind of a significant thing here if interest rates were to decline, call it in the next six to 12 months?

Yeah, you're not gonna see as much early repayments. Because it's really inefficient for the sponsors and our loans are fairly short duration anyway. They're not gonna go do a refi to save 200, 300 bips and spread. It's really, they're looking to sell these assets primarily. So if interest rates drop, I wouldn't expect any sort of like mass payoff, early payoffs.

Okay, that's understandable then. As you think about the timing of investments, given the increase to the investment volume guidance, should we expect maybe the delta between what's kind of currently in guidance and what was in guidance, the time of one Q earnings to close really late in the year? I'm just trying to kind of circle the square, if you will, of the increase in investment volume guidance and the fact that kind of AFO guidance stayed flat.

Yeah, I would say that, go ahead, Phil.

No, I would say, yeah, we would expect that to kind of get deployed later in the year.

Is there anything, you know, if you think about guidance in two Q versus one Q, anything baked in there in terms of maybe additional conservatism around at home? Obviously, I know the two assets you have are thus far retained, but are you kind of considering something, you know, as this kind of bankruptcy process is ongoing that, you know, obviously, it's probably gonna get paid here for the next couple of months, but that could change, you know, in the back half of the year?

You know, both of the at-home, neither of them, again, were on the list for closure. Both of them paid July rent, and we generally expect to collect rent for the remainder of the year. So there's nothing specific in there, but I mean, it is one of the reasons, right, that we give a range, just because, you know, and expect that things can happen, but at this point in time, we fully expect to get paid on our at-homes.

That's it for me, thank you very much.

Thank you, and one moment for our next question. And our next question comes from the line of Rob Stevenson with Janie Montgomery Scott. Your line is open, please go ahead.

Phil, the $50 to $70 million disposition guidance, that's just properties that doesn't include loan repayments, does it?

That's correct, that's just property that's on this disposition side.

Okay, then John, given your comments about the difficult acquisition environment these days, you know, you increased the investment guidance, but left the dispositions the same. Why not look to sell more assets, especially with the stock trading at roughly an implied 10 cap rate, and use those proceeds to both lower debt and buy back stock?

You know, I think that certainly could be a possibility, but we are seeing good investments that are creative to the company rather than shrinking the company. I think we're seeing some really good investment opportunities which will make the enterprise worth more. So, you know, you won't see us rapidly selling just to buy back stock. You know, as we're selling assets, we're being patient about it, not some sort of fire sale. So it's a little bit just kind of taking our time with it unless we see a big acquisition happen and we really want to speed it up, which we would do that.

Okay, and then Phil, other than the, I think you said it was a penny drag between the yield on the public's loan versus the repayment of debt associated with that. Anything other than that that's a headwind in the back half of this year earnings-wise as we think about the quarterly progression and the investments being back half stacked?

No, nothing really specific. The repayment alone will be the only really identified drag there. Other than that, you know, the profits are just going to depend on the timing of acquisitions and dispositions and kind of, you know, which leads.

Okay, all right, thanks guys. Have a good weekend. Thanks, you too.

Thank you. This concludes today's question and answer session. This also concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.