Alpine Income Property Trust, Inc. Q3 FY2024 earnings call

• Successfully continued accretive asset recycling, originated a high-yielding loan, raised the quarterly dividend, reduced Walgreens exposure, and lengthened weighted average lease term.
• Acquired 4 net lease properties for $37.5M, including a sale-leaseback in Tampa with 30-year leases and 2% annual escalations; also purchased and amended a construction loan for a Publix-anchored shopping center in Charlotte with $10M funded at closing and 10.25% yield.
• Sold 8 properties for $48.6M, generating $3.4M in gains, reducing Walgreens exposure from largest tenant concentration to second largest.
• Raised quarterly common dividend from $0.275 to $0.28 per share, with AFFO payout ratio at 64%.
• Improved leverage to net debt to EBITDA of 6.9 times, with $80 million liquidity and no debt maturing until 2026.

During the quarter, Alpine Income Property Trust acquired 4 net lease properties for $37.5 million at a weighted average initial cap rate of 8.8%. Three of these were sale-leaseback transactions in the Greater Tampa Bay area. Additionally, they purchased and amended a first mortgage construction loan for $17.8 million with an initial yield of 10.25%. On the disposition side, 8 properties were sold for $48.6 million at a weighted average cash cap rate of 6.8%, generating aggregate gains of $3.4 million. The loan portfolio had an aggregate outstanding balance of $43.2 million at a weighted average yield of 10.4%. Total revenue for the quarter was $13.5 million, including $11.7 million in lease income and $1.7 million in interest income from commercial loans. Revenue contribution: lease income was the largest component at $11.7M out of $13.5M, commercial loan interest income was $1.7M.

• Raised full-year 2024 FFO range to $1.67 to $1.69 per share and AFFO range to $1.69 to $1.71 per share.
• Increased investment guidance to $100 million to $110 million and disposition guidance to $70 million to $75 million, having closed $84 million of investments and $69 million of dispositions.
• Utilized common equity ATM program to issue ~620,000 shares for net proceeds of $11.1 million.

• Hurricane impact on Tampa properties: While damaged by Hurricanes Helene and Milton, operator expects them open by end of year/early next year; robust insurance requirements ensure no material rent interruption.
• Potential credit issue with At Home: At Home has balance sheet issues, but properties are low basis and can be re-leased to smaller tenants.

Q: How is the transaction environment?

A: Liquidity environment improved, more opportunities for acquisitions and loan investments.

Q: Details on insurance for Tampa sale-leaseback properties and offsetting factors in portfolio?

A: Restaurants had some storm damage but operator working to reopen; weighted average lease term can be extended but strategy is to grab good real estate with good yields.

Q: How high will loan portfolio go and managing lumpiness?

A: Loan book not to exceed 10% of total enterprise value; will take advantage of great credits and developer relationships, but loan book may naturally pay off and come down.

Q: Current exposure to Walgreens and nearest lease term expiration?

A: Walgreens is second largest tenant; nearest lease term expiration is 6 years.

Q: Plans to reduce exposure to dollar stores?

A: Some dollar stores are on the market, but not a priority compared to Walgreens properties.

Q: Background on Tampa deal, timing of purchase option, and cap rate?

A: Relationship with Crabby's led to sale-leaseback; option to buy out lease after 6 years at double-digit IRR for shareholders.

Q: Fourth quarter plans with balance and capital markets?

A: Okay with some floating rate exposure; may utilize ATM again if capital markets allow.

Q: Portfolio exposure to specific tenants and cap rate expectations?

A: Mix of investments, targeting 7.5 caps and above, agnostic on investment grade exposure but may dip into lower caps for specific tenants like Lowes.

Q: Size of Crabby's business related to Tampa assets and rent coverage?

A: Roughly 20-25% of Crabby's business; rent coverage was around 15% yield on NOI.