Operator: Good day, and thank you for standing by. Welcome to the Alpine Income Property Trust Q2 26 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press 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, director of finance. Ma'am, please go ahead.
Jenna McKinney: Thank you. Joining me and participating on the call this morning are John Albright, president and chief executive officer Philip R. Mays, chief financial officer, and other members of the executive team will be available to answer questions during the call. As a reminder, many of our comments today are considered forward looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these 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 SEC filings. You can find our SEC reports, earnings release and most recent investor presentation, which contain reconciliations of the non-GAAP financial measures we use on our website at www.alpinereit.com. With that, I will turn the call over to John.
John Albright: Thank you, Jenna, and good morning, everyone. We are pleased to report another strong quarter. Highlighted by 32% growth in AFFO per diluted share compared to the same quarter last year, and approximately $77 million of total investment activity at a blended initial yield of 8.7%. With this activity, our property portfolio's annualized base rent grew to $50 million at quarter end. With 55% attributable to investment grade rated tenants and our commercial loan portfolio remained at our targeted level of 20% of total undepreciated asset value. Starting with property acquisitions, During the quarter, we acquired 3 properties for $36.6 million at a weighted average initial cap rate of 7.4% and a weighted average remaining lease term of 9.2 years. These acquisitions included a 3 property portfolio leased to Aldi, HomeGoods, and Petco, and 2 properties ground leased to Lowe's and Alamo Drafthouse, which is a subsidiary of an A+ rated Sony Group Corporation. These acquisitions meaningfully strengthen our portfolio's credit profile. The percentage of ABR derived from investment grade rated tenants increased from 50% to 55% driven by acquisition activity that was 84% investment grade At quarter end, 4 of our top 5 tenants Lowe's, Dick's Sporting Goods, Walmart, and Alamo Drafthouse are now investment grade rated. More broadly, as of quarter-end, our property portfolio consisted of 128 properties totaling 4.5 million square feet across 31 states, with 99.5% occupancy and a WALT of 9.2 years. Moving to our commercial loan investments. During the quarter, we originated a new $40 million first-mortgage loan with $6.2 million funded during the quarter. at an initial yield of 10%. The loan is secured by a 24 acre, 55 thousand square foot Publix anchored retail development and follows the grocery shadow anchored development loan we originated in the first quarter. Also during the quarter, we received full repayment of $8 million of commercial loans that carried weighted average yield of 8%. Allowing us to recycle that capital into higher yielding investments. Reflecting this activity, at quarter end, our commercial loan portfolio consisted of 13 loans with an outstanding face amount of $167 million at a weighted average coupon rate, including PIK interest, of 13.2%. Our loan portfolio remains at our targeted level of approximately 20% of the company's total undepreciated asset value. Complementing our property portfolio and increasing the overall yield earned on our total assets. However, as noted previously, the timing of fundings and repayments may cause the relative size of loan portfolio to vary quarter-by-quarter. With our completed investment activity this quarter, and robust investment pipeline, we opportunistically utilized our ATM programs to raise capital. Our investment pipeline continues to have attractive opportunities, including high quality properties, net-leased to investment grade rated tenants to enhance the credit metrics of our portfolio. Attractive loans to replace maturities. Lastly, reflecting our earnings growth and taxable income outlook for the company, Our board has authorized a 6.7% increase in our quarterly common dividend to $0.32 per share beginning in the third quarter of 26. This new quarterly common dividend rate represents a relatively low 55% AFFO payout ratio on second quarter 26 AFFO. Further, we are raising the low end of our full year FFO and AFFO guidance which Philip will detail later. And with that, I will turn the call over to Philip.
Philip R. Mays: Thanks, John. Beginning with financial results. For the quarter, total revenue was $20 million including lease income of $12.6 million and interest income from commercial loan investments of $7.3 million. FFO for the quarter was $0.57 per diluted share and AFFO was $0.58 per diluted share. Representing growth of approximately 3% and 3 thousand%, respectively, over the comparable quarter of the prior year. I would note that the results for the quarter included approximately $300 thousand of other income related to a non refundable deposit we received upon the termination of a contract to sell an At Home to an end user. At Home indicated that they were going to renew their lease, and the buyer decided to terminate the contract. For the 6 months ended June 30, total revenue was $38.4 million including lease income of $25.2 million and interest income from commercial loans of $13.1 million. FFO and AFFO were $1.10 and $1.11 per diluted share, respectively, representing growth of 2.5% and 3 thousand% over the comparable period of the prior year. Earnings growth for the quarter and year to date was primarily driven by our investment activity in particular, the growth of our commercial loan portfolio as we grew it to approximately 20% of undepreciated asset value over the last year. Moving to capital markets activity. During the quarter, we continued to opportunistically utilize both of our at-the-market (ATM) programs. Under our common stock ATM program, we issued approximately 1.1 million shares at a weighted average gross price of $19.31 per share for net proceeds of $21.7 million and under our Series A preferred ATM program, we issued approximately 156 thousand shares at a weighted-average gross price of $25.18 per share, net proceeds of $3.9 million Year to date, we have raised a combined $61.7 million of net proceeds under these programs. At quarter end, common shares and units outstanding totaled approximately 18.8 million and preferred shares totaled approximately 2.43 million. Reflecting our investment activity and equity issuance, we ended the quarter with net debt to pro forma adjusted EBITDA of 6.4 times, down from 6.6 times last quarter and 6.7x at the beginning of the year. As of quarter end, we had $370 million of debt outstanding at a weighted average interest rate of 4.38%, including the impact of our in-place swaps. Including cash on hand, available liquidity at quarter end was approximately $83 million Further, following the recast of our credit facility earlier this year, we have no debt maturing until 2029. 1 reminder regarding interest expense. As previously disclosed, a $100 million of SOFR swap at 2.05% associated with our 2029 term loan, which matured in May and were replaced with a swap fixing SOFR at 3.36% for the remaining term. Regarding our property portfolio, we ended the quarter with annualized straight line base rent of $50 million As a reminder, our portfolio includes 4 properties acquired through sale-leaseback transactions, as well as the Alamo Drafthouse in Denver acquired this quarter, qualifies as a sales type lease. Although these 5 properties constitute real estate, for both legal and tax purposes, GAAP requires them to be accounted for as financings. Collectively, they represent approximately 12.6% of our straight line ABR, $6.3 million and approximately 10.6% of annualized in place cash base rent or $5.1 million With these cash payments reflected as interest income rather than lease income. Our quarterly earnings press release includes a supplemental table providing details for our commercial loan portfolio and related interest earnings. With respect to our common dividend, during the quarter, we paid a quarterly cash dividend of $0.30 per share. As John noted, the Board has authorized a quarterly common dividend of $0.32 per share for the third quarter, a 6.7% increase along with the quarterly cash dividend of $0.50 per share on our 8% Series A preferred stock. Now turning to guidance. For the full year 2026, we are increasing the low end of our outlook resulting in a new FFO range of $2.10 to $2.13 per diluted share and a new AFFO range of $2.12 to $2.15 per diluted share. Our investment volume assumption remains unchanged at 170 million to $200 million However, we are lowering our disposition volume expectations to a new range of $20 million to $40 million from the previous range of $30 million to $60 million Additionally, based on the equity issued during the quarter, the prospective quarterly run rate for our base management fee is now just over $1.4 million per quarter. I should note here that historically, incentive management fee has been paid, and none is reflected in our guidance. Under PINE's management agreement, an incentive fee may be earned based on total shareholder return for the full calendar year as calculated by the full year dividend and the last 10-day VWAP for the calendar year. Accordingly, any incentive fee, if earned, is recorded in the last quarter of the year. I refer you to our filings for additional information on our management fees, including the incentive management fee. With that, operator, please open the call to questions.
Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone. First question is going to come from the line of Jay Kornreich with Cantor Fitzgerald. Your line is open. Please go ahead.
Jay Kornreich: I guess just starting out, you referenced the loan portfolio nearly at that 20% cap for total assets. So how do you think about your appetite going forward for, you know, I guess, pushing beyond that 20% if you feel like there is really attractive loan opportunities? Or if we should expect, the bulk of new investments coming from the net lease real estate And on that side, how would you expect to fund it? Is that more coming from dispositions, or just how do you think about creating value on the net lease real estate side?
John Albright: Yeah. Thanks, Jay. So we do have in front of us in the pipeline a fair amount of net lease investments. And, you know, hopefully, all those come to fruition or a good part of them. On the loan side, there is 1 that we are, looking at, but not a lot and not anything kind of behind that. And so you will not see the loan portfolio get above 20%. If it does, it is only a timing issue. It goes above 20%, but then we have some payoffs coming. Which we do have some payoffs coming. So and as we grow, perhaps the loan book goes below 20%. And so on the as far as on financing acquisitions, we have, obviously, some maybe some sales coming up but, really, it is, you know, through our line. But Philip can talk a little bit more about that.
Philip R. Mays: Yeah, Jay, I mean, to finance the acquisitions, it will be a combination of our line. You know, initially. And then we can also blend in some dispos and, if appropriate, we can blend in some prep or some common stock on top of it. But initially, it will be our line of credit that takes them down.
Jay Kornreich: Okay. I appreciate that. And then just 1 more for me. I guess, on the disposition side, you updated guidance revising that lower and looks like you did not have any dispositions this quarter. So just curious if there is been any, I guess, strategic shift in how you are thinking about specific assets or tenants maybe you initially intended to dispose or if it is reflective of just overall transaction market, maybe not being at the place you want in order to sell for full value. I know you have done a lot of work already just getting the portfolio a place where you feel like it is really healthy. So I am just curious what led to the dynamics of expecting less dispositions?
John Albright: Yeah. it is a little bit more of a timing issue with regards to tenants that have expressed interest in lengthening their lease term. So we want to get through and extension or a lease renewal that, you know, kinda gets you that better cap rate valuation. So it is really more or less getting the properties in a better place to even extract more value.
Jay Kornreich: Okay. I will hold it there. Thank you.
John Albright: Sure.
Operator: Thank you. And 1 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.
Michael: Good morning. Thanks a lot for taking my question. It seems like there was some kind of 1-timers and some moving pieces in the run rate of the AFFO kind of from the second quarter to maybe the third quarter? So, Phil, do you mind walking through what the equivalent AFFO run rate would be from what you reported to given the, real noncash benefit or the onetime payment on the sale and then some of the hedges, how the run rate AFFO changes going forward?
Philip R. Mays: Yeah, Michael. So we reported 58¢ for the quarter. There is some onetime revenue items in there, and there is some expenses that are only partially, and they are not fully baked in like they will be for the remainder of the year. On the revenue side, looking at our income statement, you can see investment and other income, and it is elevated about $300 thousand for the quarter and year to date. And that was a nonrefundable deposit that we got to keep. We had an at home under contract to be sold to an end user who wanted to use the property. But when At Home emerged from bankruptcy and indicated they were renewing their lease, they dropped the contract. They could not get, a hold of the property the way they wanted to. We got to keep their nonrefundable deposit. $300 thousand is not a large number nominally, but it is about $0.02 of earnings on a per share basis. In addition, as you are aware and as I talked about last time on our call, when earlier in the year, we refinanced our debt and pushed out our term loans, 1 was originally scheduled to mature in May of this year, 1 early next year. And we had swaps that initially lined up with those maturities. So when we pushed out the maturities, we did swaps for the remaining balance. And they both, you know, switched over from the original swaps to the new forward swaps. So 1 of those happened this quarter. On our 2029 term loan. And it moved up about 130 basis points And then we have another 1 that will happen towards the end of January on our 2031 term loan, and it will also move up 130, 140 basis points. Then in addition to that, the only other thing really is we did issue equity during the quarter. So, obviously, that is, you know, within the quarter on a weighted average, it will be in at a full weight next quarter, and that also does increase our management fee a little. But if you take the current 58¢, and you adjust it for those 3 items, you know, it comes down to, like, a new initial run rate of $0.52, which we build off of. With our investments and capital as we deploy it to build it back up.
Michael: Super helpful there. And then I guess, right, maybe on the management fee, like, can you reconcile the advantages and disadvantages of when you are issuing equity Clearly, you are in a you are in a good place if you are comfortable to be issuing equity, but also, I think there is the incentive issue of an increase with the management fee and then also if there is some dilution from the-- I mean, I think we have shown in the past that, you know, the management fee is not driving the bus.
John Albright: We have bought back shares in a meaningful way when our stock really got disconnected with the NAV. And our management fee went down significantly when we did that. So it is all about, you know, basically making really good investments and driving earnings, and I think we have seen that returns have been spectacular and still, we have a higher what we have a higher FFO than EPR, and our stock price is, you know, $10.11 bucks below EPR. So I think we have some good headway in front of us as far as where we can drive more alpha for our investors.
Michael: that is what I like to hear. Thank you.
Philip R. Mays: And then, Michael, the only thing I would add is if you look at companies our size and market caps of our size, G and A tends to run 12, 13% or something of total revenue. Currently, we are running closer to 10% of revenue. So I think, you know, it is a reasonable load relative to the size of the company.
Michael: Thanks for the clarification. Good luck in the back half.
John Albright: Alright. Thank you.
Operator: Thank you. And 1 moment for our next question. Our next question is gonna come from the line of Matthew Erdner with Jones. Your line is open. Please go ahead.
Matthew Erdner: Hey, guys, good morning. Thanks for taking the question. Could you talk a little bit about the investment guidance and what would drive it towards that high-end versus the low-end, along with what you would be thinking on timing?
John Albright: It would be kind of late this quarter or early next quarter? in terms of acquisitions. Yeah.
Matthew Erdner: I think our pipeline is in really good shape. As far as quality of what we are seeing and we are far enough along on some acquisitions. In fact, we thought some acquisitions were going to happen last quarter, and it got pushed. So I suspect we will be active this quarter. And, you know, look forward to updating people as we progress. But the pipeline is strong, and it is not something that you have to wait too long for.
John Albright: Got it. And then, you know, could you talk a little bit about I guess, the type of tenants you are targeting now? The cap rates kind of came down for the properties this quarter, but it seems like you brought in some nice credits there. How should we think about the cap rate and just what you are targeting going forward?
Matthew Erdner: Still focusing on high-quality credits. that is as you know, we are more real estate focused and credit-focused, but we happen to find good locations with good credits. And so I would say the cap rates are gonna be kind of in the 7s for sure, so we do not have to dip below 7s, but 7s on up, if you will. is kind of where we are seeing some rich sort of targets.
John Albright: Got it. Awesome. that is all for me. Thank you, guys.
Matthew Erdner: Thanks. Thanks.
Operator: Thank you. 1 moment for our next question. And our next question will be coming from the line of Robert Stevenson with Huntington. Your line is open. Please go ahead.
Rob Stevenson: John, did you say that a couple of these acquisitions this quarter were ground leases?
John Albright: On the ground leases, Philip helped me with that 1. We have Acquired.
Philip R. Mays: this quarter was on a ground lease. Yep. The other ones were not on ground leases, but the Lowe's that we acquired in the quarter was a ground lease.
Rob Stevenson: Okay. Is that your only ground lease at this point, or is there anything substantial in the portfolio as a percentage of ABR?
John Albright: No. We have others, for sure. I mean, you know, Lowe's, as Philip mentioned,, we have other Lowe's and they are on ground leases.
Rob Stevenson: Okay. And then were you guys forced by the REIT rules to increase the dividend, or was this just a decision the Board made at this point in time? What was the background there?
Philip R. Mays: Yeah. So it is really just driven by the growth in taxable income as earnings has grown. So we look at taxable income not just for the current year, but we also look out and, wanna make sure that we are fully distributing taxable income. And so it was just it was driven by the growth in taxable income.
Rob Stevenson: Okay. Alright. that is it for me. Thanks.
John Albright: Have a great weekend.
Operator: Thank you. And 1 moment for our next question. Our next question is gonna come from the line of Gaurav Mehta with Alliance Global Partners. Your line is open. Please go ahead.
Gaurav Mehta: Thank you. Good morning. I wanted to ask you on your investment-grade exposure.
John Albright: It seems like it went up to 55% this quarter. Is there any target number for that exposure that you guys are looking at? No. there is not a hard target. I would say that is probably on, kind of close to the high-end of where we will have it. It may probably even go above that level here in the next quarter, but, you know, I would not I would not peg that as a as a target. So let's say 50%-plus is sort of a good target for us.
Gaurav Mehta: Okay. The second question on the disposition guidance. Does that guidance include property sales? Or does that also include any loan portfolio payoffs?
Philip R. Mays: Yeah. So it includes it includes just really 1, I think, loan payoff and or sale, so to speak. And it is just a note that we did earlier in the year for 10 million. Other than that, what is included there currently is just related to property dispositions.
Gaurav Mehta: Okay. And then lastly, on the loan portfolio, unfunded commitment of $85 million what is the timing for that?
Philip R. Mays: Go ahead.
John Albright: No. So there is 15 loans. Really, only 3 of them have any kind of significant unfunded amount. And they will draw up over time. You know, you can look at it and significantly in the next 6 months.
Philip R. Mays: They are Publix-anchored developments that are getting started now.
Gaurav Mehta: Okay. Thank you. that is all I had.
Operator: Thank you. And 1 moment for our next question. Our next question comes from the line of Alec Feygin with Barry. Your line is open. Please go ahead.
Alec Feygin: Hey, good morning, and thank you for taking my question. Maybe just on the loans, can you give some more details about this new loan? Is there maybe any sort of prelease rate what is the loan to cost? Anything else that you can provide?
John Albright: You are talking about on a potential 1? Oh, no. The $40 million Kentucky 1 this quarter. Okay. Yeah. So that is basically a Publix-anchored development. Traditionally, I think we have mentioned this before, we will loan sort of 80% plus loan to cost. And the LTV after they develop these pads and they develop the Publix and where they can sell them in the market. Tends to be 70%, 75% LTV. So that is kind of the, you know, you know, where we like to target that we will do. More of a loan to cost higher loan to cost than a bank will. But we know where these transactions are gonna happen as far as where they can sell the tenants on these pad sites and the anchor tends to kind of a 70s, 75% loan to value. As mentioned before, we always get a first look if we want to buy these pads. And, certainly, if for some reason, the cap rates go above a certain level where they are attractive to us, we will buy them. So, anyway, that gives you a little bit of flavor for that.
Alec Feygin: Yeah. No. Thank you for that. And I know, you mentioned earlier there is 1 loan in the pipe right now that you are potentially working on. Is it a larger loan? And are you mostly gonna be sticking with these construction type loans?
John Albright: it is not a larger loan. You know, it is sort of a modest size and it is yeah. It would be a development sort of 1.
Alec Feygin: Okay. Thank you, and have a great day.
John Albright: Thanks. You too.
Operator: Thank you. 1 moment for our next question. Our next question comes from the line of John Massocca with B. Riley Securities. Your line is open. Please go ahead.
John Massocca: Good morning. Maybe sticking with the loans Of that kind of $85.4 million that is kind of committed but unfunded, Is there an amount there that you think is unlikely to be drawn down? Like, Is there anything today that you have visibility into that you are committed to, but you do not think your partner will actually end up using?
John Albright: You know, most likely, at least we look at it that they will use it up, but, there is certainly that opportunity for the borrower that they may have a buyer come in along the process and decide they want to buy it before it delivers. Or they may come in and they refinance us with a cheaper cost of capital. So I would say it is a 50/50 chance, sort of, that it gets fully funded or, you know, something happens along the way and they recapitalize and we get sort of an early termination fee, if you will. So it is too early to determine right now.
John Massocca: Okay. And then on the acquisition side, you bought a theater during the quarter. Understand there is a Sony credit behind it, but anything else about that transaction that got you comfortable with buying theaters? it is been a stale market For theater acquisitions over the last frankly, 6 years.
John Albright: So just curious your thought process, and is there more opportunities to do acquisitions in that industry? Yeah. So that 1 is actually a ground lease. As well, the Alamo. And, obviously, having the Sony credit and a long-term lease is fantastic and the high cap rate. So everything about that, we really liked. And, obviously, being in Denver, as well. And, obviously, the trends in theaters have gotten a lot better. So we will keep our eye out for you know, additional opportunity where we are looking at kind of, you know, loan-to-value, if you will, of what could be built in a in on a theater parcel, and how they do. But look, the theater industry is getting healthier and healthier if you think about it. AMC, as leases roll, they are rolling down their rents. on properties that are not you know, really on the high end of performance. And so through our exposure at CTO with AMC, we see how well they are doing. We have a property that is in percentage rent. And so seeing the trends are very strong. But so if we see good risk adjusted yields, we are certainly capture them, But that is a little bit more than you wanted, I guess.
John Massocca: No. No. All helpful. And then kinda lastly, and apologies if I missed this earlier in the call, any update on the credit watch list, anything moving around as you think about tenant credit, particularly outside of your top 10 tenants?
John Albright: Yeah. Not really. I mean, that is why, you know, a little bit of the disposition guidance has gone down. We have really addressed things that were a little bit of a worry. Actually, some of them become like tailwinds, like the Party City in Long Island. That went bankrupt a while ago. You know, we have been sitting with an empty property there for a while, but we have been, you know, we have a lease signed with a new tenant. They just need to go through the permitting. Which is taking a long time. So, hopefully, that property is back producing income in early 2020. Maybe late this year. So we will continue to prune where we see things that we do not like, but it is in pretty good shape right now.
John Massocca: And can you just remind me, Is that Party City the only vacancy left, or is there something else that is at 0.5?
Philip R. Mays: Philip, do we have anything? it is just the Party City, really. We have 2 very, very minimal value former Mountain Express But, you know, combined, they are probably not a million dollars of value. So Party City is the only real vacancy we have at this time. And as John said, we have recently completed a lease for that property.
John Massocca: Okay. I appreciate all that. And that is it for me. Thank you very much.
Operator: Thank you. 1 moment for our next question. Our next question comes from the line of Craig Kucera with Lucid Capital Markets. Your line is open. Please go ahead.
Craig Kucera: Yeah. Thank you. You know, John, there seems to be an increasing bifurcation in the economy between high end and low end consumers. You know, maybe some pullback in spending at some grocers. I would be curious to get your thoughts on, is that influencing how you are thinking about lending or acquisitions in this environment?
John Albright: Not really. I mean, we are seeing the grocers have been, you know, doing very, very well. We own it, as you know, at CTO, Sprouts, and they are doing really strong. I remember, 1 not too long ago where people worried about that sort of credit,, but that is no longer the case. So in the expansion of the high-quality grocer you know, Whole Foods, Publix, it is been pretty strong. So we are not seeing any weakness with their revenues and sales. So no, we do not have that concern.
Craig Kucera: Okay. that is helpful. And I just wanna talk about your investment guidance. You know, we are hearing from some of your peers this is 1 of the best acquisition environment certainly at the property level, in some time. And you have obviously been pretty aggressive on the lending side. It sounds like there is a lot in the pipeline you are working on. You have done $150 million year to date. You are talking about 170 to 200. Is that just conservatism, or is that just what you are seeing in the pipeline?
John Albright: Well, I mean, we have we are being a little conservative because we had some property acquisitions that we are hoping to happen last quarter that through due diligence, we did not like what we saw, so we passed on them. when we internally thought that we are definitely gonna acquire them, And so it is really being a little bit conservative that we have a really good pipeline, but we know that some of them will not shake out. So, anyway, just being a little bit conservative there.
Craig Kucera: Okay. that is helpful. that is it for me. Thank you.
John Albright: Thanks.
Operator: Thank you. And I am showing no further questions at this time. Ladies and gentlemen, this will conclude today's question and answer session. as well as today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.
