Alpine Income Property Trust, Inc. (PINE) Earnings Call Transcript & Summary

Thanks. Here with me on this morning's call are John Albright, our President and CEO, Philip Mays, our CFO, along with several other executives, and they'll be on hand to take questions during the call. Just a note that a lot of what we say today falls under forward-looking statements as defined by federal securities laws. Actual future results for the company could differ materially from what these forward-looking statements describe, and we have no obligation to update them. The factors and risks that might cause actual results to vary materially from our expectations get disclosed from time to time in more detail in the company's Form 10-K, Form 10-Q, and other SEC filings. Our SEC reports, earnings release, and latest investor presentation — which include reconciliations of the non-GAAP financial measures we use — are available on our website at www.alpinereit.com; and with that, I'll hand the call over to John.

Thanks, Jenna, and good morning to all of you. It's a pleasure to share that our fourth quarter was a strong one, standing out with AFFO per common share climbing 22.7% alongside $142.1 million of investments, which capped off a record-setting year at $277.7 million of investments for 2025. That record yearly investment total played a part in generating 8.6% growth in AFFO per common share across the entirety of 2025. On top of the investment volume, we carried out every element of our business plan successfully over the course of the year. To be specific, when it comes to buying properties, we picked up 8 properties during the fourth quarter for roughly $40 million, at a weighted average initial cash cap rate of 6.9%. Across the whole year, we bought 13 properties for $100.6 million, at a weighted average initial cap rate of 7.4%. Worth pointing out, these purchases reflect our strategic barbell approach to acquisitions and featured investment-grade rated tenants including Lowe's and Walmart, along with higher-yielding property investments such as the headquarters and manufacturing facility for Germfree. Alongside that 2025 acquisition activity, in the fourth quarter we also kept executing our strategic recycling plan successfully, divesting 9 noncore properties for $38.4 million at a weighted average exit cap rate of 7.7%, which brought property disposition volume for the full year 2025 to $72.8 million, made up of $67.4 million of income-producing properties at a weighted average exit cap rate of 8% and $5.3 million tied to vacant properties. Thanks to this combined 2025 property portfolio activity, 51% of our ABR now comes from investment-grade rated tenants. Of note, Lowe's, Dick's Sporting Goods, and Walmart all now sit within the top five tenants, together accounting for 29% of our ABR. In addition, Walgreens presently accounts for 4% of ABR and has dropped to our ninth tenant, with just five locations left in our portfolio. Zooming out, at year-end our property portfolio was made up of 127 properties, spanning 4.3 million sq ft across 32 states, with a WALT of 8.4 years and 99.5% occupancy; now turning to the exciting growth in our commercial loan portfolio. Thanks to our long-standing reputation and deep industry relationships, we keep seeing and capitalizing on compelling chances to originate high-yielding commercial loans with quality sponsors at attractive risk-adjusted returns. In the fourth quarter, we originated five commercial loan investments and amended one commercial loan, amounting to a combined $102.3 million of commitments at a weighted average initial coupon of 13.5%, which brought our full year to $177 million of commercial loan originations at a weighted average initial coupon of 12%, including paid-in-kind interest when applicable. The high-quality real estate projects behind these loans sit in major MSAs, are backed by strong sponsors, and have taken many years to come together. We're thrilled to be involved in these projects. Also, during the fourth quarter, we sold a $10 million senior interest in our previously announced commercial loan, secured by a luxury residential development located in the Austin, Texas, metropolitan area. That sale lowered concentration in one of our largest commercial loans. Occasionally, we'll probably look at making more sales of senior interests in bigger loan investments, so we can manage diversification efficiently while also boosting the yield on our net interest. When the year ended, our net commercial loan portfolio stood at roughly $129.8 million, compared with $48 million when the year started, which shows the substantial scale and momentum our platform achieved over the last year. On top of that, we aim for our commercial loan portfolio to typically be around 20% of our total undepreciated asset value, which would complement the investments in our property portfolio and lift our overall yield on total assets. That said, the timing of funding and repayments on loan investments can shift from quarter to quarter. Taken together, property acquisitions and loan originations that were completed came to about $142.1 million in the fourth quarter, with an 11.7% weighted average initial yield, and $277.7 million across the entire year, at a 10.3% weighted average initial yield. The $277.7 million of investments we completed made it the most productive year in our company's history. To fund that amount of investment activity, we brought in capital through strategic asset sales and also took advantage of opportunities in the capital markets. During November, we issued $50 million of a new Series A Preferred Stock carrying an 8% coupon. Also, late in the fourth quarter of 2025 and early in the first quarter of 2026, we tapped both our common ATM and our Series A Preferred ATM programs, bringing in a combined $18.3 million of equity. Finally, as we turn our attention to 2026, we're enthusiastic about what lies ahead for the company. We think our investment activity, equity raises, and recent debt refinancings — Phil will give you more specifics on those — have put the company in a strong position as we enter the new year. In addition, our board recently chose to raise our quarterly common dividend per share by 5.3%, to $0.30 per share, starting in the first quarter of this year. With that, I'll hand the call over to Phil.

Thanks, John. I'll start with a brief overview of our financial results. In the fourth quarter, total revenue came to $16.9 million, which included $12.7 million in lease income and $4 million in interest income from commercial loan investments. FFO and AFFO attributable to common stockholders for the quarter both came in at $0.54 per diluted share, which reflects 22.7% growth compared to the same quarter a year earlier. For the full year, total revenue reached $60.5 million, including $48.7 million in lease income and $11.4 million in interest income from commercial loan investments. FFO and AFFO attributable to common stockholders were $1.88 and $1.89 per diluted share, respectively, which represents roughly 8.6% growth over the prior year. The earnings growth we saw for both the quarter and the year was mainly the result of the investment activity John talked about, along with disciplined management of our balance sheet. Now turning to the balance sheet. Much like our investment activity, we had a substantial amount of capital markets activity during the fourth quarter of 2025 and early in the first quarter of 2026. To start, on November 12, we closed a public offering of 2 million shares of Series A preferred stock priced at $25 per share with an 8% coupon; this preferred offering generated $50 million in gross proceeds before the underwriting discount and other offering expenses were deducted, with net proceeds coming to $48.1 million. We added to the preferred offering proceeds with a modest amount of issuance under both our Series A preferred and common equity ATM programs. Let me begin with our preferred ATM programs. From late in the fourth quarter through early in the first quarter of 2026, we issued just over 116,000 shares of our Series A preferred stock at a weighted average price of $24.92 per share, for total net proceeds of approximately $2.8 million. In the same period, under our common stock ATM program, we issued just over 918,000 shares at a weighted average price of $17.13, for total net proceeds of approximately $15.5 million. Also, earlier this week, we closed a new unsecured credit facility and fully recast the company's unsecured debt. This new credit facility is made up of a $250 million revolving credit facility with an initial term of 4 years, along with two 6-month extension options, a $100 million three-year term loan, and a $100 million five-year term loan. We used the proceeds from the new credit facility to fully repay and retire the company's prior revolving credit facility and term loans, which means the company now has no debt maturities for three years. In addition, pricing for borrowings under the new credit facility improved by 10 to 15 basis points, and it gives us more flexibility and borrowing capacity related to our commercial loan investments. Please refer to our recent press release about this credit facility for more details; we ended the year with net debt to pro forma Adjusted EBITDA of 6.7 times, versus 7.4 times at the beginning of the year. On top of that, we held $65.8 million in liquidity, made up of roughly $25.3 million in usable cash and $40.6 million accessible through our revolving credit facility. That said, because of bank commitments already in place, the amount we can draw on that revolver grows by another $31.4 million as we buy properties and originate commercial loans, which brings total potential liquidity to $97.3 million at year-end. To sum up our investments at year-end: our property portfolio generated annualized base rent of $46.2 million on a straight-line basis, while our net commercial loan portfolio carried loans with an aggregate face amount of $129.8 million and a weighted average coupon rate of 12.4%. One more point on the commercial loan portfolio. Two loan investments totaling $7.2 million at year-end, with a weighted average coupon rate of about 11.5%, got repaid in January of 2026. Also, as we mentioned before, our property portfolio contains roughly $3.8 million of ABR tied to three single-tenant restaurant properties that we acquired in 2024 via a sale-leaseback transaction. While those properties count as real estate for legal and tax purposes, GAAP says they have to be treated as a financing. As a result, current annual cash payments of approximately $2.8 million show up as interest income instead of lease income. To give you more detail on this topic and on our commercial loan program, we've added extra disclosures to our press release, among them the supplemental table, which lays out specifics for the loan portfolio and the related interest earnings. We hope this added information helps you understand our investments. Now on to our 2026 outlook. Our initial earnings guidance for the full year of 2026 is $2.07-$2.11 for FFO per diluted common share, and $2.09-$2.13 for AFFO per diluted common share. Key assumptions baked into our initial guidance include investment volume of $70 million-$100 million, and disposition volume of $30 million-$60 million. I should point out that our 2026 guidance and earnings growth assume dispositions generally close before acquisitions do. Beyond that, our 2025 revenue included $221,000 in the fourth quarter and $525,000 for the full year, tied to fees we earned for managing and selling the third-party properties that backed our portfolio loan. During the fourth quarter of 2025, substantially all of those third-party assets were sold, and the portfolio loan was repaid in full. So those fees won't be a significant revenue source in 2026. One final item. As John mentioned, the board has raised our quarterly common dividend to $0.30 per share, starting in the first quarter of 2026. Even after this increase, our dividend remains well covered. To be specific, this new quarterly common dividend rate works out to just a 56% AFFO payout ratio, calculated on AFFO for the fourth quarter of 2025; with that, operator, please open the call to questions.

Morning, everyone. I appreciate you answering my question. To start, I want to ask about the loan portfolio. It seems you've established something like a cap at 20% of that portfolio. Could you explain a bit about the reasoning behind choosing that figure? Also, where does the loan portfolio currently sit in relation to that cap, how much room remains to reach that maximum, and do you anticipate getting there during this year? Thanks.

Yes, Michael, this is John. I'd say that 20% struck us as a sensible figure, keeping it from growing too big, naturally, and it's something that clearly fits well alongside the company and the business. So it isn't some highly magical figure, yet it's sufficiently modest that it won't become a distraction for our investors, while still allowing for genuinely interesting investments. I'll hand it over to Phil to describe our current position, but as you can tell from what Phil mentioned, a few loans have already been repaid, and that pattern should persist as we keep locating places to put new investments.

Okay, Michael, the simplest way to frame where things stand with the runway is this: as John said, it's 20% of total undepreciated assets. At year-end, that figure would have come to $770 million, so 20% works out to $155 million to $160 million. Roughly $130 million was outstanding on the portfolio. That leaves room, then, for an additional $25 million to $30 million beyond what remained outstanding at the close of the year.

That’s useful. Thank you; and as a follow-up, you keep lowering your exposure to certain tenants that are, like, out of favor. Walgreens has dropped quite a bit on the list. I suppose, where do you currently stand on that? Is there additional work left? Are you pleased with your present position? I’m just attempting to get a feeling of whether this activity is, you know, just beginning to wind down, or whether there is still a little more left? Just how you-

No, there def-

Thank you.

Yes, thanks. Yes, we certainly still have some work ahead, and right now we are actively marketing one more Walgreens location. So we'll keep making progress on that, and eventually, you know, it will be off the books. But since we've already brought it, you know, so far down the list, it's, you know, not something we're, like, intensely focused on anymore; our goal is simply to be patient and locate the appropriate purchasers rather than unload it merely for the sake of unloading it. So we'll collect the cash flow and be sensible when it comes to selling these, but we're continuing to push that disposition effort forward.

Nice job. Good luck in 2026.

Thanks, Michael.

Hello, good morning. I appreciate you taking my question. I suppose I'll just build on that initial inquiry regarding the 20% cap for the loan investments; that has truly been an incredibly robust driver of expansion for you folks and keeps being so... and a substantial portion of the investments over the last year centered on that. So even though you've described the additional capacity you have before hitting 20%, I mean, what's the reason for not going well past that 20% limit? Do you folks, I suppose, contemplate pursuing that? Is that something you'd like to do when you consider your prospects in 2026?

No, I don't believe we do. I mean, sure, we could. I mean, there's sufficient deal flow available, but the thing is, you know, we don't wish to, you know, reverse course, so to speak, when it comes to, you know, what drives our company primarily, and that's net lease properties, core properties. So this segment has been, you know, terrific; it brings us further into developer relationships and tenant relationships, plus it gives us a source of, you know, upcoming net lease investments. And it's quite complementary, but we don't want it to become, you know, a bit of a diversion.

All right, that's helpful. Then I have just one more question. You mentioned a few of the capital-raising moves from Q4, and I wanted to ask specifically about that $10 million you drew on the ATM. What I'm wondering is how you approach putting more equity to work when the share price sits where it does now — in other words, how you weigh your cost of equity. My assumption is that money mostly goes toward the divestment loans with the higher yield. So I'd like to hear how you compare deal spreads against your cost of capital versus what the investment loans offer, and how you decide on issuing more.

Yeah, we're going to stay disciplined about it, but as you said, the bulk of it goes toward funding those investments that are highly accretive. So even if the share price isn't really where we'd want it to be, it still functions. The numbers do add up. And like you've observed with plenty of other companies, investors appear far more drawn to businesses that have greater liquidity and capacity. So when you look at it, we repurchased quite a bit of stock during the prior year, and now we're essentially putting out some of those shares again. So this isn't any kind of hugely dilutive move. It's simply disciplined funding of what are, in several cases, very accretive investments.

Fine. I'll stop with that. Many thanks.

Of course.

Hi there. Yeah, morning to all of you. I've got one about the dividend. You folks increased it once more, and as you look at that, is the primary reason the expansion in earnings that you're seeing, plus the need to distribute a somewhat larger dividend? And what's the reasoning for not holding on to a greater amount of cash flow?

Phil, that one's yours to answer.

Right, so the increase came from both profits and taxable income. Those two things offset each other. I missed the final portion of what you asked, Wes.

Oh, I'm just trying to understand why it went up, basically, since you had to pay it out — just because you're issuing stock here. The question was: why not just keep more cash flow instead of raising the dividend?

Yeah, a big part of it is growth and taxable income. You know, when you look at the loan portfolio, right, there's no depreciation attached to that. So even though it accounts for 20% of total assets and the properties represent more, there's no tax cover or depreciation associated with it, so it does help push taxable income higher; so the increase was really just to kind of get us where we need to be to pay out taxable income.

Understood, that's clear. I've got one question regarding that loan tied to the phase I developer. Are lot sales beginning to show up there, and at what point do you anticipate being paid back? Then, as a follow-up: do you think the second loan will begin funding prior to the first one starting to pay off?

Yes, well, repayment on that loan has already begun now that lot sales are taking place. And really, that money is flowing toward the senior participation that we sold off. So I wouldn't say — by the time the second portion gets funded, the loan we currently have outstanding will not be completely repaid; however, you should expect that, you know, the repayment activity will likely shift more toward us, you know, in late spring, meaning it will actually be directed to the first mortgage participation first.

All right, I appreciate that; and next, I suppose, as you examine your potential loan pipeline, what sorts of things are showing up? I mean, you've got a sizable residential loan here. Are there additional sectors you're considering simply to broaden things a bit?

Yes. So, the pipeline definitely has us quite pleased. You know, we're discussing more grocery-anchored development, roughly speaking, plus investment-grade credit development involving, you know, excellent tenants and new relationships. These are long-standing relationships, but they're new ones for Pine. And so, we're very enthusiastic as we keep developing the pipeline, so expect more soon.

Awesome. Okay. Thanks, guys.

Thank you.

Hi there, good morning everyone. I just wanted to pick up where we left off regarding the loan portfolio. John, looking further out, once a portion of these loans get repaid, is your expectation that you'll keep putting that capital back to work and hold that 20% allocation across the coming several years, or do you see that figure declining as time goes on?

Appreciate that, RJ. No — our plan, and what we see in front of us, is to hold that figure right at 20%. The deals we have lined up are really robust at the moment. So when loans pay down, they're going to be; our full intention is to bring them back up.

Understood. So this is over a longer horizon, correct — a 20% allocation, and it's a component of the Pine strategy?

That's right.

Perfect. Then, Phil, I was hoping for a bit of fourth-quarter bookkeeping. Clearly, that was a sizable figure and came in above what consensus expected. My sense is that a few one-time items might have landed in the fourth quarter. Could you maybe walk through what those were, and also how we should think about arriving at a solid run rate as we head into the first quarter of this year?

Yes, thank you, RJ. A number of non-recurring things appear in there; and, you know, one useful way to look at it is that in one of our schedules, the debt to EBITDA, there's a line item labeled non-recurring items, and for the quarter it came in at slightly above $300,000. That figure is mostly the management fees I mentioned during my prepared remarks that are being eliminated, plus a prepayment penalty from one of the loans that was repaid ahead of schedule, which together accounted for that $300,000 and some thousand. So that works out to a couple of cents that won't repeat; and then, also, remember that the fourth quarter doesn't carry the entire burden of the prep outstanding and the associated management fee. So the $0.54, if you adjust it downward for all of those items, is probably $0.50, $0.51 on a run-rate basis as of the end of the quarter.

Great. Makes sense. Thanks, guys.

Thank you.

Yeah, thanks. Morning. I'd like to ask something further regarding the balance sheet, and I was curious whether you might share your views about how leverage will look in 2026.

Phil?

Yeah, I mean, we're quite pleased with the position we're in right now. And, you know, we've got a favorable pricing level on our debt. So I think, you know, roughly where we sit at this point is pretty much where, you know, we anticipate it staying through the year, though clearly, that hinges on what opportunities come our way.

All right. A second follow-up regarding investment opportunities. During your prepared remarks, you mentioned pursuing a barbell strategy for 2026. I'm curious whether you could share your thoughts on, I suppose, what you're seeing in terms of opportunities across both the investment-grade and non-investment-grade portions of the portfolio when it comes to acquisitions.

Yes. We're quite enthusiastic about, you know, certain opportunities that we're seeing on the net lease side, where we could potentially add new investment-grade credits higher into the top five, top 10 tenancy. So, we're really, you know, concentrated on that; and so, you know, we have a solid portfolio that, you know, opportunities we're currently evaluating, so pretty thrilled about, you know, how the net lease portfolio will be composed this year.

Okay, that's everything from my side.

Hi there, morning everyone, and congratulations on such a significant 2025.

Thanks.

To start, regarding the guidance for acquisitions and dispositions, it's significantly lower compared to 25, even as our capital base expands. Can we infer anything from that? It's simply, as you know, a matter of adopting a conservative stance. Does it reflect some reluctance regarding where the market stands, or could there be another explanation?