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

Thanks. On this morning's call with me are John Albright, our President and Chief Executive Officer, Philip Mays, our Chief Financial Officer, plus additional executive team members, and they'll be around 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 vary materially from what these forward-looking statements describe, and we have no obligation to revise them. The factors and risks that might lead actual results to diverge materially from expectations get disclosed periodically 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; 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 we had a robust first quarter in 2026, which came on the heels of the record amount of investment activity we reached in 2025; we're still carrying out our investment approach, aiming to put together a top-quality portfolio of single-tenant net lease properties leased to tenants with investment grade ratings, and also to originate commercial loans that offer appealing risk-adjusted returns backed by high-quality real estate with strong, seasoned sponsors. In the quarter, we bought a retail property located in downtown Aspen, Colorado, for $10 million. That purchase was structured as a 50-year absolute triple net master lease, with an initial cap rate of 8.5% and 1.25% annual rent escalators. Turning to property dispositions, we keep selectively trimming our portfolio, selling three lease properties without investment grade ratings for $5.8 million, at a weighted average exit cap of 7.4%. Thanks to our property transactions in the first quarter combined, our property portfolio now stands at 125 properties, totaling 4.3 million sq ft, spread across 31 states, with 99.5% occupancy and a WALT of 9.3 years. 50% of our ABR comes from tenants with investment grade ratings, with Lowe's, Dick's Sporting Goods, Walmart and Best Buy making up four of our top five tenants. Also, in the quarter, we originated a $32 million first mortgage loan, and $8.6 million of that was funded at close. This loan has a 24-month term and an initial interest rate of 13%, which includes a 1.5% paid in kind interest, and it steps down to an 11.5% current pay rate once the borrower satisfies certain conditions. The loan will fund development of a 101,000 sq ft retail center with national investment grade-rated tenants plus three out parcels. That retail center sits in the Atlanta MSA, is shadow anchored by a 128,500 sq ft Target that is currently in development, and is next to an existing Publix, which creates a strong and varied merchandising mix. In addition, regarding our commercial loan portfolio, we closed and funded the $31.8 million phase two of our first mortgage loan investment, which is secured by a luxury residential development in the Austin, Texas metropolitan area. The A-1 participation that we announced earlier added another $10.8 million toward this funding. So, net of the A-1 participation, our combined investment in phase one and phase two of this loan came to $40 million at quarter end. Reflecting this quarter's loan activity, including two loan repayments totaling $7.2 million in January, our commercial loan portfolio was $160.4 million, with a weighted average current yield including PIK interest of 13.5% at quarter end. We've aimed to originate loan investments that complement our property portfolio and lift the overall yield we earn on our total assets. Notably, our loan portfolio has now reached our targeted level of roughly 20% of our total undepreciated asset value. That said, as we've noted before, the timing of funding and repayments on loan investments can make the relative size of the loan portfolio fluctuate from quarter to quarter. As we look ahead, there's a really compelling set of opportunities for investment in front of us — things like high-quality properties, net lease assets with investment grade tenants, and appealing loan opportunities. With such a strong pipeline and the investment activity we just wrapped up, we tapped both our common and preferred ATM programs during this quarter, bringing in a total of $36.2 million in equity. On top of that, we're lifting our 2026 outlook for investment volume by $100 million, and we're raising guidance for FFO and AFFO per diluted share to new ranges that suggest roughly 12% growth at the midpoints. With that, I'll hand the call over to Phil.

Thanks, John. Starting off with the financial results. For the quarter, total revenue came in at $18.4 million. That figure includes lease income of $12.6 million, along with interest income of $5.8 million from commercial loan investments. FFO and AFFO for the quarter each totaled $0.53 per diluted share, which works out to 20% growth compared with the prior year period. Growth in earnings for the quarter came from investment activity, especially our commercial loan investments, since we expanded the loan portfolio to roughly 20% of our total undepreciated asset value. Now on to the balance sheet. In the first quarter, we amended and restated our unsecured credit facility. Here's how that section would sound spoken aloud, then cleaned up a bit: The financing package we put in place includes a revolver of $250 million that comes due in February 2030, and it carries a pair of options to extend it by six months each. There's also a term loan of $100 million that matures in 2029, plus another term loan of $100 million maturing in 2031. When we closed, we layered on the SOFR swaps we already had in place. Those swaps set initial fixed rates of roughly 3.5% on both term loans, and roughly 4.8% on $100 million of what was still outstanding under the revolver. Since those original swap agreements will roll off over time, we've signed four new swap agreements, and they'll shift where our interest rates stand today. For the timing and the effect of those shifts, our earlier press release about the amended credit facility lays it all out. One thing worth noting is that after shutting down this facility, we don't have any debt coming due for close to three years. We also stayed busy during the quarter with both our common and preferred ATM programs. Through the common ATM, we sold roughly 1.7 million shares, with a weighted average gross price of $19.31 each, bringing in net proceeds of $31.6 million. Through the preferred ATM, we sold about 186,000 shares at a weighted average gross price of $25.17 each, generating $4.6 million in net proceeds. Taking into account our investment activity and the equity we issued, the quarter closed with net debt to pro forma adjusted EBITDA at 6.6 x and roughly $90 million in liquidity. John gave an update on our property portfolio. Like we mentioned earlier, some of the real estate we own came to us via sale leaseback deals. When the quarter closed, roughly 11% of our ABR—about $5 million—came from those assets. That group covers the Aspen location we picked up during this quarter plus three restaurants we'd bought before. Even though these sale leaseback sites count as real estate when it comes to taxes and legal treatment, GAAP says we have to treat them as financings. Because of that, the roughly $3.7 million in yearly cash payments we get from them shows up as interest income instead of lease income. Just a reminder—our quarterly earnings press release has a supplemental table laying out the specifics of our commercial loan portfolio along with the interest earnings tied to it. About our common dividend: back in February we told everyone that the board had approved a 5.3% bump in the quarterly payout, taking it from $0.285 per share up to $0.30 per share, and that starts with this quarter. At that new rate, the quarterly AFFO payout ratio comes to only 57%. Now let's talk guidance. For the full 2026 year, we're lifting our FFO guidance to a new band of $2.09-$2.13 per diluted share, and our AFFO outlook rises to a fresh range of $2.11-$2.15 per diluted share. Beyond that, as John noted, we're adding $100 million to our investment activity, which takes it to a new range of $170 million-$200 million. With that said, Operator, kindly open the line for questions.

Morning. I appreciate you taking the time to answer. So, my first one, folks. You've discussed the approach involving top-tier net lease alongside the commercial loan. Could you elaborate a bit on the acquisitions you made, what you did during the quarter, and then what's coming up in the pipeline, plus how all of that aligns with the broader strategy?

Yes. It seems fairly clear-cut to me; at present we have quite a bit going on in the pipeline as we aim to add more investment-grade credits positioned higher within our credit profile, and we're coming across some solid opportunities. In fact, we feel quite positive about what's achievable in the next quarter; regarding loans, a few remain in the pipeline. Since certain lower yielding loans will expire, get repaid over the next few months, that should allow a pleasant reinvestment into loans with better yields and strong quality; it's more or less the same pattern. From where we sit today, everything appears quite favorable.

Appreciate that. Building on what you just mentioned, I take it you mean the loan coming due in July 2026. My understanding is there's just one additional loan maturing relatively soon, sometime in 2026. You noted earlier on this call how that might introduce some swings in earnings — but do you have confidence in the chances to put that capital back to work and reduce a portion of that choppiness over the near to medium term?

Yes; we're quite confident, because as the loan program has grown and we've completed several loans alongside these developers, they have gotten quite accustomed to how we operate and the customized approach we take to shaping these loans around what their projects require. When these loans get repaid, there's typically another item in the pipeline that they need to address. That pipeline is quite robust and of very high quality, and the sponsors are top-notch too. Yes. We feel good that these loans with lower yields that are set to be repaid — which we expect will happen ahead of schedule — will give us solid chances to put money back to work.

Thanks a lot, and best of luck during Q2.

Thank you — I appreciate that.

Morning, everyone. Wrapping up your remarks, you mentioned that the loan book is sitting just about at that 20% ceiling relative to total assets. From this point on, should we be looking for something like a change in approach, where most of the fresh capital goes into more conventional net lease real estate rather than into loans? And if that's the case, how are you thinking about your cost of capital, along with the deal spreads you'd be able to get on those kinds of new investments?

Right. There's actually a bigger volume sitting in our pipeline when it comes to traditional net lease deals. When it comes to certain other loans we've got lined up, like I said earlier, they're likely going to address a gap created as those lower yielding loans get paid off. On the subject of our cost of capital, you're aware that across our 5+ years, cost of capital has typically been something of a constraint for us; we do sell certain properties at reduced cap rates and redeploy that capital, yet the yields sitting before us on the net lease acquisition side align nicely with our capital structure as it stands today. Philip, would you like to weigh in on this particular point?

Yes, I'd agree with that. And then, looking ahead, Jay, we're basically at that 20% ceiling — roughly an 80/20 mix, with 80% in properties and 20% in loans. When you consider the returns we've achieved across both of those categories, I believe our cost of capital fits well alongside that.

All right, that feedback is helpful. Then, moving to the disposition front, I suppose: over roughly the last 18 months, your team has clearly put in a lot of effort to adjust tenant exposures to the right size—cutting back on Walgreens and dollar stores—while, as I understand it, also adding stronger credit through Walmart. At this stage, are there additional particular exposures you're aiming to resize?

Not truly, no. I believe we've previously been questioned regarding At Home and similar names, yet the At Home locations we hold perform extremely well. Other tenants have approached us wanting to purchase the At Home and install their own concept there, while At Home has no desire to relocate; we're sitting in a favorable position, having acquired a high yielding asset in an excellent Charlotte location, and we feel quite sure they will renew since they're turning away parties who want to hand them a check. Although you might notice a few credits that seem out of place, what matters is the real estate quality. In fact, there's one deal in progress right now involving what you'd call a very low-quality tenant, except we have an investment-grade tenant ready to take that space, and it appears a buyout can be negotiated. We constantly seek to trim and improve; everything comes down to the locations we essentially focus on acquiring, where we know that should these tenants depart, a solid replacement chance will exist.

Okay. Appreciate that color. That's it for me.

Great.

Hey, good morning, everyone. Appreciate you taking our questions. So, if we stick with the loan portfolio a little longer, do you anticipate pursuing any loan-to-own possibilities, or will that capital just get rolled into fresh loans instead?

Right. The cap rates those assets would fetch on a sale don't fit with what our investment program needs. Most likely, not a single one of them turns into an ownership stake. Sure — when the developers finish building those tenants out and want to sell, they either grant us a right or simply approach us and ask, "Would you like to purchase it, and we'll avoid paying a real estate commission?" For these assets, the cap rates are quite strong, so sadly they just don't really work for us. Ideally, later on we'll come across some that we can actually work into. If a 1031 need arises, that might be the better situation for that kind of opportunity.

Understood; that helps. When we look ahead a bit to 2027 and 2028, it appears that 20% of the leases are set to roll over. Could you walk us through how that process works, whether you've begun talks with any of those tenants, and how you expect those conversations to unfold?

Yes. With everything on the horizon, we've held discussions with these tenants over time, and if problems existed, we'd likely address them sooner rather than later. I'm quite confident these will be renewal candidates. As you're aware, that's one of the opportunities we favor—acquiring properties with shorter lease terms and a strong likelihood of renewal. Many of these are priced under market, which is why you'll likely see plenty of renewals occur naturally, and typically we secure an increase on the leases too.

Understood — that's really helpful context. I have nothing further. Nice work on the quarter.

Thank you. I appreciate that.

Yeah, thanks, and good morning. I'd like to ask about your investment-grade exposure along with the lease term — as you pursue additional property acquisitions, is it reasonable for us to anticipate that you'd aim to grow that exposure and push the lease term out even more?

Yeah, look, that's the objective at all times. The mix varies somewhat. Certain assets sitting in the acquisition pipeline carry shorter duration. There's clearly a chance to step in and execute an extend blend. Again, like I said a moment ago, many of those lease rates sit at such low levels that giving up that bump isn't really something we want, since our preference is greater lease duration. What sits in the pipeline right now is accretive to our lease duration when it comes to securing that longer term. That should reflect quite well on us. Again, rushing simply to hold a longer lease duration while surrendering economics to our shareholders isn't something we're doing.

Appreciate the additional detail. Moving to my follow-up about the investment guidance — I just want to be sure about that $170 million to $200 million figure. Does that represent what you're deploying, or does it sit on the loan side and cover what you're funding, or is it purely originations?

Yes. Broadly speaking, it covers both funding and deploying — or, if you prefer to view the loans on an origination basis, either way it lands inside that range. My guess is that funding, if you're simply going by the pipeline, is somewhat difficult to project, since future loans and which funds are closing are hard to pin down. As things stand, funding likely comes in around $20 million below deployment when full origination values are included, though either way it stays inside that range.

Okay, I appreciate you taking the time for my question.

Hello there. Morning, everybody. I'd like to revisit what was asked regarding those lease renewals. For many of those tenants holding leases below market, is there an option in place, or is it possible to simply reset them to market rates?