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

Thank you. With me this morning on the call are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer, and additional executive team members, who will be on hand to take questions during the call. A reminder that a number of today's remarks count as forward-looking statements under Federal Securities laws. The company's actual future results could differ significantly from the matters discussed in these forward-looking statements, and we assume no obligation to update them. Factors and risks that might cause actual results to differ materially from expectations appear 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 most recent 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; we're happy to share results from yet another robust quarter. On a per diluted share basis, AFFO rose 19.6% versus the third quarter a year ago, and we deployed roughly $41 million at an 8.5% weighted average initial yield. Investment activity has picked up considerably during this year, and that includes the $117.3 million industrial portfolio acquisition still pending, which I'll get to shortly. Closed and under contract investments so far this year have now passed $300 million—a record for the company, topping the $277 million we recorded for all of 2025. With the amount we're investing, we're raising our 2026 full-year AFFO guidance, and Phil will walk everyone through the specifics shortly. On the acquisition side, we closed $39.2 million of property purchases this quarter at a weighted average initial cash cap rate of 8.5%. The notable tenants included a Best Buy in McAllen, Texas, a Lowe's in Fairfax, Virginia, and a Dick's Sporting Goods in Asheville, North Carolina — every one of them investment grade rated and sitting among our top five tenants by ABR. Year to date, we've completed $85.8 million in property acquisitions at a weighted average initial cap rate of 8%. Our focus remains on well-located properties that we can acquire at a low basis with an attractive initial yield, and we intend to selectively recycle lower-yielding properties into new opportunities with higher yields. After the quarter closed, we bought a Burlington in Chandler, Arizona, paying $7.9 million. Earlier this month, we announced a deal to purchase a 13 property industrial portfolio for $117.3 million, which works out to roughly $63 per square foot. That industrial portfolio comes to about 1.9 million square feet spread over 11 states. All of it is leased — 100% — to nine tenants under absolute triple-net leases that include annual rent escalations. The average remaining lease term, weighted, comes to 10.2 years, and no lease runs out before late 2031. While industrial properties aren't a strategic priority for us, several factors made this portfolio stand out. First, it provides an appealing initial yield. Second, the tenant mix is varied, and on average those tenants have run their operations at these locations for 40 years and put substantial capital into them. Third, we think in-place rents sit below market and come with annual escalations; barring the usual closing conditions, we anticipate completing the deal in the middle of the fourth quarter. The fresh financing Phil will cover provides plenty of capacity for us to fund it. Closing out the quarter, we had 130 properties in our portfolio — that's 4.8 million square feet spanning 31 states — running at 99.6% occupancy, with a weighted average lease term of 8.7 years. Annualized straight-line base rent came in at $53.9 million. Credit-rated tenants account for roughly 68% of ABR, and investment grade-rated tenants make up 56%. Two commercial loans in our portfolio were paid off in full ahead of schedule, totaling $17.9 million with a weighted average yield of 10.2%. At quarter end, that portfolio contained 11 loans, with an outstanding face amount of $160.1 million and a weighted average coupon — PIK interest included — of 13.4%. We've reached a point where the loan portfolio is close to the approximately 20% goal we established relative to total undepreciated asset value. It works alongside our real estate holdings and boosts the return we earn on invested capital. As a quick reminder, when funds are drawn and repaid, the loan book's proportional share can vary between quarters. That said, I'll turn things over to Phil.

Thanks, John. I'll start by going over our results. Total revenue for the third quarter was $20.5 million, made up of $12.8 million in lease income and $7.6 million in interest income from commercial loan investments. FFO and AFFO both came to $0.55 per diluted share, up roughly 20% from the third quarter a year ago. Keep in mind that second quarter results included about $0.02 per diluted share of income from non-recurring termination fees. This quarter contained no one-time or non-recurring income. For the nine months ended September 30th, total revenue reached $58.9 million, which included $38.1 million of lease income and $20.7 million of interest income from commercial loan investments. On a diluted per-share basis, FFO came in at $1.65 and AFFO at $1.66, with each figure rising roughly 23% versus the prior-year quarter. Turning to the balance sheet: in the quarter, our common and preferred ATM programs generated $8.2 million in net proceeds. Across both programs, we've now brought in about $70 million in net proceeds so far this year. Net debt to pro forma adjusted EBITDA stood at 6.5 x at quarter-end. That matches last quarter, yet it's over a full turn below the 7.7 x figure we posted twelve months earlier. At the close of the quarter, our outstanding debt totaled $398.5 million, carrying a weighted average interest rate of 4.48%, with nothing coming due before 2029. As we disclosed earlier, we hold $100 million of SOFR swaps at 2.05% maturing in January 2027, and those will be swapped out for agreements fixing SOFR at 3.54%. It's worth noting that after the quarter closed, banks committed to a new $100 million four-year term loan along with a $75 million expansion of our revolving credit facility. We anticipate closing this financing in late October, and the term loan proceeds will go toward paying down what's drawn on our revolving credit facility. Altogether, this financing provides $175 million in additional potential liquidity; with that, let's move to guidance. Following what John mentioned, the amount we've been investing has prompted an upward revision to our guidance. Our FFO projection for the entire year of 2026 now moves to $2.19-$2.21 for each diluted share, compared with the prior $2.10-$2.13. Likewise, we're lifting our AFFO forecast to $2.20-$2.22 per diluted share, versus the earlier $2.12-$2.15. Taking the midpoint, that works out to roughly 17% growth in AFFO per share versus 2025. These updated ranges incorporate our higher assumed investment volume of $310 million-$350 million. In addition, they account for how we expect the timing of investments, dispositions, and financing activity to play out, plus the $17.9 million in early loan repayments during this quarter that John covered, and a $7.4 million loan yielding 10.25% that comes due in the fourth quarter. To wrap up, taking into account the equity we issued during this quarter, the run rate for our base management fee on a quarterly basis now stands at roughly $1.5 million. That concludes our remarks—operator, we're ready to take questions from the line.

Hi there, and thanks. Morning to you. I was hoping you might share a bit more about that industrial portfolio you're looking to buy — anything new on how it's progressing, what yield it carried, and specifically how you plan to fund it, plus any guidance on what you figure pro forma leverage would look like.

Hi, Jay — John here. Appreciate the question. I'll hand the financing piece over to Phil. Since it's under contract and hasn't closed yet, we'll likely hold back additional specifics until closing happens. That said, we've already put a good level of detail in our investor deck even though the deal isn't done. We're big fans of this portfolio given its higher yield. It carries a solid WALT above 10 years. Escalations come annually. It's spread across 13 properties and nine tenants, with an extremely low per-square-foot rental rate; so it checks every box for what we like to acquire — strong yield, limited downside, and attractive upside; but Phil, want to cover the financing side?

Yeah. Hi Jay. So next week, we expect to complete the new financing that we mentioned in the earnings release. It's a new term loan — a four-year term loan of $100 million — and the proceeds from that will go toward paying down the line. After that, we're actually expanding the line and using the accordion feature there to add $75 million to it. So at first we'll draw it down on the line; if you look at debt to EBITDA just on its own, we move from the mid-sixes to the low sevens, roughly 7.3-ish. Then we'll look at bringing it back down later, even though we still have some room in our dispo guidance and all.

All right. Thanks for that. That answers a lot. So thinking a bit more widely about the industrial portfolio acquisition — it adds some extra diversification to a portfolio that's otherwise mostly retail; I'm just curious how you view what the ideal mix of your portfolio should be going forward. Are you aiming for more industrial or other kinds of assets, or was this deal really more of a one-time thing?

As of now, it's essentially a one-time deal, though we noted on earlier earnings calls that we were open to additional sectors. So it's about finding that strong risk-adjusted yield across sectors. As you're aware, we already held an industrial property in our portfolio prior to this acquisition. So I don't see anything else in the pipeline, more or less like what we're currently reviewing. But we're open to it. Okay. All right, I'll leave it there. Thank you.

Good morning, everyone, and I appreciate you taking my question. I want to discuss the loan portfolio a bit and what you plan to do with that capital as it begins to wind down. Are you aiming to hold that portfolio around 20%, or should we anticipate some of those funds being redeployed into properties? Also, near the end of the quarter, the shares began trading lower, which might create an appealing buyback chance. So how are you weighing all three of those considerations?

Yes, thank you. Regarding the loan book, there is no fixed target for the amount we will keep outstanding. We could face a scenario where the loan book is paid down or paid off, and we do not replenish it back to its current level. I would note that in the present environment, we are finding intriguing chances to substitute for the loans we hold. Nothing at the moment, but this is certainly a favorable climate to attract truly excellent sponsors, excellent assets, excellent locations, and excellent basis. I would anticipate additional opportunities arising. It is possible that it does get paid down. In any case, that is roughly our position on the loan book.

Understood. Thanks for that. When it comes to dispositions, do you see any credits you might exit or add in, say, 2027, as we keep moving ahead?

Yes, we're always, you know, trimming the portfolio. Naturally, we still hold some Walgreens, though their credit is improving, and we're simply letting cash flow from those until a 1031 buyer turns up; we have an At Home, as you're aware, but that At Home sits in Charlotte in a fantastic spot. Another user wanted to purchase it, and At Home wasn't willing to vacate. The properties we hold are genuinely solid. There's one Sportsman's Warehouse where someone is interested in buying it. The Party City on Long Island — we're quite far along on a lease to replace that tenant. We're continually trimming, but nothing that

Understood. Appreciate it, everyone.

Thank you. Morning, everybody. John, could you share a few thoughts on what you're observing regarding a possible shift in cap rates, or whether you're seeing any movement in the market at all, particularly in light of the higher interest rate environment?

Absolutely. We're plainly holding back our capital for truly strong opportunities where we can capture that greater yield potential. As a result, we'll be aiming at roughly that eight cap, give or take. What I'd say is that if folks are currently out there in the market selling an asset, that signals they want to clear the deck. So in this environment, you likely have sellers who are going to transact no matter what, as opposed to a market where they're seeing improved pricing and they're taking something out to market. This is the kind of time that gets us excited. So with luck, we'll have some good hunting ahead.

Thank you for that. Phil, now that we have the new debts or new financings and then the swap burn offs, can you quantify at all what the potential effect might be next year as we consider the higher rates and the swap burn off?

Yes, RJ, there are two swaps, and both of them expire in January. One carries $100 million at close, and I mentioned it in my prepared remarks, at roughly 200 basis points. It is going to roll. We have a forward swap set up that will take its place, and that one is below market, but higher than the 200 that this swap was at. So that $100 million will roll up roughly 150 basis points. The only other swap burning off is $60 million, and it matures in January as well. We have no forward to replace that one, but it is closer to market. It is perhaps 50 that is below market. So that one will not. It is smaller, it is $60 million, and it is closer to market, so that one will sting a little, but not as much. Those are the two biggest moving pieces on our rates for next year.

Okay, great. Thanks, guys.

Thank you.

Morning, and thanks so much for the question. Obviously you have a big industrial portfolio, yet the implied Q4 guidance looks a lot like the third quarter's AFFO per share. Could you walk through the pieces that move us from Q3 to Q4? Is roughly $0.55 the right runway to keep in mind going forward, building on that last question?

Yeah. Hey, Michael, this is Phil. During the quarter, as we mentioned — John mentioned it too — a couple of loans paid off. In Q4, looking at our loan schedule, there's another one, $7 million to $8 million, that is also set to pay off. Beyond that, the rate on the large residential loan does adjust downward. If you adjust the $0.55 from the third quarter for all of that, just the loan activity, it probably comes back down to, call it, $0.53 or so. The acquisitions we announced, especially the industrial portfolio, will replace that. At the midpoint of our guidance, the run rate looks consistent with Q3, but there really are moving parts. A little less loan, then the acquisition — the industrial acquisition — brings it back to $0.55. Look, it could come in higher or lower. It just depends on the timing of when the acquisitions close versus any dispositions.

Understood. Appreciate that. So leverage is trending upward here. During the past year, you made efforts to bring it down. I suppose the question is, what's the approach for reducing leverage going forward from this point? How are you thinking about that given the current environment?

Yes. I'll handle the first portion and Phil can add to it. Look, we have certain disposition plans, and even within the industrial portfolio, there could be some properties that we'd want to spin out on that one. It's really, I'd say, asset sales. Clearly, if the capital markets are available, there may be some assistance there. But we hold a fair number of properties with lower cap rate sort of characteristics. So that's essentially the plan.

Right. Like John mentioned, dispositions are going to be the main driver there. That said, we also have certain annual increases within the portfolio that will produce NOI growth, and recycling — not only outright sales — might additionally contribute to earnings growth alongside dispositions. So there are a handful of avenues for us to bring leverage down incrementally.

Understood. Many thanks. Best of luck in Q4.

Thanks.