Copper Property CTL Pass Through Trust (CPPTL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Copper Property CTL Pass Through Trust conference call. [Operator Instructions] Please note that today's conference call is being recorded with an online replay available 1 hour after the conclusion of this call. Additional information can be found on the Investors section of the company's website at ctltrust.net. [Operator Instructions] I'll now turn the conference call over to the Trust's Investor Relations representative, Jessica Cummins.

Thank you, operator. Good morning, everyone. Welcome to the Copper Property CTL Pass Through Trust conference call. Over the past few days, the Trust filed with the SEC an 8-K containing its February 2024 monthly reporting package and its annual report on Form 10-K for the period ended December 31, 2023, each of which are available online at ctltrust.net. On the call today, Neil Aaronson, the Trust's Principal Executive Officer; and Larry Finger, its Principal Financial Officer, will discuss these filings as well as other Trust activities. In addition, a representative from GLAS, our trustee, will be available to answer questions. Please note that during this conference call, some of the comments will be forward-looking statements. All statements other than statements of historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking terminology such as anticipate, believe, continue, could, estimate, expect, intend, may, might, our vision, plan, potential, preliminary, predict, should, will or would or the negative thereof or other variations thereof or comparable terminology and include, but are not limited to, the Trust's expectations or beliefs concerning future events and stock price performance. The Trust has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Trust believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. These factors, including those discussed in the Trust's registration statement on Form 10 filed with the Securities and Exchange Commission, the SEC, may cause its actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a further list and description of such risks and uncertainties, please refer to the Trust's filings with the SEC that are available at www.sec.gov and on our website. As such, it is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, Monday, March 11, 2024. [Operator Instructions] I will now turn the call over to our Principal Executive Officer, Neil Aaronson.

Thank you, Jessica, and welcome, everybody, and thank you for joining us at Copper Property CTL Pass Through Trust conference call. As you know, we are focused on achieving sales consistent with the long-term value of our properties. And in the fourth quarter, we sold our property in South Jordan, Utah, which was sold for $4.5 million representing a 7.8% cap rate. Since the Trust's formation, we've sold 6 distribution centers and 30 retail properties for a total of $995 million and a gain on sale of $134 million. The distribution centers were sold at a cap rate of 6.3% and the retail properties have been sold at an average cap rate of 4.6% or 6.0%, excluding the San Bruno sale. We sold 21 of the original 29 option properties and 9 CTL properties. We are continuously monitoring market conditions with the objective of achieving maximum value for the certificate holders either through a bulk sale of the portfolio or individual dispositions. We remain confident that the combination of the quality of the real estate portfolio and the advantages of the master lease will allow us to achieve maximum value and a significant premium for the certificate holders. With that, I'll turn the call over to Larry.

Thanks, Neil, and welcome, everyone. Including the distribution we'll be making today, to date, we distributed $1.24 billion. That represents rental income distributions of $266 million and sales distributions of $972 million. You may have noticed that in December of this year, we filed our 2024 budget with projected operating expense of $11.8 million, which compares to 2023's budget for $12.8 million. In 2022, the budget was $16.5 million. In terms of guidance, subject to the impact of sales, monthly distributions from operations are expected to continue to be between $7.5 million and $8.5 million or between $0.10 and $0.11 per certificate, supplemented by net sales proceeds as sales... And with that, we'll open up the call to questions.

[Operator Instructions] And our first question is from the line of Alex Arnold with Odeon Capital.

I was just looking -- I was just wondering your input on current market conditions relative to where they were 6 months ago and also sort of the plan with regard to marketing assets and timing of restarting proactive marketing?

Well, obviously, as I think most of you are on the -- well, first of all, thank you for the question. I think -- as most on the call know, we all are anxiously awaiting sort of what I'll call sort of a normalization interest rates and continued -- and we monitor continued guidance from the Fed and all sources of market data that we can get our hands on. And obviously, we're extremely active in the marketplace. So as we sit here today, I don't think there's any meaningful change to our marketing strategy, the market -- that being said, we continue to have, I would say, literally a daily or at worst multiple times per week basis ongoing negotiations. We are receiving bids and interest in all of our properties, both on a somewhat bulk basis, on individual basis, every single day in the week of the year and continue to be open to selling properties at the right prices. We do believe very strongly in the long-term value of these. And don't look in any way, shape of form to be selling properties at a discount just to get properties sold.

[Operator Instructions] The next question we have is from the line of Dixon Yee with YAM Investments.

Just wanted, the people who are expressing interest in your properties, are they all the mall operators or are they financial investors?

It's all. It's a broad range, but the -- probably the most prominent buyers are 1031 buyers. People coming out of a real estate sale that they're looking to roll out. That's the -- generally, the deals we've been able to close because they are -- the people most inclined to be aggressive in terms of price.

[Operator Instructions] Our next question will be coming from the line of Fernando Lopez-Ona with Wexford Capital.

Going back to the question you answered earlier, you said you don't want to sell at a discount, you're looking for the best price possible. In your mind, what sort of -- what cap rates are you aiming to? Obviously, cap rates have moved a lot since Copper Trust came out. So like what cap rates are you sort of trying to aim for? Obviously, you've sold everything recently, call it, more in the 7 handle cap rate. Is that sort of the type of cap rate you're looking for or sort of -- or you're being more aggressive than that?

Yes. Well, again, I appreciate the question. I would say for purposes of just ongoing negotiations that we have going on, we really don't give that type of guidance to the marketplace. But I would just say, in general, we evaluate all deals on a property-by-property basis. And then the offers that we have been receiving on more bulk-type sales, we look at it as a portfolio of sales being discussed. So [indiscernible] that number differs between all the different properties. And so property, we may have made a prior sale with over the last year, we might not be willing to accept that same price for another property within the portfolio. But overall, we just look at -- use our past sales as guidance, and we continue to just look at every single property in the portfolio and try to [ root ] what we think is the right value for that property.

Our next question is a follow-up from the line of Alex Arnold with Odeon Capital.

I guess I'm just looking to see if you guys could characterize current market conditions as compared to what you were seeing 6 months ago. Is it the same? Has it -- have things loosened up, gotten tighter?

Yes. I would suggest that it has loosened a bit. It is -- I apologize if I [ didn't ] understand that would the question earlier. I would say definitely, we're starting to see things loosen up a little bit. Clearly, we're not back to where the financial markets -- consistent with what's going on in the financial markets. We're seeing a little bit of a loosening. We're definitely seeing real interest in our portfolio. Obviously, interest rates are still high and those buyers that are reliant on financing are still -- their cost of capital is higher causing their -- some of their offers to be higher than -- higher cap rates than we're willing to accept.

Do you get a sense that their access to capital has changed at all over the past 6 months?

I would say there's definitely been a small softening in the marketplace. We do see that. But again, in the grand scheme of things, it's a much tighter market than it was, call it, a year plus ago.

Our next question is from the line of Dixon Yee with YAM Investments.

One quick follow-up here. In terms of the interest that's been expressed in your properties, is there one geographic region that's more of interest to buyers? Or is it pretty much spread out geographically?

I think we are fielding interest on the portfolio across the country. So there's been no like definitive of this one areas where all the interest is -- these 2 or 3 areas where the interest is. We are in ongoing conversations and negotiations for properties across the country and in every region.

[Operator Instructions] And the next question is a follow-up from Alex Arnold with Odeon Capital.

Do you sense that -- I mean, is your pipeline changing in terms of activity? People kicking the tires, do you sense that it's getting bigger or smaller?

The kick in the tires is -- there's a good amount of kicking the tires as to what is in the actual sales pipeline, that's not something we're comfortable commenting on.

Okay. I actually was just more interested in if it seemed -- if the demand seems to be changing. And I've got other touch points...

It's the same answer as to the other. It's a slight increase. Feel free to ask a follow up without going back into the queue.

At this time, we have no additional questions. Would you like to make some further remarks?

No, just once again like to thank everyone for attending the call for their continued interest in Copper Property Trust, and we look forward to updating you further in future quarters.

This will conclude today's conference. You may now disconnect your lines at this time, and thank you for your participation.