Alpine Income Property Trust Inc (PINE) 2026 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Alpine Income Property Trust Q2 2026 earnings conference call.

(Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Jenna McKinney, Director of Finance. Ma'am please go ahead.

Thank you. Joining me and participating on the call this morning are John Albright, President and Chief Executive Officer; Philip Mays, Chief Financial Officer; and other members of the executive team who 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.

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 three 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 three-property portfolio leased to ALDI, HomeGoods, and Petco, and two properties ground-leased to Lowe's and Alamo Drafthouse, which is a subsidiary of an A+ rated Sony Group Corporation.

These acquisitions meaningfully strengthened 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, at 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, 55,000-square-foot, Publix-anchored retail development and follows the grocery shadow-anchored development loan we originated in the first quarter.

Also in the quarter, we received full repayment of $8 million of commercial loans that carried a 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 and 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 the 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, and 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 2026. This new quarterly common dividend rate represents a relatively low 55% AFFO payout ratio on second quarter 2026 AFFO. Further, we're raising the low end of our full-year FFO and AFFO guidance, which Phil will detail later.

And with that, I will turn the call over to Phil.

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 30% and 32% respectively over the comparable quarter of the prior year.

I would note that the results for the quarter included approximately $300,000 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 is the tenant and indicated they were going to renew their lease, and the buyer decided to terminate the contract. For the six 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 25% and 26% 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 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 156,000 shares at a weighted average gross price of $25.18 per share for 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 18,819,000 and preferred shares totaled approximately 2,426,000.

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 6.7 times at the beginning of the year. As of quarter end, we had $369.5 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. One reminder regarding interest expense. As previously disclosed, $100 million of SOFR swaps at 2.05% associated with our 2029 term loan matured in May and were replaced with swaps 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 four properties acquired through sale-leaseback transactions, as well as the Alamo Drafthouse in Denver acquired this quarter, which qualifies as a sales-type lease.

Although these five 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 or $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 of 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 a quarter.

I should note here that historically no 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 Instructions)

Jay Kornreich, Cantor Fitzgerald.

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, I guess, pushing beyond that 20% if you feel like there's really attractive loan opportunities, or if we should expect really the bulk of new investments coming from the net lease real estate?

And on the net lease real estate 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?

Yes, thanks, Jay. So we do have in front of us in the pipeline a fair amount of net lease investments. And hopefully, all those come to fruition or a good part of them. On the loan side, there's one that we're looking at, not anything kind of behind that. And so you won't see the loan portfolio get above 20%.

If it does, it's 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 the acquisitions we have obviously we have some, maybe some sales coming up, but really, it's through our line. But Phil can kind of talk a little bit more about that.

Yes, Jay, I mean, to finance the acquisitions it'll be a combination of our line initially, and then we can also blend in some dispos, and if appropriate we can blend in some prefer some common stock on top of it, but initially it'll be our line of credit that takes them down.

Okay. I appreciate that. And then just one more for me, I guess on the disposition side, you updated guidance revising that lower, and it looks like you didn't have any dispositions this quarter. So, just curious if there's been any, I guess, strategic shift in how you're thinking about specific assets or tenants maybe you initially intended to dispose, or if it's reflective of just overall transaction market, maybe not being at the place you want in order to sell for full value.

I know you've done a lot of work already just getting the portfolio into a place where you feel like it's really healthy. So I'm just curious what led to the dynamics of expecting less dispositions.

Yes, it's 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 kind of get through an extension or a lease renewal that kind of gets you that better cap rate valuation. So it's really more or less getting the property in a better place, even extract more value.

Michael Goldsmith, UBS.

It seems like there were some kind of like one-timers and some moving pieces in the run rate of the AFFO kind of from the second quarter to maybe the third quarter. Do you mind walking through kind of like what are the, what's kind of like the -- what the equivalent AFFO run rate would be from what you reported to given the non-cash (inaudible) or the one-time payment on the sale, and then something like the hedges, like how the run rate AFFO changes going forward?

Yes, Michael. So we reported $0.58 per quarter. There's some one-time revenue items in there and there's some expenses that are only partially in there, 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's elevated about $300,000 for the quarter and year-to-date, and that was a non-refundable 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 because they could not get a hold of the property the way they wanted to, and we got to keep their non-refundable deposit.

$300,000, not a large number nominally, but it is about $0.02 of earnings on a per share basis. In addition, as you're 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, one was originally scheduled to mature in May of this year, one 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 switch over from the original swaps to the new forward swap. So one of those happened this quarter on our 2029 term loan. It moved up about 130 basis points, and then we have another one that will happen towards the end of January on our 2031 term loan, and it also moves up about 130, 140 basis points.

And then in addition to that, the only other thing really is we did issue equity during the quarter. So obviously that's it's in on the quarter on a weighted average, it'll be in the full weight next quarter. And that also does increase our management fee a little, but if you take the current $0.58 and you adjust it for those three items 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.

Super helpful there. And then I guess, right, maybe on the management fee, can you kind of reconcile kind of the advantages and disadvantages of when you're issuing equity? Clearly you're in a good place if you're comfortable enough to be issuing equity, but also, I think there is the incentive issue of it increases the management fee and then also if there's some dilution from the denomination.

I mean, I think we've shown in the past that the management fee is not driving the bus because we've 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's all about basically making really good investments and driving earnings. And I think you've seen that. Returns have been spectacular. And still, we have a higher FFO than EPRT, and our stock price is $10, $11 below EPRT. I think we have some good headway in front of us as far as where we can kind of drive more alpha for our investors.

That's what I wanted to hear. Thanks.

Yes. And then, Michael, the only thing I'd add is if you kind of look at companies our size, with market caps our size, their G&A tends to run 12%, 13% or something of total revenue. Currently, we're running closer to 10% of revenue. So I think it's a reasonable load relative to the size of the company.

Thanks for the clarification. Good luck in the back half.

Matthew Erdner, JonesTrading.

Hey guys, 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'd be thinking on timing? Would it be late this quarter, early next quarter in terms of acquisitions?

Yes, I think our pipeline is in really good shape as far as the quality of what we're seeing. And we're 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'll be active this quarter and look forward to kind of updating people as we progress. But the pipeline is strong and it's not something that you have to wait too long for.

Got it. And then could you talk a little bit about, I guess, the type of tenants you're targeting now? You know, the cap rates came down for the properties this quarter. It seems like you brought in some nice credits there. You know, how should we think about the cap rate and just what you're targeting going forward?

Sure. Still focusing on high-quality kind of credits. As you know, we're more real estate-focused than credit-focused, but we happen to find good locations with good credits. And so I would say the cap rates are going to be kind of in the sevens for sure, so we don't have to dip below sevens, but sevens on up, if you will, is kind of where we're seeing some rich targets.

Rob Stevenson, Janney.

John, did you say that a couple of these acquisitions this quarter were ground leases?

So on the ground leases, Phil, help me with that one. We have --

Acquired -- this quarter was on a ground lease.

Yes.

The other ones were not on ground leases, but the Lowe's that we acquired in the quarter was a ground lease.

Okay. Is that your only ground lease at this point or is that anything substantial in the portfolio as a percentage of ABR?

No, we have others, for sure. I mean Lowe's, as Phil mentioned, we have other Lowe's and they're on ground leases.

Okay. And then were you guys forced by the REIT rules to increase the dividend, or was this just a decision that the Board made at this point in time? What was the background there?

Yes, so it is really -- it's 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 want to make sure that we're fully distributing taxable income. And so it was just, it was driven by the growth in taxable income.

Gaurav Mehta, Alliance Global Partners.

Okay. Thank you. Good morning. I wanted to ask you on your investment-grade exposure. 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's not a hard target. I would say that's probably on close to the high end of where we'll have it. It probably may even go above that level here in the next quarter, but I wouldn't peg that as a target. So let's say 50%-plus is a good target for us.

Okay. The second question on the disposition guidance, does that guidance include property sales or does that also include any loan portfolio payoffs?

Yes, so it includes just really one, I think, loan payoff or sale, so to speak. And it's just the A-note that we did earlier in the year for $10 million. Other than that, what's included there currently is just related to property dispositions.

Okay. And then lastly, on the loan portfolio, unfunded commitments of $85 million, what's the timing for that?

Yes, so out of the (multiple speakers)

Go ahead.

No, so there's 15 loans, really only three of them have any significant unfunded amount, and they'll draw up over time.

You know, you can look at them. Most significantly in the next 6 months, they are Publix-anchored developments that are getting started now.

Alec Feygin, Baird.

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 pre-lease rate? What's the loan to cost? Anything else that you can provide?

You're talking about on a potential one?

No, the $40 million Kentucky one this quarter.

Okay. Yes. So that's basically a Publix-anchored development. You know, traditionally, I think we mentioned this before we'll 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's the where we like to target, that we'll do more of a loan-to-cost, higher loan-to-cost than a bank will. But we know where these transactions are going to happen as far as where they can sell the tenants on these pad sites and the anchor, and trends to a 70%, 75% loan-to-value.

And 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. Anyway, that gives you a little bit of flavor for that.

Yes, no, thank you for that. And I know you mentioned earlier there's one loan in the pipeline right now that you're potentially working on. Is it a larger loan? And are you mostly going to be sticking with these construction-type loans?

It's not a larger loan. It's sort of modest size and it would be a development loan.

John Massocca, B. Riley Securities.

Good morning. Maybe speaking with the loans, of that $85.4 million that's committed but unfunded, is there an amount there that you think is unlikely to be drawn down? Like what's -- is there anything today that you have visibility into that you're committed to, but you don't think your partner will actually end up using?

You know, most likely, at least we look at it that they'll 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 cheaper cost of capital. So I would say it's 50%-50% chance that it gets fully funded or something happens along the way and they recapitalize and we get an early termination fee if you will. So it's too early to determine right now.

Okay. And then on the acquisition side, you mentioned a theater during the quarter. Understand there's a Sony credit behind it, but anything else about that transaction that got you comfortable with buying theaters? It's been a stale market for theater acquisitions over the last, frankly, six years. So just curious your thought process and is there more opportunities to do acquisitions in that tenant industry?

Yes. So that one is actually a ground lease as well. The Alamo and obviously having the Sony credit and a long-term lease was fantastic, and the high cap rate. 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 additional opportunity where we're looking at kind of the loan-to-value, if you will, of what could be built 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're rolling down their rents on properties that aren't really on the high end of performance.

And so through our exposure at CTO with AMC, we see how well they're doing. We have a property that's in percentage rent. And so seeing the trends are very, very strong. But so if we see good risk-adjusted yields, we'll certainly capture them. But that's a little bit more than you wanted, I guess.

No, no, all helpful. And then 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 kind of tenant credit, particularly outside of your top 10 tenants?

Yes, not really. I mean, that's why a little bit of the disposition guidance has gone down. We've really addressed things that were a little bit of worry actually some of them become like tailwinds, like the Party City in Long Island that went bankrupt a while ago. We've been sitting with an empty property there for a while, but we have a lease signed with a new tenant. They just need to go through the permitting, which has taken a long time.

So hopefully that property is back in producing income in early '27, maybe late this year. So we will continue to prune where we see things that we don't like, but it's in pretty good shape right now.

Can you just remind me, is that Party City the only vacancy left, or is there something else that's at 0.5%?

Phil, do we have anything?

It's just the Party City, really. We have two very, very minimal value former Mountain Express, but combined, they're 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've recently completed a lease for that property.

Craig Kucera, Lucid Capital Markets.

Yes, thank you. John, there seems to be an increasing bifurcation in the economy between high-end and low-end consumers maybe some pullback in spending at some grocers. I'd be curious to kind of get your thoughts on, is that influencing how you're thinking about lending or acquisitions in this environment?

Not really. We're seeing the grocers have been doing very, very well. We own, as you know, CTO Sprouts and they are doing really strong. I rememberF not too long ago where people worried about that sort of credit, but that's no longer the case. And the expansion of the high-quality grocers Whole Foods, Publix, has been pretty strong. So we're not seeing any weakness with their revenues and sales. No, we don't have that concern.

Okay, that's helpful. And I just want to talk about your investment guidance. You know, we're hearing from some of your peers that this is one of the best acquisition environments, certainly at the property level in some time. And you've obviously been pretty aggressive on the lending side. Sounds like there's a lot in the pipeline you're working on. You've done $150 million year-to-date. You're talking about $170 million to $200 million. Is that right? Is that just conservatism or is that just what you're seeing in the pipeline?

Well, I mean, we're being a little conservative because we had some property acquisitions that we were hoping to happen last quarter that through due diligence, we didn't like what we saw, so we passed on them, when we internally thought that we're definitely going to acquire them. And so it's really being a little bit conservative that we have a really good pipeline, but we know that some of them won't shake out. So anyway, just being a little bit conservative there.

Thank you. And I'm 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.