Alpine Income Property Trust (PINE) Q3 2026 earnings call transcript

I wouldn't like to turn the conference over to your speaker today. Jenna Thank you. Joining me in 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. alpinereat. com.

With that, I will turn the call over to John.

Thank you, Jenna, and good morning, everyone. We're pleased to report another strong quarter. AFFO per diluted share grew 19.6% over the third quarter of last year, and we invested approximately $41 million at a weighted average initial yield of 8.5%. Our investment activity has accelerated meaningfully this year, including our pending $117.3 million industrial portfolio acquisition, which I'll discuss in a moment. Our closed and under-contract investments year-to-date now exceed $300 million, a company record that surpasses our full year 2025 total of $277 million. As a result of this investment volume, we are raising our full year 2026 AFFO guidance, which Phil will walk through shortly.

Starting with acquisitions, during the quarter we closed $39.2 million of property acquisitions at a weighted average initial cash cap rate of 8.5%. Key tenants included a Best Buy in McAllen, Texas, a Lowe's in Fairfax, Virginia, a Dick's Sporting Goods in Asheville, North Carolina, which are all investment grade rated and among our top five tenants by ABR. Year-to-date, we've closed on $85.8 million of property acquisitions at a weighted average initial cap rate of 8%. We've continued to target well-located properties we can buy at low basis at attractive initial yield, and we look to selectively recycle lower-yielding properties into new higher-yielding opportunities.

Subsequent to quarter in, we acquired a Burlington in Chandler, Arizona for $7.9 million and earlier this month announced an agreement to acquire a 13-property industrial portfolio for $117.3 million or approximately $63 per square foot. The industrial portfolio totals about 1.9 million square feet across 11 states. It is 100% leased to nine tenants on an absolute triple net basis with annual rent escalations.

A weighted average remaining lease term of 10.2 years and no expiration before late 2031. While industrial is not a strategic focus, this portfolio stood out for a few reasons.

First, it offers an attractive initial yield. Second, the tenant base is diversified and the tenants have operated at their sites for an average of 40 years and invested significant capital in them.

Third, we believe in-place rents are below market and benefit from annual escalations. We expect to close in the middle of the fourth quarter, subject to customary closing conditions. The new financing fill we'll discuss gives us ample capacity to fund it. At quarter end, our property portfolio consists of 130 properties, totaling 4.8 million square feet across 31 states with 99.6% occupancy and a weighted average lease term of 8.7 years.

Annualized straight-line base rent was 53.9 million. Approximately 68% of ABR comes from credit-rated tenants and 56% from investment-grade-rated tenants. On our commercial loan portfolio, we received earlier payment in full on two loans totaling 17.9 million and a weighted average yield of 10.2%. At quarter end, the portfolio consisted of 11 loans with outstanding face amount of $160.1 million and a weighted average coupon, including pick interest of 13.4%. The loan book is near our target of approximately 20% of total undepreciated asset value.

It complements our property portfolio and increases the overall yield on our investments. As a reminder, the timing of fundings and repayments can cause the relative size of the loan portfolio to vary from quarter to quarter.

With that, I'll turn the call over to Phil.

Thanks, John. Starting with our results, third quarter total revenue was $20.5 million, including lease income of $12.8 million and interest income from commercial loan investments of $7.6 million. FFO and AFFO were both $0.55 per diluted share, up approximately 20% from the third quarter of last year. As a reminder, second quarter results included approximately $0.02 per diluted share of non-recurring termination fee income. This quarter did not include any one-time or non-recurring income. For the nine months ended September 30th, total revenue was $58.9 million, including lease income of $38.1 million, and interest income from commercial loan investments of $20.7 million.

FFO and AFFO were $1.65 and $1.66 per diluted share, both up approximately 23% from the same period last year. Turning to the balance sheet, during the quarter, we raised $8.2 million of net proceeds through our common and preferred ATM programs. Year-to-date, we have now raised approximately $70 million of net proceeds across both programs. We ended the quarter with net debt to pro forma adjusted EBITDA of 6.5 times.

While this is consistent with last quarter, it is more than a full term lower than the 7.7 times we reported a year ago. As of quarter end, we had $398.5 million of debt outstanding at a weighted average interest rate of 4 and no debt maturing until 2029 As previously disclosed we have million of SOFR swaps at 2 that mature in January 2027 and will be replaced with swaps fixing SOFR at 3.54%. Notably, subsequent to quarter in, we received bank commitments for a new $100 million four-year term loan and a $75 million increase to our revolving credit facility.

We expect this financing to close in late October, and we'll use the term loan proceeds to reduce borrowings outstanding on a revolving credit facility. In total, this financing adds $175 million of potential liquidity.

Now turning to guidance. As John said, our investment volume has led us to raise guidance. For full year 2026, we are raising our FFO outlook to $2.19 to $2.21 per diluted share, up from $2.10 to $2.13. We are raising our AFFO outlook to $2.20 to $2.22 per diluted share, up from $2.12 to $2.15. At the midpoint, this represents approximately 17% FFO per share growth over 2025.

Our new guidance ranges reflect our increased investment volume assumption of $310 million to $350 million. Further, they reflect the expected timing of investments, dispositions, and financing activity, as well as this quarter's $17.9 million of early loan repayments John discussed, and a $7.4 million loan with a 10.25% yield maturing in the fourth quarter.

Finally, based on equity issues this quarter, our quarterly base management fee run rate is now approximately $1.5 million. With that, operator, please open the call to questions.

Hey, Jay, it's John. Thanks for the question. I'll let Phil talk about the financing aspects of it. Because it's under contract, we haven't closed yet. We'll probably save more details until after it closes.

But obviously, we've given a fair amount of detail on our investor deck on it without having it been closed. But we love the portfolio because it is higher yielding. It has a nice wall of over 10 years. It has annual escalations. It's dispersed in 13 properties, 9 tenants, and incredibly low rental rate per square foot. So it fits all the boxes of things that we like to buy where there's good yield and limited downside and nice upside.

But, Phil, you want to talk about the financing side?

Yeah. Hey, Jay. So next week we should close on our new financing that's disclosed in the earnings release, a new term loan, a four-year term loan for $100 million for which the proceeds will be used to pay down the line. And then we're actually growing the line and hitting the accordion there to increase the line $75 million. So we'll initially take it down on the line on debt-to-e, but if you just want to look at that solely by itself, we go from mid-sixes to low-sevens, probably 7.3-ish. And then we'll look at – we still have some room in our DISCO guides and all to get back down later.

For right now, it's basically a one-off, but we had mentioned in our previous earnings calls that we were open to other sectors. And so finding that great risk-adjusted yield in sectors, and as you know, we already have an industrial property in our portfolio before this acquisition. So I don't see anything else in the sort of window kind of like what we're looking at, but we're open to it.

Yeah, thanks. So on the loan book, you know, it's not a hard set as far as an amount that we'll have out there. So there could be a situation where the loan book, you know, pays down, pays off, and we don't replace it to the amount it is now. But I will say in this environment, you know, we are seeing interesting opportunities to replace the loans that we have. so nothing right now, but certainly this is a good environment where to get really terrific sponsors, terrific assets, great locations, great basis.

So I would expect that there'll be more opportunities, but it could be a situation where it does pay down.

And anyway, that's kind of where we are with the loan book.

Yeah, I mean, we're constantly, as you know, pruning the portfolio. And, of course, you know, we have, you know, some Walgreens left, but their credit gets better. And we just kind of cash flowing those out until you know find that 1031 buyer and we have an at home as you know but the at at is in Charlotte in a terrific location We had another user that wanted to buy it and at didn want to leave So the locations that we have are really strong. We have one sportsman's warehouse where we have someone that wants to buy that. The party city in Long Island, we're far along on a lease to replace that. So we're always pruning, but nothing that...

Sure. I mean, clearly, you know, we're saving our capital for, you know, really good opportunities where we are getting that higher yield potential. So, you know, we're going to be targeting sort of that eight cap, plus or minus.

And, you know, I would say that if people are out in the market right now selling something, that means they want to clear the deck. So you probably have in this environment people that are going to sell, going to transact, no matter what, versus a market where, you know, they're seeing, you know, better pricing and they're taking something out to market. So this is the time that gets us excited.

So hopefully we'll have some good hunting here.

Yeah, there's two swaps, RJ, that expire both in January. One is for 100 million at close, and I talked about it in my prepared remarks, at around 200 basis points. So it's going to roll up. We have a forward swap in place that will replace it that is below market but higher than the 200 that that swap was at. So that 100 million will roll up about 150 basis points. then the only other swap we have burning off is 50 million.

And it also matures in January. We do not have a fort to replace it, but it's closer to market. It's maybe 50 bits below market. So that one won't. It's smaller. It's 50 million, and it's closer to market. So that one will have a little sting, but not as much. Those are the two biggest moving parts on our rates for next year.

Yeah, hey, Michael, it's Phil. So in the quarter, as we noted, John noted, we had a couple of loans that paid off. And then in the fourth quarter, if you look at our loan schedule, there's one for $7 million, $8 million. It's also scheduled to pay off. In addition to that, we do have the rate that adjusts down on the large residential loan. So the 55 cents in the third quarter, if you kind of adjust for all that, just the loan activity, you know, it probably falls back to call it 53 or so.

And then with the acquisitions we announced in particular, the industrial portfolio, you know, that will, you know, kind of replace it. So it looks like, you know, in the middle of our guidance, the run rate's kind of consistent with the third quarter. But there's really moving parts there, a little less loan. and then the acquisition, industrial acquisition, bringing it back to 55. And look, it could be, you know, higher or lower. It'll just depend on timing of when the acquisitions close versus any dispositions.

Yeah, I'll take the first part of it, and Phil can follow on. Look, we have some DISPO plans, and even the industrial portfolio, there might be some properties we want to spin out on that one. So it's really, I would say, asset sales. Obviously, if the capital markets are there, there may be some help there, But, you know, we have a fair amount of properties with lower cap rate sort of attributes.

So that's sort of the plan.

Yeah, you know, as John said, dispos will be the biggest mover there. But also just, you know, we do have some annual bumps in the portfolio where NOI will grow. And, you know, recycling, not just straight dispos, could also help, you know, earnings grow in addition to dispositions. So we've got the phase to incrementally move leverage down.

It'll be something less net of the loans maturing. And you can see the schedule. You can see the maturity dates on there. We have $8 million paying down in the fourth quarter alone. So, you know, repayments will help, you know, fund some of the draws actually going out so that, you know, we never have to really come out of pocket the $75 at any moment in time. Those draws are spread out over two years and can be at least partially handled with just loans maturing.

They, for the new $100 million four-year term loan, it's already swapped. We have a forward on it. And so that rate will be called 4.75-ish on that. So we don't really have to do that. We already had to forward that we can just move over to that swap. So there's no new swap to fix it. So it'll be fixed at closing.

It doesn't go all the way out to the full term of it. So, you know, we will at some point look to do the tail later, but it'll be 4.75-ish at close.

There's some, but not a material amount.

Sure.

Well, since we're basically doing the amount of investment volume this year equal to our market cap, You can probably figure that should be less next year. So I don't know how many years we can kind of keep on doing our market cap investment.

But, you know, look, we always, you know, it is too early. But, you know, for sure, if we find opportunities that really fit, we're going to find the capital. And it could be a partner. That's easy. If the capital markets are kind to our stock and our securities, then we'll find external capital. There's an incredible amount of that right now in the net lease space. As you guys probably follow on better than we do, that every private equity group, mammoth private equity groups, have our starting net lease groups. So there's no shortage of capital.

So we look forward to kind of finding those opportunities, and that's our job is to find the right capital for it.

Yeah, the portfolio sort of happened, you know, it was not a long drawn-out process. I mean, it had been fully marketed, but, you know, it was one where, you know, The pricing is somewhat reflecting this new environment of higher interest rates. So we feel very comfortable with where the cap rate is relative to where the 10-year is.

Yeah, I mean, we feel very good with the ones that we're in because they're second home, third home, fourth home sort of communities. And actually, believe it or not, the fall market is the strongest market. And I think what you're seeing on the high net worth sort of folks is that owning sort of sticks and bricks isn't a bad thing to have.

So we're not worried about kind of where our position in these. It's not like first-time homebuyers or move-ups. This is sort of like a lot of discretionary capital.

Exactly.

Thank you.