Alpine Income Property Trust, Inc 2026 Q3 Earnings Call

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.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. 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 will 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 5 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 end, we acquired a Burlington in Chandler, Arizona for $7.9 million.

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 9 tenants on an absolute triple net basis with annual rent escalations. A weighted average remaining lease term of 10.2 years and no expirations 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 Phil will discuss gives us ample capacity to fund it. At quarter end, our property portfolio consisted 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 received earlier payment in full on 2 loans totaling $17.9 million at a weighted average yield of 10.2%.

At quarter end, the portfolio consisted of 11 loans with outstanding face amount of $160.1 million in a weighted average coupon, including PIK 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 turn 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 4.48%, and no debt maturing until 2029. As previously disclosed, we have $100 million of SOFR swaps at 2.05% that mature in January 2027 and will be replaced with swaps fixing SOFR at 3.54%. Notably, subsequent to quarter end, we received bank commitments for a new $100 million 4-year term loan and a $75 million increase to our revolving credit facility. We expect this financing to close in late October, and we will use the term loan proceeds to reduce borrowings outstanding on our 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-$2.21 per diluted share, up from $2.10-$2.13. We are raising our AFFO outlook to $2.20-$2.22 per diluted share, up from $2.12-$2.15. At the midpoint, this represents approximately 17% AFFO per share growth over 2025. Our new guidance ranges reflect our increased investment volume assumption of $310 million-$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 issued this quarter, our quarterly base management fee run rate is now approximately $1.5 million. With that, operator, please open the call to questions.