Good morning ladies and gentlemen and welcome to Generation Income Properties Second Quarter 2022 Earnings Conference Call. At this time, all lines have been placed in listen-only mode. Please note that today's conference call is being recorded. Replay information is included in our second quarter earnings release issued on Friday, which can be found on our Investor Relations section of the company's website at gipreit.com. After the speakers' prepared remarks, there will be a question-and-answer period. I will now turn the conference over to the company's Chief of Staff, Emily Cusmano. You may begin.

Thank you, operator. Good morning everyone. I am joined this morning by David Sobelman, Chief Executive Officer; and Allison Davies, Chief Financial Officer. David will provide an overview of the company's growth strategy, business and capital markets activities, second-quarter highlights and subsequent events to-date. Allison will review our quarterly financial results and balance sheet. Today's conference call includes forward-looking statements that reflect the company's current views with respect to, among other things, our planned acquisition activity, anticipated market size, future events, and financial performance. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect it. Therefore, you should not place undue reliance on these forward-looking statements. During this call, we will refer to FFO, core FFO, AFFO, and core AFFO, and net operating income, which are each non-GAAP financial measures. Reconciliations of net income to the most comparable GAAP measure to these non-GAAP measures can be found in our earnings release or in our investor presentation. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections, including the risk factors included in our Form 10-K for the 2021 fiscal year filed with the SEC. As such, it is important to note that management’s comments include time-sensitive information that may only be as accurate as of today’s date, Monday, August 15, 2022. Following management’s prepared comments, this call will be open for your questions. We request that you ask only one question and one follow-up to allow ample time for everyone to ask questions. If time permits, we welcome you to re-queue to ask additional questions. With that, I will now turn the call over to our Chief Executive Officer, David Sobelman.

Thank you, Emily, and welcome to our earnings call. For those of you not familiar with the company, Generation Income Properties is a NASDAQ-listed real estate corporation, formed in 2015 to opportunistically acquire and own retail, industrial, and office net-leased properties located in densely populated submarkets, with a focus on investment-grade credit tenants. Our diversified portfolio currently consists of 13 assets across eight states and the District of Columbia. We differentiate ourselves by specializing in underwriting primarily investment-grade tenants with remaining primary lease durations of under 10 years, coupled with strong real estate fundamentals. We believe this combination typically correlates to a higher probability of tenants either maintaining their current tenancy beyond their lease expiration or the opportunity to re-tenant the asset in future years. Our comprehensive underwriting process has determined that stabilized investment-grade credit tenanted assets with shorter lease terms are oftentimes attractive opportunities overlooked by both large institutions and private investors. We focus on this segment because, in our view, shorter lease terms provide flexibility to potentially realize attractive rental rate increases, higher long-term values, and resilience to economic fluctuations. During the second quarter, we focused on stabilizing our portfolio from both the creditworthiness and long-term debt perspective in order to help us better navigate the uncertainty that is prevalent throughout today's markets. As mentioned, our current portfolio consists of 13 assets with a gross asset value of approximately $61 million and is made up of primarily investment-grade credit tenants. In fact, 92% of GIPR's portfolio in terms of annualized base rent is investment grade or equivalent, which we believe is the highest proportion of investment-grade tenants in our peer group. We have increased gross asset value by 29% year-over-year and continue to focus on growing our portfolio with high-quality assets. We've also continued to be diligent about the internal growth of our portfolio, and we're happy to report that we're maintaining the contractual increases of annualized base rents that are within 92% of our portfolio. We have either fixed increases in our rental rates or what has worked to our shareholders' benefit this year, Consumer Price Index (CPI) increases with the primary lease term. For instance, our asset that is tenanted by Irby Construction and guaranteed by the investment-grade credit of Quanta Services, a New York Stock Exchange company with an approximately $19 billion market cap, had a 7% increase in their rental rate in the second quarter due to the uncapped CPI increase in their lease structure. These increases in rent have provided us with approximately 165 basis points of annual same-property rent growth over the same period last year. And we continue to seek assets that could also provide internal growth to the portfolio for years to come. We remain focused on insulating our portfolio from volatility, demonstrated through our previously announced refinance of seven of our properties, which was completed in April. It's important to mention some of the metrics that surround that refinance because it's a major component of how our long-term investment thesis is being put into practice at opportune times. As announced, GIPR replaced short-term debt with long-term debt for approximately $13.5 million from Valley Bank in the second quarter of this year. We accomplished our goal of securing long-term stabilized debt at what is today a below-market interest rate of 3.85% to provide us with tenure debt for seven of our properties, all of which have debt maturities beyond the primary lease term for each asset. As of today, approximately 85% of our portfolio is encumbered by debt, where the maturity exceeds the primary lease expiration of the assets, and we have no mortgage debt expiring until mid-2024. Given that lenders typically do not provide mortgage debt durations beyond the primary lease term of any one property, we feel that this is a testament to their belief in our investment thesis and performance. You've probably heard the adage 'patient money is smart money'; being in the net lease industry for as long as I have, I've experienced a persistent lag between sellers adjusting their pricing expectations and the pace of the rising cost of capital, creating a widening bid-ask spread. We continue to see acquisition opportunities that meet our investment criteria, and today our pipeline consists of assets that mimic our current portfolio from a creditworthiness and real estate perspective. However, we note these opportunities are remaining on the market longer, suggesting to us that buyers are being patient and waiting for sellers to recalibrate. Early signs that may be underway include sellers focusing more acutely on buyers with a high certainty to close versus, for example, 1031 Exchange buyers who tend to be more fickle but have essentially been driving the market for the last several years. We are acutely aware of and recognize the need for external growth to propel stock price appreciation over the long term. But we will remain disciplined and won't be swayed from our investment principles in response to short-term market dislocations. And speaking of our future, in the initial days of the third quarter of 2022, we entered into an agreement with our largest limited partner unit holder, whose partnership contributed two assets totaling roughly $19 million in value to our portfolio in 2018. To redeem approximately $1.2 million in LP units to common shares with the balance in cash, which we believe is a testament to his confidence and continued support of GIPR for the long term. Our UPREIT program has been a successful part of our external growth, and we are happy that our partners are willing to continue their involvement with our company. The second quarter of this year also proved to be beneficial for increasing the level of interest in our company throughout the REIT industry. I, along with members of senior management, were present in New York to attend events and meetings surrounding NAREIT's Annual Investor Conference. We were encouraged by being invited to meet with members of our REIT peers, and we were delighted by both the amount of interest that other attendees expressed in us and their level of knowledge about our story. Most of the outreach to us centered on groups with an interest in learning more about our company, our investment thesis, and our long-term growth plans. We left our time in New York with a new understanding that we were being noticed by our efforts, and there was a level of interest in GIPR that went beyond our initial understanding. With that, I'm delighted to turn over the call to our CFO, Allison Davies.

Thank you, David. As David mentioned, GIPR's high credit quality tenant base and well-located real estate assets continue to keep our portfolio relatively insulated from shifting economics. We continue to collect 100% of base rents, and occupancy has remained at 100% since inception. GIPR's weighted average remaining lease term is 5.8 years, reflecting our short-term lease thesis. We have one lease expiring at the end of 2022, and our team is in active discussions with the tenant while also exploring alternative tenancy. Given the high-quality asset and demand in that market, we are confident we will be able to successfully renew or re-tenant with minimal downtime. As I look back on the last few months, I'm extremely proud of everything we've accomplished. Just as I was onboarding, the team had recently closed on the acquisition of four high-quality assets within a few months. But as David mentioned, with the interest rate hikes and growing concerns of a recession, the market has slowed down. This slowdown has given our team a chance to hit pause, evaluate our financial position, and set ourselves up for the growth we're looking forward to. We still have full access to our $25 million commitment from American Momentum Bank, and we recently modified this commitment to increase it up to $50 million based on certain equity criteria, and we plan to use that commitment for future purchases. Additionally, in April, we were able to increase our ownership and our tenancy in common investment from 37% to 50%, and we are pleased with the ongoing strong performance of this asset. Friday night, we issued a press release announcing our financial and operating results for the quarter. Total revenue from operations was $1.4 million during the quarter, which represents a year-over-year increase of 40% driven by the acquisition of properties, an increase in recoverable expenses, and contractual rent increases. Operating expenses for the same periods were $2 million and $1.3 million, respectively. This increase is primarily driven by increases in professional fees, recoverable expenses, depreciation, and amortization from recent acquisitions and compensation costs. Net operating income was $1.1 million compared to $824,000 during the same period last year, a 28% increase. This increase is clearly indicative of our disciplined underwriting and focus on accretive investments. During the quarter, we incurred approximately $107,000 in debt deal expense related to acquisition costs incurred from a portfolio of assets we are no longer pursuing. While we aim to keep the deal expenses to a minimum, we believe this does highlight our ability to exercise discipline when pursuing acquisitions to ensure every asset we acquire is accretive to growth for shareholders. Net loss for the quarter was $917,000 compared to $318,000 for the same period last year, which is directly attributable to the increase in expenses mentioned previously. Core AFFO was $36,000 compared to $108,000 for the same period last year. All this said, I'm very pleased with where we ended the quarter. We have a healthy cash balance and a strong balance sheet that are positioning us to withstand this market uncertainty. We have successfully secured long-term financing for all of our mortgage debt, converting all of our rates from variable to fixed, and have structured our debt maturities to not only manage cash requirements but also hedge against the continued expected increases in interest rates. And finally, our acquisitions and underwriting team are in a great position to continue growing our asset base, building upon the relationships made in the quarter to uncover new opportunities and continue to provide a strong pipeline for us to execute on throughout the second half of the year. With that, I'll turn the call back over to David.

Thank you, Allison. Before opening the call for your questions, I wanted to remind you that the name Generation Income Properties was derived from our ethos of generating income, not just for today, but for the generational long-term. It is our philosophy that multigenerational families benefit from making decisions affecting not only those who begin the legacies but for those that come after. It has also been our goal to be a part of that effort for all stakeholders of GIPR. And we thank you for the confidence you have placed in us for your generations. With that, operator, please open the call for questions.

Thank you. Our first question is from an unidentified analyst. Please proceed.

Thank you. Good morning, I want to go back to your comments on the transaction market. Can you provide some color on the cap rate for different subsectors that you guys are in? I know you talked about buyers' and sellers' expectations, but I was hoping to maybe understand how much the CapEx that moved in the last few months?

Good morning, Gaurav. This is David. So research is showing that average cap rates for all net lease properties hover around 6.5%, and that's not a very specific number that I'm giving you. That's just a rough estimate of what I've recently read. Most of our assets have been purchased above 7%, and anything in our pipeline, we're looking at that cap rate or higher.

Okay, so that's 6.5% number. That's probably for properties that have higher longer lease term than your target properties, right?

That's right, the research that I've read, that's for all available net lease properties. And so we focus on that subset of properties that have shorter lease durations. So typically, the cap rates are higher for those.

Okay as we think about your acquisition pipeline for the remainder of the year, how should we think about allocation between retail, industrial, and office?

Yes, we are a diversified net lease company. So our pipeline consists of all three asset classes. We're going to go after the best assets that are available for the capital that we have access to at that time. So ultimately, our pipeline consists of all three asset types, and we'll make that determination of which assets to add when it comes to fruition.

Okay. Lastly, on a common dividend, David, your dividend is not covered by AFFO. How should we think about that coverage going forward?

Good morning, Gaurav, and you know, we are covering the dividend as a priority for us. And we're working to be able to do that as soon as possible. But at this stage, we're anticipating we'll be able to cover it with our future acquisitions. So just as any company our size grows, it's imperative, and we'll continue to update the market on that.

Okay, thank you.

This concludes the question-and-answer portion of today's call. I will turn the call back over to Mr. Sobelman for his closing comments.

We realize this is an uncertain time in the global markets, but we remain steadfast to our principles and believe that we are at the threshold of a greater profile. In short, we will remain patient and disciplined as our work is just beginning. And we are focused on creating generational wealth, as our company name implies. We think we have positioned ourselves well to weather the current economic environment and seize the opportunities that may come as a result. Thank you for joining us. Have a great week, and we look forward to speaking with you again next quarter.

Thank you. This does conclude today's conference. You may disconnect your lines at this time.