Good morning, and welcome to the Alpine Income Property Trust Third Quarter Earnings Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to John Albright, President and CEO. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today for the Alpine Income Property Trust third quarter 2020 operating results conference call. I am pleased to have Matt Partridge, our new Chief Financial Officer, joining me this morning. Before we begin, I’ll turn it over to Matt to provide a customary disclosure regarding today’s call. Matt?

Thanks, John. I’d like to remind everyone that many of our comments today are considered forward-looking statements under Federal Securities Law. 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 in our earnings release, which contains reconciliations of non-GAAP financial measures we use on our website at alpinereit.com. With that, I will now turn the call back over to John.

Thanks, Matt. It is an excellent third quarter for Alpine as we work to achieve a 100% contractual base rent collection rate for each of the three months within the quarter. With the Q2 negotiations largely behind us, we were able to refocus on actively growing the company in the third quarter by executing our targeted acquisition strategy of investing in income-producing properties. These properties exhibit strong real estate fundamentals, leading to high-quality tenants. In the third quarter, we invested in 15 properties in five states for $23.9 million at an average weighted going-in cap rate of approximately 6.8%. Notably, 100% of the acquired annualized base rent is from Dollar General and Advance Auto Parts, both investment-grade rated tenants, and the weighted average lease term of the third quarter investment was 13 years at the time of acquisition. In addition to our third quarter acquisition activity, we also sold our Outback Steakhouse in Charlottesville, Virginia, for a price of $5.1 million. This represented a 5.75% cap rate on in-place net operating income, which we believe, when coupled with the going-in cap rate of our acquisitions and their associated investment-grade credit, is highly accretive to our portfolio on a risk-adjusted basis. Year-to-date, we’ve acquired 26 properties for approximately $99.3 million at a weighted average going-in cap rate of 6.9%. We’re particularly excited that our acquisitions this year were comprised primarily of new credits and high-performing sectors. Specifically, through the first nine months of 2020, we selectively invested in five new retail sectors and notably increased our concentration in grocery, convenience store, dollar store, and auto parts sectors, which all provide excellent incremental diversification. These investments have also provided an opportunity to partner with ten new retail tenants, including sector-leading operators such as Walmart, 7-Eleven, and Dollar General, which together make up approximately 18% of our annualized base rent, with Walmart and Dollar General now representing two of our top five tenants. Initially, even though we’ve more than doubled the number of assets in our portfolio through the first three quarters of the year, we’ve maintained an outsized portfolio level of exposure to top-tier markets, as evidenced by nearly two-thirds of our annualized base rents coming from ten of the ULI’s top 30 markets for 2021. As of the end of the third quarter, our portfolio was 100% occupied and consisted of 45 income properties comprised of nearly 1.5 million square feet of rentable space located in 17 states, with all five of our top tenants serving as leaders in their respective industries. As we look forward into the fourth quarter and beyond, there remains considerable uncertainty regarding the underlying economy and its impact on the operational performance of our existing and prospective tenants. However, I’m very happy to say we have received 100% of the contractual base rents for October, and in combination with our previously announced transaction activities in our evolving acquisition pipeline, we have increased our acquisition guidance to $110 million from $105 million, and we’ve increased the midpoint of our previously provided FFO and AFFO guidance. With that, I’ll now turn over the call to Matt to discuss our financial results and balance sheet activities.

Thanks, John. As John referenced, the company experienced excellent rent collection results during the third quarter, collecting 100% of contractual base rents in each of the three months. Thanks to proactive portfolio management and the resulting strong rent collection trends, we reported total revenues of $5.1 million during the quarter. I’ll remind everyone that the 100% collection rate represents rents that were contractually due in each respective month and include the effect of rent deferrals or abatements agreed to prior to the rent payment date. Comparatively, rent collected during the third quarter was on average approximately 5% less per month than what would have been due prior to entering into COVID-19 related amendments. We anticipate 100% repayment of deferred rent by the end of 2021. For the third quarter of 2020, funds from operations were $3 million or $0.35 per share and adjusted funds from operations were $2.9 million or $0.34 per share. As announced during the second quarter, AFFO was previously impacted by $625,000 from the previously mentioned rent deferral agreements. As those rent deferrals are repaid in subsequent periods, we will experience a positive impact on our AFFO during the periods of repayment. For the third quarter of 2020, we received just over $86,000 of scheduled rent deferral repayments, which positively impacted our third quarter AFFO. General and administrative expenses in the third quarter, inclusive of the company’s management fee, totaled $1.1 million, which was down 271 basis points as a percentage of revenue from the second quarter of 2020. We believe this trend will continue as we realize more economies of scale in the execution of our investment strategy. As previously announced, the company paid a $0.20 third quarter cash dividend on September 30 to stockholders of record on September 15. This represented a quarterly payout ratio of 57% of FFO per share and 59% of AFFO per share. As part of our dividend policy, we believe in providing a reliable and consistent dividend to our shareholders. In consideration of the strategy and the underlying growth of the company, our Board of Directors approved and the company declared a $0.22 dividend to be paid on December 31, 2020, to stockholders of record at the close of business on December 15, 2020. This fourth quarter cash dividend represents a 10% increase over the Company’s previous quarterly dividend at an annualized yield of approximately 6.1%. Now turning to the balance sheet. Total debt outstanding as of September 30 was $88.3 million and total cash on hand was $1.9 million. Net debt to total enterprise value at quarter end was approximately 39%, while our fixed charge coverage ratio for the quarter was approximately nine times. As we announced just a few days ago, we expanded our revolving credit facility from $100 million to $150 million with the addition of two new banking relationships. With no debt maturities until 2023, of which there is a one-year extension option that could take that maturity to 2024, and the 50% increase in our revolving credit facility, we’re in a very good liquidity position to drive earnings growth as we execute our growth strategy. With that, I’ll now turn the call back over to John for a summary of the quarter and his closing remarks.

Thanks, Matt. In advance of the Q&A, I’d like to summarize some of the highlights, particularly since we’ve made some meaningful strides operationally in our growth as an organization. As previously noted, we have achieved a 100% rent collection rate for the past four months, including this first month of the fourth quarter. We continue to build on the momentum in the transaction market acquiring only investment-grade tenants during the third quarter, which is going to further strengthen our growing portfolio and create tangible economies of scale. Consistent execution has allowed us to increase our full year guidance and increase the cash dividend for the fourth quarter by 10% quarter-over-quarter to a yield of approximately 6.1%. And with the expansion of our credit facility, we have ample liquidity to execute on our disciplined investment strategy and drive outside per share earnings growth. In summary, I want to thank our shareholders for their continued support and congratulate our team on their successes within the quarter. At this time, we’ll open it up for questions. Operator?

And our first question comes from Barry Oxford of D.A. Davidson. Please go ahead.

Great. Thanks, guys. If you could give me and us on the phone a little more color on your acquisition pipeline, maybe as far as the dollar amount of how much you’ve looked at and where you are as far as maybe getting close to a letter of intent to the extent that you can?

Sure. Thanks, Barry. Look, the acquisition pipeline is pretty strong. We’re in some sort of negotiation for amounts that exceed our guidance. Thinking that some may not fully come into negotiation or something might happen within due diligence. So we’re very comfortable with what we’re seeing in front of us as far as high-quality credits and good locations.

Would you expect to be able to do roughly something close in 2021 for acquisitions that you did in 2020, considering that Q2 was a little light?

Of course, given our track record and what we’ve been able to accomplish so far this year, we’re highly confident that the successes this year, and obviously given the pandemic, can be replicated or even exceeded.

Great, perfect. Appreciate that. Turning to the balance sheet. You guys are in a stellar position by any metrics. But at what point would be the outside range of which you would want to raise debt to, and you can speak to it from any metrics that you want—the fixed income, debt to EBITDA, or debt to market cap—whatever metric you want to look at.

Yes. I’ll let Matt kind of discuss that point.

Great. Thanks, Matt.

I don't want to put a ceiling on it, but during the roadshow, the company told investors that they wanted to run a long-term average somewhere around six times net debt to EBITDA. We’re approaching that level, but obviously we may be comfortable going above and certainly operating below that that’s intended to be a longer-term average. So I think for us, it’s going to depend on the opportunities in front of us.

Great, great. Thanks, guys. That’s all for me.

Thank you.

Thanks.

Our next question will come from Rob Stevenson of Janney. Please go ahead.

Good morning, guys. John, beyond the Outback, what is the level of assets in the portfolio today that you may want to sell over the next few years, and some of those you think might be more attractive to 1031 buyers who might be motivated to pay more and close deals by year-end to provide you with better pricing?

Yes. I mean, thanks for the question. Look, we intentionally took that property out to market because I think there’s a disconnect between our stock price and the implied cap rate and the asset base we have. So I think shareholders probably didn’t appreciate that. You look at casual dining, and certainly we’ve been challenged during this pandemic, but we knew on the ground that there’s still a very strong investor appetite for those types of assets. So we almost put that asset out to demonstrate the strength of the portfolio and the strength of the investor universe. And so that was highly accretive to sell a casual dining sector credit and be able to redeploy that into a higher credit, longer lease investment. So, in a roundabout way, we could certainly do a lot more of that if we wanted to, we don’t have plans to at this point.

Okay. And then, sort of feeding into that and piggybacking off Barry’s question. The guidance implies about $10 million of acquisitions in the fourth quarter. You guys just increased the capacity on the line to give you additional room there. But when you think about the leverage levels that Matt was talking about, how are you thinking about financing the next $50 million of acquisitions? Especially with the stock at $14 and change, do you look at preferreds? Do you target more asset sales? Can you give us a glimpse into the conversations you and the board are having regarding funding the company’s growth over the next few quarters?

Yes. Certainly, there are different opportunities, but we’re certainly not going to leverage this significantly. We don’t have plans to leverage this up with the capacity we have. It’s just nice to have the capacity. If we did see a unique investment opportunity, we certainly could take it down and then do what we just did with the casual dining sales of very low cap rate investments and keep working the portfolio. If the stock was not performing, there are different opportunities for us or different flexible options. But we don’t intend to just do all the leverage and sit back. So we’ll look at the different opportunities as they arise.

Okay. Thanks, guys. Appreciate it.

Thank you.

Our next question comes from Craig Kucera of B. Riley Securities. Please go ahead.

Good morning, guys. And Matt, welcome aboard.

Thanks, Craig.

First of all, I want to talk about the Dollar General properties you acquired this quarter. Can you tell us what was so compelling about acquiring them in the third quarter?

Look, that credit is very strong credit, a very successful operator. That’s a growing business that has performed very well during the pandemic, and it turns into a very necessity-driven credit that we like a lot. If we see more good opportunities with a good lease length, we don’t mind having more of that credit in the company. I wouldn’t expect a lot more of them, but certainly, a great company, and we’re very excited to have it on board.

Okay, great. And can you give us some color on the leases with Dollar General that you executed this quarter? Is there any sort of guarantee or support at the corporate level?

Well, certainly, it’s a corporate credit. So we’re getting into the mother ship. We wouldn’t be buying it if we didn’t get the full credit.

Okay, great. And John, I feel like earlier in the pandemic, given the performance of the office assets versus retail, you had mentioned that you might even look to add to office because it had performed so well. What are your current thoughts today? Are you still thinking that way? Are you more tilted in your pipeline and thoughts towards retail?

Yes. The pipeline is 100% retail at the moment. We do keep looking and are open to office acquisitions; however, the high-quality single-tenant office properties we've looked at are still being priced below our acquisition guidance. So we’re still open to it, but right now the pipeline is retail.

Got it. I want to circle back to the dividend. I’m sure investors appreciated the 10% increase, which I think based on this quarter’s FFO was about a 65% payout of AFFO. How was the board thinking about payout ratios going forward? Is this sort of an initial step toward raising the dividend to a higher level of recurring cash flow? Or is 65% how investors should think about the dividend going forward?

Craig, it’s Matt. In conversations with the board, I think the long-term target is somewhere between 75% and 85% of AFFO. Obviously, we intend to grow the portfolio. So retaining cash flow for that is certainly top of mind, but the increase for Q4 is a step towards that longer-term payout ratio. And as we continue to grow, we’ll assess where the dividend stands.

Okay, great. I want to circle up on Hilton Grand Vacations. I think last week they announced that they’d been laying off a healthy number of people. Had there been any discussions with them regarding downsizing space from you? Any color would be great?

Yes. Thanks for the question. So Hilton Grand Vacations has announced corporate layoffs, and half their properties are timeshare properties. We feel like we’re in a very good position with regards to the two buildings that we have with them in that they had expanded outside of our buildings next door into more expensive office space and shorter lease durations. We’ve already discussed that the plan is to consolidate some of those operations into our buildings, thus mitigating the impact of the layoffs. Our buildings in Orlando are single-storey and they’re the only tenants, allowing them the security and efficiency of being in our space without the need for elevators or interaction with other tenants. The rent we charge them is less than their other occupancy costs.

Got it. And just one more from me. As we stand here in October, you’ve got about 2% of rent that’s being abated or deferred. Can you give us any color on the categories that are still having some trouble with rent adjustments, and what your outlook is heading into 2021?

Yes, Craig. So we’re collecting 100% of existing obligations, but obviously that’s post-deferral agreements. The areas where we’ve received deferral agreements have been in the entertainment space, specifically with the theaters. With those deferrals, we’ve been able to enhance the length of the leases and also secure some income participation rights as part of those agreements. So we feel like we’re in a good spot, especially with all October rents being paid.

Good morning. So Matt, I just wanted to touch back on the 5% that’s sort of from pre-COVID levels that’s either in deferrals or abatements? Just curious, as we look into 2021, what’s the expectation for recovery? Or how much do you expect to recover as we move into 2021?

Yes. So the way the deferral agreements were laid out, there was some slight repayment in Q3, which I talked about in the prepared remarks of $86,000. It’s generally in that same range for Q4, and then it really ramps up in Q1 and Q2 of 2021. We expect all the deferrals to be repaid by the end of 2021.

Okay. And what’s the mix between deferral and abatement in that 500 basis point bucket?

Yes. The abatement piece is depending on the months it’s between 2% and 1%. The abatement was only through the end of this year. After this year, those leases will have concluded with the abatements, but otherwise everything else is deferrals.

Okay. That makes sense. And then, obviously, 100% of the rent is billed and collected for the third quarter. We’re just curious, John, if you have any thoughts on the longer-term risk of potential fallout for those that are already paid rent but might be concerned going forward or what categories might be concerning going forward?

Yes. The ones to really watch are the theaters. We feel like we’re in a good spot with them because, if a—let’s say AMC—goes bankrupt, they’re going to go through a process and look at rejecting and accepting certain leases. We feel like we’re secure because we just came out of COVID negotiations with them, and they extended the lease with us, incorporating percentage rent in addition to our base rent. We are confident about those properties remaining secure, especially since they were performing strongly pre-COVID and are in markets with minimal competition. So we believe our exposure in that area is manageable compared to other more urban theaters, which may face challenges due to higher labor costs and expiring rent that we see as problematic.

Okay. Thanks, guys. That’s all I have.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to John Albright for any closing remarks.

Thank you for joining the call. I look forward to talking to you throughout the quarter.

The conference is now concluded. Thank you for attending today’s presentation, and you may now disconnect.