Good morning, and welcome to the Alpine Income Property Trust Fourth Quarter and Full Year 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.

Good morning, everyone and thank you for joining us today for the Alpine Income Property Trust fourth quarter and yearend 2020 operating results conference call. With me is Matt Partridge, our new Chief Financial Officer. Before we began, I’ll turn it over to Matt to provide the customary disclosures 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. In our first full operating year, 2020 was filled with unprecedented challenges and a number of notable achievements for us here at PINE. We had a significant fourth quarter, capping off a very strong first year despite the challenged macro environment, highlighted by outstanding collections, strong dividend growth and beating our full year acquisition guidance. In the fourth quarter, we invested in three properties in Texas, Arizona and Washington State for $17.4 million at a weighted average cap rate of 7%. For the second quarter in a row, we collected 100% of our required rent from investment-grade tenants where we continue to add exposure to Dollar General and Walgreens while also adding Kohl's to our portfolio of high-quality tenants. The weighted average lease term of our fourth quarter investments was nearly 10 years at the time of acquisition. For the full-year 2020, we acquired 29 properties for $116.6 million at a weighted average cap rate of 6.9%, performing towards the top end of our cap rate guidance, exceeding our acquisition volume guidance. Taking a step back and looking at the acquisitions we made throughout the year, we were able to invest in a mix of industry-leading tenants and high-quality real estate. This performance throughout the pandemic demonstrated the attractiveness and long-term viability of operational success at the various locations. We added exposure to 10 sectors in 2020 including grocery, convenience store, dollar store, automotive parts, consumer electronics, home furnishings, entertainment, pharmacy, and general merchandising, with 76% of acquired annualized base rent focused on the better-performing grocery, general merchandise, and dollar store sectors. Over 60% of the rents acquired during 2020 was concentrated among investment-grade rated tenants including best-in-class operators such as Dollar General, Walmart, 7-Eleven, Kohl's and Walgreens. Of the 28% of acquired rents associated with non-rated tenants, 61% was related to Hobby Lobby, which maintained a strong credit profile and sector-leading operations in spite of the challenges many tenants have faced during the pandemic.

Thanks, John. As John referenced, the quality of our assets and stability of our tenants resulted in excellent collections during the fourth quarter of 2020 and for the first two months of 2021, where we collected 100% of contractual base rents for each month. Total revenues for the fourth quarter of 2020 were $5.4 million and total revenues for the full year 2020 were $19.2 million. The calculation of the percentage contractual base rent includes the required repayments of previously deferred rent, and I'll remind everyone that the 100% collection rate represents rents that were contractually due in each respective month and include the positive and negative effects of rent deferrals or abatements agreed to prior to the rent payment date.

Thanks, Matt. As evidenced by the execution of our investment strategy since the IPO, strong portfolio performance in 2021 guidance, we're excited about our accomplishments and looking forward to what the future holds for Alpine. I want to thank our shareholders for their continued support and congratulate our team on a terrific year. At this time, we'll open it up for questions. Operator?

We'll now begin the question-and-answer session. The first question comes from Barry Oxford of D.A. Davidson. Please go ahead.

John, if you could give me a little color on the acquisition pipeline as it relates to the type of tenants that you're currently looking at right now. I know you don't want to mention a specific tenant, but if you can give me the type of tenants that are currently in that pipeline?

The pipeline includes various amounts of tenants who we don't presently have in ownership. So it would be a range of well-known tenants with substantial operations. So I don't want to probably go too much into categories, but whether the companies are dominant in their sector or the real estate that we're looking at is strong and the store operations are effective, we feel very confident that even if this operator is slightly less involved in the future, the real estate will be strong for another operator. So it's a little bit of a mix, but the good news is it's a mix of tenants that we don't presently own.

When you guys are not competing for these acquisitions, is the environment more competitive now than it was previously? What are you seeing, and are there any different types of buyers showing up at the table than what you had typically seen?

Yeah, I'd say that for the highly favored type of 1031 tenant properties, there's a lot of competition and cap rates compressing. Whether it's a grocery store with 20 years left or something similar, you're going to see unusually low cap rates than traditional. So there is a flight to quality and strength and durability, but what we're looking for we're finding are pockets with good attractions as part of various opportunities where the real estate is very strong, a tenant may have renewed but it's simply too large for the mom-and-pop 1031 capital. It's a lot of one-off type transactions where we can focus quickly and execute before it gets too competitive.

Lastly, John, you touched on the ground lease and that you wanted to explore that area more. Can you give me a sense of how deep that market is and maybe how much volume you're looking at right now? The ground lease sector is such a favored one. We want to highlight that we own these ground leases in our portfolio and we're looking at acquisitions with ground leases, but it’s not an unusual structure for us to execute, whether it's an origination or acquisition. So you're going to see us highlighting it more in the future.

The next question comes from Rob Stevenson of Janney. Please go ahead.

Matt, the guidance, what level of acquisitions beyond the $4.5 million that you’ve done thus far in the first quarter is it based on?

Yeah Rob, obviously there are a lot of assumptions in the guidance and given the size of the company and the fluid nature of a lot of those, timing is probably the most impactful. We’re not going to disclose specifics, but you can expect us to be pretty active this year on the acquisition front.

Okay. Another question would be about how you’re thinking about capital raising at this early stage of 2021 given your cash position, and debt capacity, but your stock price is up. How do you view the equity side of the capital equation?

Yes, obviously it has performed very well over the last 30 days, with yesterday being one of the best days for the company from a stock price performance standpoint. We're focused on driving risk-adjusted returns. To John's point on the acquisitions pipeline, we have many good opportunities we’re looking at. So we're trying to find high-quality opportunities that add value to the portfolio, and then we will evaluate the right capital to fund those transactions as they materialize.

How much exposure to Dollar General do you feel comfortable with given your recent acquisitions? Is there an upper limit you and the board feel comfortable with before needing to diversify?

Yeah, you can definitely say we've acquired a lot of Dollar General lately. However, as we grow the company, diversification is key. We certainly like that operator; they're robust in credit quality and performance. We have long leases, and we appreciate the exposure. But over the upcoming year, you will likely see that exposure decrease as we expand the portfolio with other credits.

How much have you and the board held back on dividend growth to be prudent regarding COVID and the market environment, versus how aggressive dividend growth would have been absent these factors?

Look, obviously there is room, as you can see from the payout ratio, for more growth, but we're just being conservative in our approach. Certainly, as we progress, it will inch upward given our requirement to pay out as a REIT. We're not looking to increase dramatically or pull it forward; it'll be methodical.

Matt, where are you regarding the new dividend level versus taxable net earnings payout?

Yes, so at the end of the year, we were just over 100% taxable income. Obviously, we weren’t fully invested throughout 2020; we had to grow a little bit for the dividend. Expect to target around 100% taxable income. Free cash flow is our most efficient form of equity, and with existing guidance, our payout ratio is quite attractive right now.

The next question comes from Michael Gorman of BTIG. Please go ahead.

Thanks. If I can follow up on the dividend, you mentioned free cash flow as a source of equity. As you consider the payout ratio, you definitely have room, but how do you balance returning cash flow to shareholders versus having that source of equity to fund your growth in 2021? How do you strike that balance?

Yes, it’s a good question, Michael. The board looks at it quarterly. We have our projections for the year and beyond, and we try to balance growth with the payout ratios we discussed. Providing a consistent and predictable dividend is key for shareholders, but managing debt and dividends given our size and growth patterns is also essential for the board.

Regarding your market activity in 2020, have you seen any cap rate movements or arbitrage between markets due to what happened in 2020? Have you noticed cap rates decrease in your target markets compared to coastal markets?

Yes, you're not seeing significant cap rate improvement, but there are more buyers. Investors have shifted their focus from the Northeast or California; those California investors are now looking at Arizona and Texas, and so forth. So more buyers are present, but cap rates aren't showing as much compression.

You mentioned the unlocking of the ground lease. What were the considerations on the other side during your conversations with the location regarding giving up that out parcel?

They went through bankruptcy, and as a result of their lease default, we had the chance to terminate them. The site they had is very attractive, paying very low rent on a large parcel. By allowing them to return to the lease, we got the out parcel approval, which enables us to execute on ground leases or sales, with several offers already on the table for a combination of both. This highlights the strength of the location and the opportunities available to us.

Lastly, Matt, have you made any use of the ATM on a year-to-date basis looking at what’s happened to the stock price?

No, we haven’t used the ATM year-to-date.

The next question comes from Wes Golladay of Robert. Please go ahead.

Did you mention how much benefit you anticipate from the scheduled repayments this year from the deferred rent?

Hey Wes, no, that's a good question. In reviewing the 2020 financials, we have a specific line item for COVID deferrals and repayments, which had a net impact of $338,000 for 2020. We expect the impact for 2021 to be around $400,000 of repayments, which translates to approximately $0.05 upside on the current share count for AFFO on a relatively basis.

Can you talk about the long-term plans with the balance sheet? I realize timing will likely affect the numbers, but overall, would you consider the bank loan market, and what rate could you borrow at?

Currently, we have over $40 million of availability on our facility. In the near term, you can expect us to likely term out through banking relationships as we continue to grow the outstandings on the facility. We'll stagger out the maturities and we'll see how other capital sources materialize. For the foreseeable future, the strategy will involve growing our banking relationships and the bank group while managing balances.

In terms of acquisitions, is there anything outside of equity funding for the company? With the equity price rebounding, could deal flow or company resources become a constraint?

We're in good shape. We have a strong pipeline in front of us, and it's all about execution. Our team is well structured. We grew our team last year, and everything is in good shape, focusing on successfully executing some acquisitions in the first quarter and seeing how things progress.

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

Thanks for the insights on deferred rent. Will that be weighted more towards the first half of 2021? I think that was the expectation last quarter, or does the activity in the fourth quarter make it more distributed throughout 2021?

That's a really good question, Craig. It will be weighted more towards the first and second quarter. Expect about half in the first quarter, and then a more steady pace throughout the rest of the year.

Regarding your two large office assets that performed well during COVID, are you focusing primarily on retail, or are there any office assets you're considering?

It's 100% retail. There are no office assets in the pipeline; we are mainly focused on retail.

As your company grows, could the office assets become sources of additional capital to transition more towards a pure retail focus, or are they better long-term holds?

It could be an opportunity to become a pure retail player. We know the values of those properties, so we have to ensure the values are fully recognized by buyers before we sell. This won’t happen soon but could be a possibility in the future when the macro market stabilizes.

Just to circle back to capital, I know you still have room on your credit line at $40 million. Is there an existing accordion feature available if necessary?

Yes, when we expanded the facility in the fourth quarter, we also expanded the accordion to allow it to grow to $200 million with additional commitments from the lender group.

And our next question comes from RJ Milligan of Raymond James. Please go ahead.

Most of my questions have been answered, but I'm curious about the captive pipeline through CGO. How much do you expect to become available through CTO this year, and how much could potentially source from that revenue?

There are attractive assets at CTO, and as CTO continues to divest these single-tenant properties, we believe there will still be some opportunities for Alpine this year. Thank you very much for attending the conference call.

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