Good day, and welcome to the Alpine Income Property Trust First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would 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 first quarter 2021 operating results conference call. With me is Matt Partridge, our 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.

Thanks, Matt. I am pleased to report a solid start to the year with strong investment activity in the first quarter, acquiring five properties for nearly $22 million and entering into our first transaction agreements with CTO since our IPO to acquire seven single tenant net lease properties for $56 million. Our strong start also saw us continue our trend of collecting 100% of our contractual base rents and the continued growth of our quarterly dividend, which we increased for the third quarter in a row with our Q2 dividend announcement earlier this week. More specifically, in relation to our acquisitions activity, we invested in five properties in Texas, Ohio, and Mexico for $21.9 million and a weighted average cap rate of 8.2%, and with a weighted average remaining lease term of 9.2 years at the time of acquisitions. Our acquisitions were a combination of increasing exposure to existing well-performing credits, such as At Home and Dollar General, as well as adding a few new names to our tenant roster such as sports and warehouse. As we went through our underwriting process for each property, our due diligence suggests very strong tenant operations when compared within the broader market and throughout the existing chains nationally at The Ohio New Mexico properties. We believe this implied tenant strength combined with their locations, along highly trafficked retail thoroughfares, solid demographics, and our ability to acquire at a reasonable cost basis and rent basis, present very attractive risk-adjusted opportunities for us to strategically grow our portfolio. As of the end of the quarter, our growing portfolio was 100% occupied, consisting of 53 properties in 19 states, totaling 1.8 million square feet with top tenants that included Wells Fargo, Hilton Grand Vacations, Hobby Lobby, Dollar General, At Home, Walmart, and Walgreens. We are very confident in the quality of our assets, as our two top tenants Wells Fargo and Hilton Grand Vacations occupy. However, as we announced in yesterday's press release, we're going to explore the sale of these office properties as we migrate towards a 100% retail-focused portfolio. We have a robust pipeline, and the proceeds from these potential sales would be redeployed into retail acquisitions, further growing our high-quality retail portfolio and simplifying the overall investment strategy. We look forward to providing updates on this process as we head into the summer and start receiving market feedback.

Thanks, John. I'll start by highlighting our strong portfolio performance in the first quarter and into the second quarter, where we collected 100% of contractual base rents for each of the first four months of the year. We're no longer experiencing any of the effects of deferred rent as the rent deferrals we previously agreed to have all run their course. Our contractual base rents and the associated collection statistics do include repayments of previously deferred rents. While we reported 100% collected for each of the four months, I'm pleased to say we've had certain circumstances where we've had tenants pay for their deferred rents earlier than anticipated or required. Total revenues for the first quarter of 2021 were $5.9 million, a 41% increase over the first quarter of 2020, and our general and administrative expenses, which include our management fee, decreased by 300 basis points from the fourth quarter of 2020, and more than 1300 basis points when compared year-over-year to the first quarter of 2020 reflecting our quickly improving scale. The first quarter of 2021 funds from operations were $3.7 million or $0.42 per share, and adjusted funds from operations were $3.9 million or $0.44 per share. FFO and AFFO per share growth in the first quarter of 2021 was 91% and 120% respectively, when compared to the first quarter of 2020, again reflecting an increasing scale of the platform. Our AFFO in the first quarter was positively impacted by approximately $271,000 from the repayment of deferrals related to the previously mentioned rent deferral agreements. We do expect to experience a continued positive impact to our AFFO in future periods of 2021 related to the scheduled repayments and previously deferred rent, although the first quarter of 2021 represents the largest quarter of repayments. For the first quarter of 2021, the company paid a cash dividend of $0.24 per share on March 31 to stockholders of record on March 22.

Thanks, Matt. We're very excited about the momentum we have coming out of the first quarter where we delivered triple-digit AFFO growth, our third consecutive increase to our quarterly dividend, demonstrated expanded access to the capital markets, and have a strong pipeline that will continue to diversify our high-quality portfolio. I want to thank our shareholders for their continued support and congratulate our team on all their accomplishments. At this time, we'll open it up for questions. Operator?

We'll now begin the question-and-answer session. Our first question will come from Michael Gorman with BTIG. Please go ahead.

Yes, thanks. Good morning, guys. John, I wonder if we could just spend another minute talking about the office portfolio and what caused the change there as you think about the assets, whether it's just you're seeing better opportunities on the retail side, if you saw inbound interest in the assets, kind of what brought on the discussion about the office portfolio?

Sure. I think as you know, during the pandemic, the office assets did terrific and were a strong portfolio contribution. But it's become very apparent that investors view the office as a bit of a distraction. We get a lot of questions about the office and even though we're very comfortable with them, we think that selling them and using the capital to expand in retail and becoming 100% retail should be a very good contribution to the company and should help us narrow that multiple discount against the 100% retail peers in the net lease space. So, even though we're comfortable with them, and they've done very well, we want to really kind of become a pure retail platform and that to become less of a distraction to investors.

Now, great, that makes sense. And you all have been very disciplined with your capital raising. And I noticed that your discussion of the sale process maybe over the summer sort of lines up with one of the CTO transactions. Should we assume that you're going to run these in parallel? Where you're going to try to match fund the acquisition pipeline with the office sales? Or should we expect any kind of potential short-term dilution from the sale process?

I mean I think, look, we'd love things to work out perfectly, but we're not going to try to match everything up to be perfect. So there may be some sort of lag between a sale and acquisitions. But given the robust pipeline, I assume it'll be fairly streamlined as far as disposition and then acquisitions quickly thereafter.

Great. And then one last one from me on the retail side. Now that we're more than a year into it, obviously, the portfolio is in great shape, as you're looking at either potential acquisitions or just industries in general, are you seeing any conversations about longer-term effects? In some of the tenant categories from the pandemic, that may change the way you think about those retail categories as a potential target going forward?

Yes, so it made us obviously quite interested in what the pandemic has done across the board, but, most of our credits have actually improved. If you look at our latest acquisition on At Home or Dollar General, I wish we had bought At Home stock and not the real estate. At Home is just thriving as a category, and Dollar General, we're fortunate we were able to buy what we could buy, because the cap rates have compressed quite dramatically in the last couple of months. So, for the most part, all of our categories have been strengthened during the pandemic, and balance sheets are better, and so forth.

Great, thanks, guys. Appreciate it.

Thank you.

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

Good morning, guys. John, what's the rough book value of the office assets from the IPO?

I’ll let Matt handle that one?

Yes. Rob, the book value is pretty attractive. It's in the $60 million range. I don't have the exact numbers in front of me, but it's pretty attractive in terms of where market is and where we think market is today versus book value.

Okay, just trying to figure out what type of obviously the market proceeds, if you were to sell would wind up being an access to that. So just trying to figure out what a source of funds would be? And then if you exit the office space within Pine, does that open additional opportunities for CTO to acquire triple net office? Or is that within that company? Still not an asset class that you're going to move forward with?

Yes, we wouldn't be targeting net lease office as much, just kind of keep clear, defined lines.

Okay. And then after the transaction that you've announced, how many assets are there left at CTO, that Pine would have a natural fit for strong interest in acquiring?

Well, the ones we announced are definitely the low-hanging fruit. For Alpine, there are a couple of others as CTO. But they may be below kind of the investment threshold as far as cap rates for Alpine. So I went, I went to think, when I think of it as having a lot of shadow pipeline as CTO, but there are a couple.

Okay. And then how are you feeling about movie theaters going forward, presumably, as the big movies start to roll out? Vaccinations continue, and the operators would get back closer to normal operations level? Do you buy well-located assets at a discount to pre-pandemic prices over the next six months into that? Do you look to sell what you own when the price has recovered? Do you hold tight and maybe make a decision in a year or so when things really return to normal? How are you guys thinking about, not only the movie theaters that you have, but also whether or not your appetite for acquiring or disposing of them in the future?

Yes, we're not looking for new acquisitions in the theater space. I think the only thing that I could see us doing is maybe seeing an opportunity to buy a ground lease under well-located land, maybe something that we would view. But we haven't seen anything like that lately. With regards to what we have, obviously, we're comfortable with what we have, but probably would exit when the opportunity comes about. So that's kind of how we're viewing the world.

Okay. All right. And then, from the standpoint, Matt, of maintaining the guidance, if you just basically do, this quarter's level going forward, hold out all things static or whatever, the number is basically almost at the top end of your guidance range. I mean, how much of a dilution are you thinking might wind up happening in the near term, from trading out of office assets into the retail assets? Or as a capital raise what's the conservatism? Why guidance didn't move up, given the strong first quarter results?

Good question. So obviously, like we talked about in the last call, there's a lot of assumptions that go into the guidance, it's somewhat of a fluid set of assumptions, especially given the size. So I can't speak exactly to what the dilution would be on the office assets, because we're pretty early in the process in terms of pricing. And timing obviously has a material impact to that. We also have some capital assumptions in our models that went into guidance. So the timing of all of those, the price of where we raise capital, all has a significant influence on how guidance is impacted, which is why we chose to keep it where it was set last quarter, given the strength of the first quarter.

Okay, thanks, guys. Appreciate that.

Thanks, Rob.

Our next question will come from Wes Golladay with Baird. Please go ahead.

Yes, good morning, guys. I want to look at the potential office sales, is there anything you can do ahead of time, such as extend leases to enhance the value?

We could, but to be realistic, the leases are long enough that that's not where the tenants head is right now. So we haven't taken that approach. We've made the tenants aware, obviously, of the process. So that could come about but that's not something we're just because there's enough length on the leases that really that's not in the queue for the tenants to really consider at this point, as they really deal with more near-term lease issues in their portfolio.

Got it. And for this quarter's acquisition that you calculated north of an 8%? And can you talk about what drove that cap rate above 8%? And how much competition you face for the assets?

Yes, I think, look, we're very happy to find the assets we found and at the pricing, some of the assets we followed, even pre-pandemic. When we saw how well, like, for instance, sportsman did during the pandemic and came out a whole lot stronger, now being merged into Cabela's Bass Pro, and it's right next to Costco. So we were very fast to kind of go back and pursue that acquisition. At Home performed very well. When we saw that opportunity, we were quick to act. And we hope to see more. We do have a strong portfolio or pipeline where we're seeing good activity.

And I guess if we were to look at that end of that pipeline right now, is it more of the similar cap rates or more like last year's cap rates around the 7% range?

Yes, more like last year? I mean, I wouldn't expect a lot of 8%, but hope to find some more.

Got it. Thanks for taking the questions.

Our next question will come from RJ Milligan with Raymond James. Please go ahead.

Hey, good morning, guys. Just curious for the office assets in terms of what you're thinking in terms of pricing on a cap rate basis and whether or not you expect to be able to recycle that capital creatively.

Yes, I think it's a little too early to kind of give that sort of guidance. We're comfortable where we expect the property to transition. As Matt said, it still looks very favorable, definitely on a book value basis to shareholders. I would say that if there is a kind of cap rate dilution, I'm sure we'll pick it up on lease length and being in pure retail. So anyway, we'll kind of give a little bit further guidance when we're a little bit further down the road.

Okay, that was all I had. Thanks guys.

Our next question will come from Craig Kucera with B. Riley. Please go ahead.

Hey, good morning, guys. I may have missed this, but what was the size of the acquisition pipeline you're looking at outside of the assets coming over from CTO over the next quarter or so?

Look, we have, call it $100 million to $200 million in the pipeline of things that we're actively pursuing. I know that's kind of a wide range, but some are closer, as far as discussions and some are more in competition mode.

Okay, got it. And I feel like last quarter, you had a renegotiation with old time pottery in Jacksonville and got an out parcel back and were going to try to either sell that or maybe get a ground lease. Is there any update on that?

Yes, I wish I had about 100 of those because we were having a high-class problem as far as the dialogue with regards to that property, so just hang tight, and hopefully, next quarter, we'll have some news.

Okay, thanks. That's it for me.

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 participating on the call, and we look forward to talking to you in the next couple of weeks.

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