Good morning, everyone and welcome to the Alpine Income Property Trust Third Quarter 2021 Earnings Conference Call. At this time, I’d like to turn the conference call over to John Albright, President and CEO. Sir, please go ahead.

Good morning, everyone and thank you for joining us today for the Alpine Income Property Trust third quarter 2021 operating results conference call. With me is Matt Partridge, our Chief Financial Officer. Before we begin, 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, and you can find our SEC reports in our earnings release, which contain 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. This was another solid quarter of execution as we found a number of attractive acquisition opportunities in the market and made progress on several notable initiatives. We continued our consistent acquisition pace during the quarter, acquiring $55.4 million of high-quality net lease properties at a weighted average going in cap rate of 6.8%. We closed on a new $80 million term loan with an initial fixed rate of 1.83%, with existing and new banking relationships to give us additional liquidity to fund our investment activities for the balance of 2021 and 2022. And I am excited to announce that we entered into a new store development lease with a well-known national grocer to develop a store on an undeveloped parcel at one of our existing properties in Jacksonville, Florida. Our acquisition activities in the quarter were once again focused on well-located properties that exhibit strong real estate fundamentals and are occupied by high-quality national brands operating in well-performing retail sectors. During the quarter, we acquired 19 properties spread across 12 different states, 6 of which are new to our portfolio. Our new acquisitions include 14 tenants operating in 12 sectors, and we made a concerted effort to increase our exposure to existing high-performing tenants in our portfolio such as 7-Eleven, Walmart, At Home, Hobby Lobby, Advanced Auto Parts, Dollar Tree, and Family Dollar. We also added a number of high-quality tenants, which we think add excellent tenant diversity and credit quality, including notable brands such as O’Reilly Auto Parts, Harbor Freight, Valero, Tractor Supply, and Camping World. Year-to-date, we have acquired 42 net leased properties for nearly $159 million at a weighted average going in cap rate of 7.2% and a weighted average remaining lease term at acquisition of 8 years. Our portfolio continues to be 100% stable, and the properties continue to be 100% occupied. As of the end of the quarter, it consisted of 89 properties totaling 2.7 million square feet with tenants operating in 25 sectors within 28 states. Our top tenants include Wells Fargo, Hilton Grand Vacations, At Home, Hobby Lobby, Dollar General, Walmart, and Walgreens. As we have grown the portfolio, we have been able to meaningfully increase the diversity of our tenants, geographic and sector exposures. Since the beginning of the year, we have nearly doubled the number of properties and the number of tenants in the portfolio. We have now diversified to a point that we no longer have a tenant exposure above 10%, and our largest sector exposures are below 13%. Both of which are trends we expect to continue as we execute on our disposition plans and grow the overall portfolio. Speaking of our disposition efforts, we continue to work towards the sale of our office properties to position the company as 100% retail-focused. We are currently under contract to sell the Hilton Grand Vacations properties, and we are in the process of discussions with interested parties to sell the Wells Fargo property in Hillsboro, Oregon. While we do expect the disposition of these properties to be partially dilutive to our earnings, we anticipate we will have similar metrics regarding our investment grade tenant and credit rated retail exposure following the sale and redeployment of the disposition proceeds. Increased portfolio diversity by replacing these properties with a number of new tenants sector exposures in geographic locations with a better weighted average lease term, given that the office properties have a combined remaining weighted average lease term of approximately 4.5 years. I will also highlight that we sold our Outback Steakhouse in Huntersville, North Carolina during the third quarter for a 5.5% exit cap rate, which we believe serves as a reference point for the quality of our portfolio. With that, I will now turn the call over to Matt to talk about our performance in the quarter, capital markets activities, and increased guidance.

Thanks, John. Total revenues for the third quarter of 2021 increased 60% over the third quarter of 2020 to $8.2 million. General and administrative expenses as a percentage of revenues, which include the management fee of our external managers CTO Realty Growth, decreased by more than 270 basis points when compared to the second quarter of 2021 and by more than 500 basis points when compared year-over-year to the third quarter of 2020, continuing our improving organizational scale. For the third quarter of 2021, both funds from operations and adjusted funds from operations were $4.8 million, or $0.37 per share. FFO and AFFO per share growth in the third quarter of 2021 were 5.7% and 8.8%, respectively, when compared to the third quarter of 2020. Our AFFO in the second quarter was positively impacted by approximately $23,000 from the repayment of deferred rent related to the previously disclosed rent deferral agreements. We only have one tenant making repayments under a previously agreed upon rent deferral agreement related to the COVID-19 pandemic, and these payments are scheduled to occur through the second quarter of 2022. Year-to-date FFO was $1.15 per share and AFFO was $1.18 per share, representing year-over-year per share growth of 34% and 71%, respectively, when compared to the first 9 months of 2020. For the third quarter of 2021, the company paid a cash dividend of $0.255 per share on September 30 to stockholders of record on September 9. This represents a quarterly payout ratio of 69% of FFO per share and AFFO per share, with an annualized yield of approximately 5.4%. Our third quarter dividend marks the fifth dividend increase by the company since its IPO in late 2019, and our fourth consecutive increase, which is a more than 2% increase over our second quarter 2021 quarterly dividend. Year-to-date through the first three quarters of 2021, the company has paid $0.745 per share in cash dividends. These dividends represent a year-to-date cash payout ratio of 65% of FFO per share and 63% of AFFO per share. We anticipate announcing our quarterly cash common stock dividend for the fourth quarter towards the end of November. As John referenced at the beginning of his prepared remarks, we completed a new $80 million term loan on September 30 at an initial interest rate of 1.83%, which we use to reduce the outstanding balance of our revolving unsecured credit facility, extend our debt maturity profile, and bring in three new banking partners. As with our first term loan earlier in the year, this new term loan helps broaden our access to capital and lock in longer-term debt at an attractive rate. The new $80 million unsecured term loan has a term of more than 5 years with a maturity date in January 2027. We now have more than $130 million of liquidity from cash and undrawn revolver capacity to support future acquisitions, which is in addition to the proceeds expected from the office property sales discussed earlier. Given the current and prospective liquidity of the company, we were not active on our ATM equity program during the third quarter. However, as we previously announced, we did issue an additional 55,000 OP units to close out our inaugural OP unit transaction and acquire one remaining property that was part of a 10-property diversified portfolio. The OP unit issuance was completed at $18.85 per share, the same per share value as the previously issued 425,000 OP units. Total debt as of September 30 was $191.5 million, and total cash and restricted cash was $7.3 million. Net debt and total enterprise value at quarter-end was approximately 44%, while our net debt to pro forma EBITDA was approximately 6.9x. Heading towards the end of 2021 and as we prepare for 2022, our balance sheet continues to be well positioned to execute on our acquisition pipeline and support our future operating activities. In consideration of our capital markets activities, third quarter performance, and other assumptions specific to the fourth quarter, we did increase our 2021 full year FFO and AFFO guidance. For the full year of 2021, our FFO guidance is now $1.47 to $1.50 per diluted share, and AFFO guidance is now $1.48 to $1.51 per diluted share. With that, I want to thank our shareholders, banking relationships, and other business partners for their continued support. And I’ll turn the call back over to John for his closing remarks.

Thanks, Matt. We are about a month away from our 2-year anniversary as a public company, and I am excited about the progress we have made in that relatively short period of time. We built a high-quality portfolio, delivered consistent execution, and meaningfully grown our dividend during these first 2 years. While we have a lot of work ahead of us, I am confident we will be able to continue to execute our disciplined investment strategy and drive further value for our shareholders. Thank you all for your time and support. At this time, we will open it up for questions. Operator?

Our first question today comes from Rob Stevenson from Janney. Please go ahead with your question.

Hi, good morning guys. John, how should we be thinking about the timing of the sale of the office assets? Is the Hilton, given that it’s under contract, likely to close at the end of the fourth quarter, or are these both likely to sort of drift into the first quarter?

Yes, so thanks, Rob. The Hilton definitely will be scheduled to close before the end of the year under the contract terms. Wells Fargo may be one that could close at the end of the year but could also drift into the first part of next year. Wells is a little bit more complicated because there is redevelopment potential in different sectors. And so people are really digging in on the redevelopment side. So, everything is fairly straightforward about the property and the lease, but everyone is looking at the redevelopment potential.

Okay. And then I guess on that same topic, Matt, given that there is going to wind up being some dilution in your guidance, what are you assuming regarding the Hilton closing? Is that likely to happen at the tail end of the fourth quarter, so that doesn’t really have any material impact on the fourth quarter, or is it likely to be early December? How is that sort of factored into your guidance?

Yes. Our guidance contemplates a late November or early December close.

Okay.

So, we’ll get about 2 out of the 3 months of cash flow off of it.

And then basically, are you assuming that you are going to get almost all of the cash flow off of Wells?

Correct.

Okay. In terms of the acquisition pipeline that you are looking at today, how big is that? And are there any meaningful tenant exposures in that pipeline, anyone that would immediately jump into your top 10, or whether exposure goes from de minimis at 1% or 2% up to 10% or anything like that?

No. There is nothing lumpy about the pipeline. The pipeline is fairly strong. We want to be proactive because, in the whole real estate industry, there is a crunch for year-end closings because of the fear regarding federal 1031 exchange taxes. That’s causing an incredible amount of transaction volume cramming into the end of the year. So we are trying to get in front of that wave as much as we can. But as far as the composition, there is nothing abnormal about what you have been seeing. As we add new credits and diversify more, it will just be more of the same.

Okay. So assuming that Wells and Hilton are sold at year-end, then At Home and Hobby Lobby would jump up to be your top two tenants at approximately around 8% to 8.5% of annualized base rent. Am I thinking about that correctly?

As we stand right now, but I wouldn’t be surprised if something else jumped up, if we added on to another credit that just because we are so small, those things can move around fairly easily.

Okay. And then last one for me, John, you guys increased the dividend by $0.005 or 2%. How much did the pending sale of the office assets and the dilution there influence the increase? In other words, if you weren’t going to have the dilution from the office sales on a temporary basis, would this dividend increase likely have been higher, or is the Board thinking that given where you are today and the payout ratios, that a 2% increase is how we should be thinking about things going forward regarding the dividend?

Yes. I think you can see that incrementally moving it up. Given our low payout ratio, of course, there will be that natural pressure to go up. But that’s the way I would think about it—not anything dramatically changing from the office buildings side.

Okay. Thank you, guys.

Thank you.

Our next question comes from Wes Golladay from Baird. Please go ahead with your question.

Hi, good morning guys. Can you talk about if there are any other personal development opportunities in the portfolio? Is this particular development this quarter related to the old time pottery?

Yes. It is related to old time pottery. And look, I am sure there are other opportunities in the portfolio that exist. After COVID, we became a little bit more forward-thinking on that particular asset and engaged brokers, and that’s the outcome. Given that everything else in our portfolio is obviously stable now, there is not any redevelopment analysis we are doing right now. There might be other opportunities, and that’s how come our focus has been on good real estate. We love it when there is an opportunity to buy large parcels that have one store where there is optionality in the future, but not right now.

Got it. And then when you look at the Wells Fargo potential redevelopment, is that maybe an outparcel development, or is that redeveloping the existing asset?

No, it would be the entire site. It’s a large site in Hillsborough. Hillsborough is a very strong market, especially with COVID, as everyone is leaving Portland and coming into this market. You have Intel with the Fab 5 plant and Nike’s headquarters. So, not only from the residential side and the intensive multifamily side, but you are seeing data centers. Hillsborough is one of the markets in the data center world that has power supply right now, while other data center markets face limited power supply. You are seeing all kinds of different uses of potential.

Got it. And we are trying to calibrate our models for next year. Can you help us in any way on the expected cap rate for the office assets total? You may be under contract with one that you can’t disclose. But if we were to blend the two, how should we think about modeling the cap rate for dispositions of the office?

It’s somewhat consistent with how we talked about this when we started the process. The cap rates are kind of in the 7s, whether it’s kind of low, mid, or even mid-high. It depends, but the one thing to think about is we are retaining the property a little longer and have a lot of cash flow coming from it. So, I would say mid-7s would be a good measure to consider the properties.

Got it. Thanks a lot, guys.

Our next question comes from RJ Milligan from Raymond James. Please go ahead with your question.

Hey, good morning, guys. So, cap rates have ticked down a little bit in the quarter. Obviously, we have been hearing that there has just been compression across this sector. I am just wondering if you could give us sort of an update as to what you are seeing in the market more broadly, and then expectations for activity in the fourth quarter as we look into ‘22. In the fourth quarter, do you expect the normal rush that we have seen historically as sellers look to get transactions done before the end of the year?

Yes. There is definitely a lot of capital pursuing these acquisitions. You can assume that’s been a contributing factor to the lower cap rates. That would obviously mean the portfolio we have demonstrated by selling an Outback in North Carolina at a 5.5% cap. We would never have been a buyer of that at a 5.5% cap. We are also seeing the opportunity to sell certain properties like that. But I would say that we are pleasantly surprised that we are able to find opportunities with good quality tenants and good locations without giving up too much on the cap rate side. So, I wouldn’t say that, after this last quarter, cap rates are going to move down from what we just blended to. I think we are seeing something somewhat consistent. To answer your question about the volume on the acquisition side, if you are a seller of assets, it’s almost getting too late to have a closing by the end of the year, given the infrastructure on title companies, surveys, and environmental property condition reports. So, I think you are going to see a lot of things move into the first quarter, just as an industry observation.

And then so already for the year, I think close to $160 million of acquisitions, which should put you over $200 million for the year. Is there any reason why that can’t be replicated next year? Are there concerns about cap rate compression, or just I know you can’t give guidance, but I am just trying to think of what were the components this year that may not allow you to do the same volumes in ‘22?

I think we are pretty bullish about next year. I think the pressure on the competition will probably relax a bit after the New Year. I am confident we will be able to do the same or potentially even more volume next year.

Okay. My last question is for Matt on the leverage levels ending the quarter at 6.9x. Can you just talk about how you expect that to trend in the fourth quarter as we move into ‘22?

Yes. We have been consistent in saying over the long run we want to be closer to that 6x net debt to EBITDA level from a leverage perspective. We ended at 6.9x, which we are comfortable with. The fixed charge coverage ratio is 7x, on a run rate it’s about 6x. So, there is really no pressure from a cash flow perspective. As we have talked about, leverage will move around as we leverage up and raise capital and then bring it back down.

Okay, great. Thanks guys.

Thank you.

And our next question comes from Michael Gorman from BTIG. Please go ahead with your question.

Yes. Thanks. Good morning, guys. A lot of my questions have been answered. But John, I was wondering if you could just talk about, I think you have mentioned in the past, seeing some opportunities in the acquisition markets, taking on some shorter lease durations and being comfortable with that. I am just wondering if you are seeing any shifts with some of the inflation talk, if there is more competition at that shorter end of the lease duration, where resets could come sooner rather than later. Is there more competition in that property type?

Yes. There is definitely more competition there. I mean that definitely seems to be the sweet spot in which you want to be with inflation and all those pressures. You don’t want to tie yourself to long-term tenants when you have the opportunity for them to come up for renewal. We have been seeing this across the real estate industry. As you know very well, you can’t build these properties for the basis we have been buying them. Tenants over the years have managed to obtain favorable rental rates that can’t be replicated. The stickiness of the tenants to the properties, with inflation factors and increased construction costs and labor, is just more enhanced. So, that is just definitely the sweet spot. A lot of buyers are still small firms with leverage that really can’t compete with shorter durations because they require efficient leverage. So, there is definitely more competition, but it remains a good opportunity.

Okay, great. And then maybe sort of a similar vein, when we think about inflation pressures and maybe some of the shortages we have heard about, how did you approach the build-to-suit opportunity in Jacksonville in terms of underwriting it and laying out the contracts with the tenants? How has that structured when you think about building in this type of environment?

Yes. The structure is such that if we don’t get the building costs in line, we have guaranteed maximum cost contracts, and we can get out of the deal if needed. There is protection there. We wouldn’t bind ourselves to a lease and delivery without ensuring that the cost equation is well defined.

Okay, great. And then just the last one for me. Matt, on the capital structure side, obviously, you mentioned with the asset sales, a lot of equity coming into the balance sheet over the next couple of quarters. How do you balance the funds coming in and the need to redeploy that, while also tapping the equity markets and leveraging the associated benefits that come from increasing the market cap and average daily volume? How should we think about your approach to the equity markets as you go through these asset sales?

Yes. In general, we want to grow the equity market cap and create more liquidity for the shareholders and more flow. I think everybody would like to see that. We want to be opportunistic with the stock. We are very sensitive to making sure that we are good stewards of capital for existing shareholders while still trying to balance bringing in new shareholders and increasing demand for the stock. We try to strike that balance. Obviously, we have the ATM, which helps us be efficient in accessing those equity capital markets on a match funding basis. So, I would say that’s generally how we think about it. We are going to try to be opportunistic and balance both constituencies on the equity side.

Okay, great. Thanks guys.

Thank you.

Yes. Thanks. Good morning, guys. I want to talk about the next six months or so. Can you talk about the pipeline that you are evaluating and sort of where you are seeing the best risk-adjusted returns from a category perspective?

It’s a good question. I mean, I think we are seeing really good risk-adjusted returns based on a little bit of that shorter duration, where we are picking strong real estate locations. I would say that we have bought even in unfavored categories that we wouldn’t mind being exposed to. So, it’s a little bit harder to just say one category; we see better return opportunities in risk-adjusted terms. I think it’s early. We aim to ensure we are getting good real estate, and whether the shorter lease duration is really driving the opportunities for us. All the tenants seem to be doing very well, and if there is a category that isn’t performing well, we would only be involved to gain the real estate, similar to the old time pottery scenario.

Got it. I guess then does the concept of buying investment grade and maybe paying up for that a little bit more become less important when the economy is strengthening and you are looking a little bit more for real estate and are happy if a tenant leaves after a couple of years?

We will still invest in the investment-grade side to keep that ratio fairly decent because it’s important for portfolio composition.

Okay, fair enough. And one more for me, just going back to the development in Jacksonville. Can you give us some metrics or thoughts around how meaningful that might be from an investment or cash flow perspective once the properties are completed?

Hey, Craig, this is Matt. We have disclosed that it’s about a 23,000 square foot building, and it’s a grocery store. You can assign a per square foot number there and triangulate to an overall value. Expect us to target some spread above and beyond where it would trade in the market, obviously, because we are taking the development risk. So, this should be pretty accretive to overall earnings on a run-rate basis once the build is completed.

Okay, I appreciate it. Thanks.

Thank you.

Thanks.

Ladies and gentlemen, at this time, I am showing no additional questions. I would like to turn the floor back over to the management team for any closing remarks.

Thank you for joining us. I look forward to speaking to you during the quarter.

And ladies and gentlemen, with that, we will conclude today’s conference call. Thank you for joining. You may now disconnect your lines.