Good day and thank you for standing by. Welcome to the Alpine Income Property Trust First Quarter 2022 Earnings Call. Please be advised today’s conference may be recorded. I'd now like to hand the conference over to your host today, Matt Partridge, Senior Vice President, Chief Financial Officer and Treasurer. Please go ahead.

Good morning, everyone. And thank you for joining us today for the Alpine Income Property Trust first quarter 2022 operating results conference call. With me today is our CEO and President, John Albright. Before we begin, 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 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. And good morning, everyone. We have had an eventful start to the year, acquiring 16 properties during the first quarter of 2022 for just over $65 million, with a weighted average cap rate of 6.9%. Most recently, we sold our last remaining office property in Hillsboro, Oregon. This office sale completes our strategic shift to a 100% retail portfolio, which now positions Walgreens as our largest tenant. The bulk of our acquisition volume was concentrated in a nine-property Walgreens and CVS occupied pharmacy portfolio, purchased via a reverse 1031 exchange in anticipation of the office property sale. This portfolio allowed us to maintain the investment grade credit exposure we were losing with the Wells Fargo sale, while also improving geographic diversity and more than doubling the remaining lease term of the sole property. In total, our 16 newly acquired properties are located in 12 states, have a weighted average lease term of nine years, and included seven different tenants operating in the pharmacy, grocery, auto parts, dollar stores, specialty retail, and convenience store sectors. With a 6.9% initial cap rate, the first quarter saw our acquisition yields return to a more normalized level, which is consistent with where we expect to acquire throughout the year. However, with year-to-date accelerating interest rates, we're hopeful to start seeing incremental cap rate expansion as we prudently look for opportunities to add to our pipeline. In terms of markets, we continue to favor infill locations that benefit from population density and higher barriers to entry, with more than two-thirds of our Q1 acquired rents coming from larger MSAs with populations exceeding 1 million. Along these lines, we're able to add exposure to the New York, Philadelphia, Baltimore, and Washington DC markets at attractive per square foot valuations in assets that sit at the heart of busy intersections. As of the end of the quarter, our portfolio was once again 100% occupied and consisted of 129 properties, totaling 3.5 million square feet, with tenants operating in 26 sectors across 35 states. With the majority of our Q1 acquisition volume coming from the pharmacy sector, particularly Walgreens, I'm pleased to say our investment grade credit exposure reached 50% at the end of the quarter. Walgreens is now our portfolio's largest tenant exposure, and pharmacy is our largest sector. Following the sale of the office property earlier this month, our top tenants now include Walgreens, At Home, Hobby Lobby, Academy Sports, Dollar General, Walmart, and Lowe's. The most significant change to our top tenant list was the removal of Wells Fargo. When combined with our Hilton office property sale in the fourth quarter, our office dispositions generated more than $16 million in gains, which were reinvested into our Houston ground lease portfolio and the Walgreens and CVS Pharmacy portfolio in the first quarter. We are confident that these recent changes to our portfolio enhance our overall profile for investors. Given that we are trading at just over an implied 6.9% cash cap rate, we hope they will drive better valuations as the investment community can now more easily compare our portfolio to our largest net lease peers. Furthermore, we have increased our disposition guidance for 2022 as we aim to sell properties where we can generate strong net investment spreads and realize gains on our assets, highlighting our portfolio's intrinsic value. By selling at low cap rates and buying at higher yields, we will be able to gradually deleverage our balance sheet. We anticipate being able to redeploy proceeds into comparable, stronger credits, and we are optimistic that our disposition program will further enhance our overall portfolio metrics and drive higher quality FFO per share. With that, I'll now turn the call over to Matt to discuss our first quarter performance, balance sheet, capital markets activities, and revised guidance.

Thanks, John. Jumping right into Q1 results, first quarter 2022 FFO was $0.49 per share, a $0.07 per share or 16.7% increase compared to the first quarter of 2021. First quarter 2022 AFFO was $0.48 per share, a $0.04 per share or 9.1% increase over the first quarter of 2021. The most notable variance between our FFO and AFFO year-over-year performance is the $248,000 of net non-recurring COVID rent deferral repayments that totaled $271,000 in the first quarter of 2021 and just $23,000 in the first quarter of 2022. I'm very pleased to say next quarter will be the last quarter of scheduled COVID rent deferral repayments, marking the completion and full recovery of all of our previously deferred rents. On the operating side of things, our portfolio remains 100% occupied. As we have monitored the corporate performance of our tenants through the first quarter of the year, we've largely seen continued improvement in corporate-level operating trends, demonstrating a strong consistent performance across nearly all of our tenant sectors. Our general and administrative expenses for the quarter, which includes $936,000 in management fees to our external manager, totaled $1.4 million. This year-over-year increase of 39% was largely driven by increases to our management fee from our 2021 equity capital markets activities and was positively offset by revenue growth of more than 83%. G&A as a percentage of revenues in the first quarter was 13.3%, demonstrating a year-over-year decrease of nearly 425 basis points, reflecting our improving organizational scale and efficiency. For the first quarter of 2022, the company paid a cash dividend of $0.27 per share, representing a 12.5% year-over-year increase over the company's Q1 2021 cash dividend, with its current annualized yield of approximately 5.7%. FFO and AFFO first quarter payout ratios were very healthy at 55% and 56%, respectively, and we anticipate announcing our regular quarterly cash dividend for the second quarter towards the end of May. On the capital markets front, we issued 315,000 shares of common stock through our ATM program during the first quarter for total net proceeds of $6.1 million and an average issuance price of $19.65 per share. We ended the quarter with net debt to total enterprise value of 56%, net debt to pro forma EBITDA of 8.8 times, and a very healthy fixed charge coverage ratio of 5.6x. Subsequent to the quarter end, we exercised the accordion options on our 2026 and 2027 term loans, closing on an additional $60 million of proceeds, used to pay down our unsecured revolving credit facility. Combined with the proceeds from the Wells Fargo asset sale, which were also used to pay down our unsecured revolving credit facility, we increased our potential liquidity to approximately $100 million through available cash and overall borrowing capacity on our revolver. In consideration of our Q1 performance in the current capital markets backdrop, we increased our full-year guidance to account for a lower weighted average share count for the year, increased acquisition and disposition guidance expectations for increasing near-term and long-term interest rates, as well as revisions to several other influential assumptions. We began the second quarter of 2022 with a portfolio-wide in-place annualized straight-line base rent of $41.6 million, or $40.5 million in-place annualized cash base rent, before the Wells Fargo sale that occurred during the second quarter. Our increased full-year 2022 FFO guidance range is now $1.55 to $1.60 per share, and our full-year 2022 AFFO guidance range was increased to $1.53 to $1.58 per share. Consistent with our comments last quarter regarding our 2022 per-share guidance, we're forecasting a deleveraging of the balance sheet compared to our current Q1 2022 credit metrics, accomplished through our increased disposition guidance and from our revised projections for capital markets activities throughout the remainder of the year. Regarding transactions, we now expect to acquire between $215 million and $250 million of retail net-leased properties during 2022, which is a 7.5% increase to the bottom end of our range and subject to other market conditions, we believe these acquisitions will occur at similar or better blended yields to our current 2021 full-year acquisition cap rate. Lastly, as John noted earlier, we increased our disposition guidance in order to provide real-time valuations of some of our larger tenant exposures, generate accretive net investment spreads, and incrementally deleverage our balance sheet. All of this is expected to improve our overall portfolio metrics and drive higher quality AFFO per share. Our revised disposition guidance forecasts between $75 million and $100 million of asset sales throughout the year, up by $35 million at the low end and $50 million at the high end, which includes the already completed sale of the office building in Hillsboro, Oregon. With that, I'll now turn the call back over to John for his closing remarks.

Thanks, Matt. We're pleased with our solid start to the year, driven by our strong investment activity and the completion of our portfolio's strategic shift to becoming 100% retail. While there has been a lot of volatility in the market this year, we intend to selectively prune our portfolio to demonstrate the attractive and resilient value of our investments while driving towards higher-quality earnings. We have a strong operational roadmap in place to help us outperform over the long run, and we appreciate the continued support of our shareholders as we execute on our plan. I want to thank our team for all of their accomplishments. At this time, we'll open it up for questions. Operator?

Our first question comes from Rob Stevenson with Janney.

Good morning. John, the Walgreens leases, are those the standard flat no-bumps leases? And if so, what does that do to your bumps for the portfolio as a whole now that Walgreens is your largest tenant? And what also made that portfolio attractive to you at this point in time, given the sort of hyper growth phase that Pine is still in at this point?

Yes. Thanks, Rob. To answer your latter question about its attractiveness, it was a portfolio deal. The sellers were motivated, not tax-driven or what have you. We wanted to get it done; it was a smaller portfolio and not too price-sensitive. So we feel like we secured a really good price for the quality portfolio. As for the Walgreens lease, yes, it's a standard lease situation that Walgreens has across the board. Regarding rent bumps and their effect on the portfolio, let Matt opine on that.

Yes. Hey, Rob. Post-acquisition of the Walgreens and post-sale of the Wells Fargo, about half the portfolio has either annual or periodic rent bumps in the existing terms.

And what is that average now?

In terms of annual growth? It depends on the year, but it's somewhere between 75 and 125 basis points per year, on average.

Okay, perfect. And then, Matt, while I have you here, you expanded your debt capacity. If you had to go out and access new debt today or replace parts of your stack, where would that price versus the beginning of the year? It seems like, over the last five to seven years, every time rates have gone up, the spread has gone down in the REIT space. I assume that some of that has happened. However, some of that big jump in rates over the last three or four months would be transmitted into your cost of borrowing. How significant is that for you these days if you had to access new debt rather than expanding existing?

Yes, I would say spreads have largely remained steady on the unsecured side. I think they have widened out a little bit on the secured front, which we don't do a lot of. The real widening has occurred on the forward swaps. A couple of weeks ago, they had moved out to over 2.5%. From a spreads perspective, we're between 135 and 195, which has been attractive for us. However, with where new swaps are, you're looking at 4% plus range to secure new fixed-rate five-year debt.

Okay. And then last one for me, John, regarding your pipeline and the conversations you're having on the deals, has there been any notable changes in terms of pricing for assets or the amount of properties being brought to market these days compared to three or six months ago?

Yes, so as I mentioned on our last earnings call, we have certainly expanded our acquisition interest regarding cap rates, which have been wider than the market. We expanded our disposition guidance because we still see very strong low cap rates on smaller type assets. We're feeding more of our properties into the selling market because we can reinvest those at higher spreads and yields. Currently, we're seeing strong pricing for smaller assets. This is likely due to investors wanting to exit the bond market. If you're a fixed-income investor, and bonds are going to be a poor deal, transitioning into a strong real estate asset with a long lease at a higher yield appears more attractive. Thus, we plan to take our time with acquisitions and are not seeing any compelling deals at the moment, but may later in the year.

Our next question comes from Wes Golladay with Baird.

Hey, good morning, guys. I'd like to dig in more on this asset recycling you're planning to do in the second half of the year. What type of spread are you targeting between what you're buying and what you're selling? Will it be a significant part of your strategy moving forward?

It'll be a significant part of the strategy. If we continue to see great opportunities to sell properties at lower cap rates, we will always look to reinvest at higher spreads. Generally, I would say we're targeting about a 100 basis point spread between what we're selling and what we're buying, potentially even higher.

What about transaction costs? How much would that impact your spreads?

It's not that significant. It could be material depending on one's perspective, but I wouldn't view it as a gating issue.

When we assess leverage by the end of the year after asset recycling, what do you predict it can reach?

Based on current guidance, we're projecting it to be at or below 7x net debt to EBITDA.

Lastly for me, with the office sales now complete, will you have any more assets for reimbursements in the income statement?

No, we don't anticipate any operating expenses beyond what existed in the first quarter. There will be some leakage in there, but not much, given that the Hilton property, a higher leakage asset, is now out of the portfolio.

Our next question comes from Anthony Hau with Truist Securities.

Good morning, guys. Thanks for taking my question. John, how would you describe the assets you're planning to sell this year and where do they rank in terms of quality within the portfolio?

I believe that investors may not view some of the assets we're looking to sell as high quality, but we know these locations are such high quality that they will attract premium pricing. We're looking to impress our investors with the strength of Pine's portfolio, and they may be surprised at the valuations we get on the distribution side. To clarify, these assets may not be core names regarding credit, and it's more about pruning the portfolio to ensure all locations are properly valued in public markets.

Will you be reducing your exposure to any specific sectors given the hyperinflation environment?

Yes, we have been early in selling casual dining and banks over the last couple of years and avoided casual dining due to increasing labor costs. We're cautious about casual dining as it directly relates to labor costs and inflation, and we currently own only one car wash, which could also be a candidate for disposition, as it's a discretionary spending item and not particularly ESG-friendly.

Given where rates are headed, what's the plan for managing variable debt exposure? Should we assume that 90% of the balance sheet will be fixed by year-end?

Yes, we will be opportunistic in fixing existing variable rate debt. We want to maintain some balance on the revolver as we sell assets or, in case we raise additional equity, to pay down floating rate debt versus locking it in and facing equity drag. My strong preference is to have fixed rate debt over variable rate debt long-term, given current volatility with the forward curve and forward swap pricing. If we find a reasonable rate to lock in on the variable rate debt, we'll pursue that.

Our next question comes from Michael Gorman with BTIG.

Yes, thanks. Good morning. John, I know you mentioned that changes in buyer behavior on the net lease side haven't been drastic, but there was a solid first quarter in terms of deal volume and yield. I'm curious about what's driving that volume, allowing you to have a strong first quarter and giving you confidence in sourcing offset acquisitions for your planned dispositions in a volatile environment.

Yes, I would say the volatility benefits us by kicking out the marginal buyers. I'm confident we can locate acquisitions through our small but effective deal team. If a specific situation arises where someone needs to close quickly, we can focus and meet that need. We've accomplished a lot early on and are in a strong position to take our shot when we identify good value.

Regarding supply, have you noticed an increase in the market, with sellers concerned about future valuations or issues around debt maturity?

We haven't seen a significant increase in product due to those concerns yet. However, at a recent ULI conference, brokers advised that if clients want to sell, they need to list sooner rather than later. So while we haven't seen that increase yet, I expect more supply to emerge as sellers become proactive.

That's helpful. Shifting to inflation discussions, could you explain how the current environment influences your decision regarding internalizing management for Pine?

Not really; we've evaluated cost structures, and they are marginally higher than we anticipated at IPO. Finding someone like Matt doesn't come cheaply. So while some costs have increased, it doesn't significantly alter our size objectives for internalized structure.

Our next question comes from Jason Stewart with JonesTrading.

Thanks. Good morning. Most questions have been answered, but I wanted to hear your medium-term outlook for cap rates and sectors, given the shifts we've seen in rates this year.

So, as mentioned, we're still encountering strong cap rates on assets we plan to sell. Surprisingly, we've heard from brokers that pricing is expanding for assets that had previously tightened due to leverage being a key factor. Multifamily often relies heavily on leverage, which is causing disruption. For single-tenant net lease properties, influenced mostly by the 1031 exchange and less leverage, we haven't observed the expected volatility. I hope to see dislocations to create purchase opportunities, so we will remain patient.

Can you remind me of the CTO's ownership of Pine and any limitations on that?

Yes, Jason. CTO currently owns about 15% of Pine. Limitations are dictated by REIT structure and tax rules. CTO can own up to 11% of Pine's REIT shares, in addition to the OP units currently held.

Our next question comes from Craig Kucera with B. Riley Securities.

Hey, good morning, guys. John, last quarter you mentioned there were reverse inquiries on potential asset sales. Have those inquiries intensified in the last few months?

We receive a regular stream of those inquiries. However, given the market's disruption and our stock not performing favorably, we've opted to be more proactive in hiring brokers and testing the waters on assets. We've been pleasantly surprised by pricing and interest. We are methodical in this process and utilize reverse inquiries as a foundation for initiating sales.

Is it fair to expect that after such strong acquisition activity over the last four quarters, acquisition efforts may slow down in the second quarter as you wait for the market to settle?

Yes, that's fair. We're instructing the acquisition team to not rush to impress with acquisition volume. We can proceed once we identify good value and assess the market's direction.

Do you have any updates on the grocery development site in Jacksonville?

Yes, good question. The project is back on track. Delays were due to negotiations with Old Time Pottery and the new grocer. All logistics issues have now been resolved, and we'll provide an update on the timing in the next quarter.

Our next question comes from Andrew Lavery, an Individual Investor.

Hi, everybody, how are you doing? I have a question regarding ESG. What are your thoughts concerning ESG and stakeholder capitalism as a whole?

We are very mindful of ESG; we have a dedicated slide in our investor deck. We take pride in having, as CTO, managed the planting of 170,000 pine trees in Florida over the last couple of years, and we have also made strides in diversifying our boards. As a small company, we're very conscious of these issues and proud of our progress. However, it's a significant matter that we continue to address.

You mentioned having one carwash property, which is not very ESG-friendly due to water usage and wastewater production. If you sell that for ESG reasons but receive good rental income, would you feel you've fulfilled your fiduciary responsibility to shareholders?

We wouldn't sell it unless we received a strong price, ensuring we are acting in the best interest of shareholders. We believe in hitting two birds with one stone, obtaining a good price while considering ESG factors. Ultimately, we let shareholders and analysts determine the ESG implications of car washes. Our comment regarding water usage was merely an observation.

It was 129 at quarter-end, but following the Wells Fargo sale after the quarter, it's dropped back down to 128.

Okay. Perfect. Yes, I saw in the quarterly earnings report it’s at 129. And on the investor relations page, it's at 128, so I just wanted to ensure there was no discrepancy. Thank you. That concludes today's Q&A session. I'd like to turn the call back to John Albright for closing remarks.

I just wanted to say thank you for attending the call, and I look forward to any follow-up questions. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.