Good day and thank you for standing by. Welcome to the Alpine Q3 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Partridge, Chief Financial Officer.

Good morning, everyone, and thank you for joining us today for the Alpine Income Property Trust Third Quarter 2023 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, earnings release and most recent investor presentation, which contain reconciliations of non-GAAP financial measures we use on our website at alpinereit.com. I'll now hand the call over to John for his prepared remarks.

Thanks, Matt, and good morning, everyone. Jumping right in, investments during the quarter totaled $27.2 million, made up of $19.4 million of net lease acquisitions and a $7.8 million loan investment. Dispositions during the quarter totaled $20.6 million. During the quarter, the cash cap rate on our acquisitions was 9%. The initial yield on our loan investment was 8.5% and the exit cap rate on our dispositions was 6.3%. Contributing to our outsized acquisition yield is the Kohl's we purchased in Chandler, Arizona. This property is set to have its rent rolled down 25% in the first quarter of 2024. The roll down was negotiated prior to our purchase in order to meaningfully extend the term of the property. The acquisition cap rate on our Q3 activity post rent reset is 7.5%, which is the second highest cap rate for quarterly acquisition volume in our company's history and more than 50 basis points above our historical average. The mortgage we originated during the quarter is our first loan investment at Pine. The project is a 33-acre development outside of Indianapolis that includes five net lease outparcels, including Wawa, as the anchor tenant, in a multifamily development parcel. While our loan is secured by the entire land assemblage, proceeds from our loan are for the development of the single-tenant parcels. The loan has a term of two years, an initial yield of 8.5% in year one, an increased rate of 9.25% in year two, and we received origination fees as part of the financing. The outstanding balance of the quarter end was $6.9 million. As we discussed on our last call, we view these first mortgage investments as an opportunity to invest in properties with high-quality tenants and strong sponsorship and outsized risk-adjusted return. These investments are going to be a minority component of our strategy, but they do provide attractive short-term yields while we see longer-term core investment opportunities. In addition to our investment activity, we continued our strategic asset recycling program during the quarter, selling eight properties leased to non-investment-grade tenants, the majority of which were franchise restaurant operators. These asset sales generated total gains of $2.6 million. Our net investment spread during the quarter, which is the difference between the yield on our investments and less the yield on our properties sold, was 266 basis points or 118 basis points when adjusted for the Kohl's rollout. The 118 basis points is more than twice our long-term average and our highest quarterly spread since the third quarter of 2022. Overall, we're pleased with this quarter's transaction activity as we believe we have improved portfolio quality while generating attractive risk-adjusted returns. Year-to-date, we've invested $87 million at a 7.5% initial yield. 61% of acquired base rents come from tenants with investment-grade credit ratings and 87% of the acquired base rents come from tenants that are publicly traded or whose debt is publicly traded. Additionally, during the first nine months of the year, we've sold 22 properties for $100 million generating gains of sales of $7.8 million. 14 of the 22 properties sold were occupied by tenants who are not publicly traded or whose debt is not publicly rated. Today, 64% of our portfolio's base rent comes from investment-grade rated tenants, and 93% of our tenants are either publicly traded or have debt that is publicly rated. Our top tenants remain unchanged from the second quarter, which includes notable industry-leading operators such as Walgreens, Lowe's, Dick's Sporting Goods, Dollar General, Dollar Tree, Family Dollar, Walmart, Best Buy, Hobby Lobby and Home Depot. From a portfolio management perspective, we did have seven Valero branded convenience store properties become vacant during the quarter as a result of bankruptcy and subsequent liquidation of the operator, Mountain Express. These properties are relatively small in size and the rents are modest in the context of our entire portfolio, but nevertheless, the lost rent and resulting marginal increase in our borrowing costs due to this bankruptcy, as well as projected timing of the transaction activity, are all contributing factors to our revised guidance. The impact of the bankruptcy should largely be contained to our third quarter and fourth quarter operating results as we anticipate putting this issue behind us by selling the properties in the coming months and reinvesting the proceeds. And finally, we did buy back nearly $5 million of common stock during the third quarter, and we believe it to be accretive pricing as our stock is trading near an implied 8% cap rate and well below our book value. We'll continue to be active on our $15 million buyback program as long as our stock trades at what we believe is a meaningful discount to the underlying value of our portfolio and operating platform. Now I'll turn the call over to Matt to discuss our quarterly results, balance sheet and revised guidance.

Thanks, John. As of the end of the quarter, our portfolio was 99% occupied and consisted of 138 properties totaling 3.9 million square feet with tenants operating in 23 sectors within 35 states. Occupancy ticked down as a result of the Mountain Express bankruptcy, but as John mentioned, our top tenants generally remain unchanged and continue to be made up of a well-diversified mix of industry-leading operators, the majority of which have investment-grade credit ratings and are publicly rated or publicly traded. Third quarter 2023 FFO was $0.37 per share, representing a 7.5% decrease compared to the third quarter of 2022, and third quarter 2023 AFFO was $0.38 per share, representing a 9.5% decrease over the third quarter of 2022. Our quarterly results were negatively impacted by the nonperforming tenant issues, timing of investments and dispositions, and higher interest expense from year-over-year increases in interest rates. These items were partially offset by regular rent increases within the owned portfolio, attractive net investment spreads from our asset recycling program, increased interest income from cash and restricted cash on balance sheet, and the benefits of an incrementally lower share count resulting from our share repurchase program. Our general and administrative expenses for the quarter totaled $1.7 million, which included the $1.1 million management fee to our external manager. Our G&A increased 13% year-over-year, largely driven by increases to the management fee driven by our net equity capital markets activities over the past 12 months. The current annual run rate for the management fee before any assumed new equity issuances or repurchases is $4.3 million, and G&A as a percentage of total revenues in the third quarter was 14.3%, down from 14.6% in the second quarter of 2023. As a result of the Mountain Express bankruptcy, we took a $2.9 million impairment during the quarter and subsequently classified the seven properties as held for sale. The impairment was largely offset by the $2.6 million gain on disposition of assets during the quarter. Both items are adjusted for as part of our FFO and AFFO calculation. Year-to-date, FFO was $1.10 per share and AFFO was $1.11 per share, representing year-over-year per share decreases of approximately 19% when compared to the first nine months of 2022. As previously announced, the company paid a third quarter cash dividend of $0.275 per share, representing a current annualized yield of approximately 6.6%. Our third quarter FFO and AFFO payout ratios remained well covered at 74% and 72%, respectively. We anticipate announcing our regular quarterly cash common stock dividend for the fourth quarter during the end of November. As John previously referenced, we were active during the quarter and our Board approved a $15 million share repurchase program. We're purchasing over 280,000 shares of our common stock for a total cost of $4.7 million at an average price of $16.78 per share. Year-to-date, we have repurchased over 300,000 shares of our common stock for a total cost of $5.1 million at an average price of $16.66 per share. We ended the quarter with net debt to total enterprise value of 48%, net debt to pro forma EBITDA of 6.9 times, and we continue to maintain a strong fixed charge coverage ratio of 3.4 times. Our balance sheet has no floating interest rate exposure, no debt maturities until 2026, and total liquidity at quarter end through cash, restricted cash, and undrawn revolver commitments was more than $217 million. And finally, as we transition into the fourth quarter of 2023, we began the quarter with portfolio-wide in place, annualized straight-line and cash-based rents of approximately $39.2 million. We have updated our full year 2023 guidance to account for our third quarter performance and lost rents from the Mountain Express bankruptcy, projected timing of dispositions and investments, forecasted capital markets activities, and other various assumptions. We have reduced our full year FFO and AFFO guidance ranges to $1.45 to $1.47 per share and $1.46 to $1.48 per share, respectively. The forecasted weighted average share count for the year was increased by 100,000 shares at the low end and decreased by 400,000 shares at the high end to account for our third quarter and expected fourth quarter net equity capital markets activities. And we've maintained our overall dispositions and investment guidance, the latter of which does incorporate our loan investment activity. While we do have a tenant credit issue to work through during the fourth quarter, we're confident in our portfolio will continue to perform well in any economic environment as benefits from nearly two-thirds of rents coming from investment-grade rated tenants and strong financial transparency with nearly 93% of rents coming from publicly traded and publicly rated tenants. Combined with our accretive asset recycling strategy, derisked balance sheet and opportunistic share repurchase program, we believe we're strongly positioned for 2024.

Now we'll open the call up for questions.

Hey, good morning, guys. Thanks for taking the question. So it seems like for the remainder of the year, the disposition activity is going to come from the Mountain Express and then maybe an acquisition opportunistically somewhere if you find something that fits, but thinking ahead to 2024, are you guys expecting to be net buyers or net sellers?

Well, we hope to be, obviously, net buyers for sure. It's obviously capital markets dependent and recycling dependent. But clearly, we're starting to see more interesting opportunities. And so we're obviously taking advantage of where we can continue to sell down properties and credits at good prices and kind of be in a position to purchase. So we're patiently looking at opportunities. And, yes, so obviously, we'd love to be a net acquirer next year.

Yes. And then as a follow-up to that, 93% is currently publicly rated or traded. Is the goal eventually to get to 100% there?

Not necessarily, but we think it's a great indication that obviously a publicly traded company has more access to capital than a private company. And so just kind of a good data point, I think, for investors.

Thank you. One moment for questions. Our next question comes from Rob Stevenson with Janney Montgomery Scott. You may proceed.

Good morning, guys. Matt, what's the monthly or quarterly revenue impact from the bankrupt tenant for you guys?

It's a little under $150,000 a quarter base rent. And then obviously, there's carrying costs related to those assets for real estate taxes and maintenance and so on and so forth. So I think what you can expect, though, is that we'll hopefully exit those before the end of the year.

Okay. And then, John, why Kohl's, I mean, non-investment grade tenant at this point having or at least had operational issues, stocks a third of what it was 18 months ago. What's the allure there even on a longer-term lease from them given the opportunities otherwise that were out there for you during the quarter?

Chandler, Arizona is a fantastic infill location with very well-priced rent, despite a decline in rent roll. The area boasts strong demographics, and many chip manufacturers are aggressively building fabrication plants there. It's an established location where you can't replicate the cost basis. If anything happens to these manufacturers, there will definitely be a demand for the space or a subdivided area.

Okay. That's helpful. And then last one for me. How are you guys thinking about capital deployment in the fourth quarter, buy back more stock, reduce debt? Are there more dispositions teed up and acquisitions as well, given where you are relative to the guidance? How likely is that stuff to close in the fourth quarter versus something more out into '24?

So a little bit all of the above. Obviously, we're buying stock, we think opportunistically. We're looking at some interesting investment opportunities and we have assets on the market and in the process of selling to recycle. So we're super active on all fronts.

Thank you. One moment for questions. Our next question comes from Wesley Golladay with Baird. You may proceed.

Hey, good morning guys. Question on the 118 basis point spread. Maybe looking forward, do you have a sense of what kind of spreads you can get going forward? And then maybe can you comment on the growth rate of the assets you're buying versus selling?

Yes. I would say there are definitely some intriguing spread opportunities between what we can sell and what we can buy. I'm not sure if they will materialize. Additionally, there might be a more moderate approach to selling some non-investment-grade properties and purchasing investment-grade properties, where the spread isn't as significant but allows for portfolio upgrading. So it's a mix of having clear spread opportunities and some situations that are a bit neutral.

Yes. And on the growth, Wes, I would say about half of what we bought this year has contractual rent increases. Obviously, the Kohl's has a roll down, but that notwithstanding, it's going to be investment specific because depending on what lease is available on the market at the time that we buy it, it may or may not have rent growth. And if it's a shorter-term lease, there might not be contractual increases in the existing term, but if we're buying it right, then there should be growth on the options.

Okay. Fantastic. And then can you comment on your watch list now? You definitely pared back some of your smaller tenants? And then maybe could you comment on what happened with this bankruptcy? It looks like a liquidation and I probably wouldn't have been your base case at the start of the year.

I'll let Matt kind of discuss some of that. But in general, on the liquidation that company, Mountain Express was teed up to be sold. There is a standoff between the private equity and the lenders and private equity has basically decided to just liquidate the company. So kind of a startling change, but we've had multiple parties that had followed that process that have come to us interested in these properties. So we're actively in discussion on getting those sold. On the watch list, clearly, as you know, Wes, we've been very active on starting the sale process over a year ago and focusing on a lot of credits that could be an issue and we're continuing that process. But I'll let Matt discuss a little bit more granular.

Yes. Just to expand on that, if you look at what we sold in the third quarter, a lot of its franchise restaurant operators where, while we're not trying to get to that 100% publicly traded or publicly rated route that John referenced earlier, we are focused on investing in tenants that have clear transparency when it comes to their financials. And so there are other tenants within our portfolio, a small amount that we'll look to exit opportunistically if the market gives us appropriate pricing.

Okay. And then just one final one for you, Matt, on the balance sheet. It looks like interest expense did pop for the balance of the year. Do you expect to be at the lower pricing grid at the start of next year?

Yes. We will see how the asset sales develop through the end of the year, but our objective is to lower our leverage sufficiently to achieve a better interest rate on all of our debt by year-end.

Great. Thanks for the time, everyone.

Thanks a lot.

Thank you.

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