Alpine Income Property Trust, Inc 10-Q for FY2024 Q1
Alpine Income Property Trust, Inc. (PINE)
About this 10-Q
Alpine Income Property Trust, Inc filed this 10-Q on April 18, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $12.47M
- up 11.7% from $11.16M a year earlier
- Net loss
- $260K
- compared with net income of $3.34M a year earlier
- Diluted EPS
- -$0.02
- compared with $0.21 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Large Accelerated Filer | ☐ | | Accelerated Filer | ☐ |
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☒ | | Smaller Reporting Company | ||
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s common stock outstanding on April 11, 2024 was
INDEX
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| As of | ||||
| March 31, 2024 (Unaudited) |
| December 31, 2023 | ||
ASSETS | | | | ||
Real Estate: | | | | | |
Land, at Cost | $ | | | $ | |
Building and Improvements, at Cost | | | | | |
Total Real Estate, at Cost | | | | | |
Less, Accumulated Depreciation | | ( | | | ( |
Real Estate—Net | | | | | |
Assets Held for Sale | | | | | |
Commercial Loans and Investments | | | | | |
Cash and Cash Equivalents | | | | | |
Restricted Cash | | | | | |
Intangible Lease Assets—Net | | | | | |
Straight-Line Rent Adjustment | | | | | |
Other Assets | | | | | |
Total Assets | $ | | | $ | |
LIABILITIES AND EQUITY | | | | | |
Liabilities: | | | | | |
Accounts Payable, Accrued Expenses, and Other Liabilities | $ | | | $ | |
Prepaid Rent and Deferred Revenue | | | | | |
Intangible Lease Liabilities—Net | | | | | |
Long-Term Debt | | | | | |
Total Liabilities | | | | | |
Commitments and Contingencies—See Note 19 | | | | | |
Equity: | | | | | |
Preferred Stock, $ | | | | ||
Common Stock, $ | | | | | |
Additional Paid-in Capital | | | | | |
Dividends in Excess of Net Income | | ( | | | ( |
Accumulated Other Comprehensive Income | | | | | |
Stockholders' Equity | | | | | |
Noncontrolling Interest | | | | | |
Total Equity | | | | | |
Total Liabilities and Equity | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
3
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share data)
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Revenues: | | | | | | |
Lease Income | | $ | | | $ | |
Interest Income from Commercial Loans and Investments | | | | | | — |
Other Revenue | | | | | | — |
Total Revenues | | | | | | |
Operating Expenses: | | | | | | |
Real Estate Expenses | | | | | | |
General and Administrative Expenses | | | | | | |
Provision for Impairment | | | | | | — |
Depreciation and Amortization | | | | | | |
Total Operating Expenses | | | | | | |
Gain on Disposition of Assets | | | — | | | |
Gain on Extinguishment of Debt | | | — | | | |
Net Income From Operations | | | | | | |
Investment and Other Income | | | | | | |
Interest Expense | | | ( | | | ( |
Net Income (Loss) | | | ( | | | |
Less: Net (Income) Loss Attributable to Noncontrolling Interest | | | | | | ( |
Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | | $ | ( | | $ | |
| | | | | | |
Per Common Share Data: | | | | | | |
Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | | | | | | |
Basic | | $ | ( | | $ | |
Diluted | | $ | ( | | $ | |
| | | | | | |
Weighted Average Number of Common Shares: | | | | | | |
Basic | | | | | | |
Diluted | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
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ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
| Three Months Ended | |||||
| | March 31, 2024 |
| March 31, 2023 | ||
Net Income (Loss) | | $ | ( | | $ | |
Other Comprehensive Income (Loss) | | | | | | |
Cash Flow Hedging Derivative - Interest Rate Swaps | | | | | | ( |
Total Other Comprehensive Income (Loss) | | | | | | ( |
Total Comprehensive Income | | $ | | | $ | |
Less: Comprehensive Income Attributable to Noncontrolling Interest | | | | | | |
Net (Income) Loss Attributable to Noncontrolling Interest | | | | | | ( |
Other Comprehensive Income Attributable to Noncontrolling Interest | | | ( | | | — |
Comprehensive Income Attributable to Noncontrolling Interest | | | ( | | | ( |
Comprehensive Income Attributable to Alpine Income Property Trust, Inc. | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands, except per share data)
For the three months ended March 31, 2024:
|
| Common Stock at Par |
| Additional Paid-in Capital |
| Dividends in Excess of Net Income |
| Accumulated Other Comprehensive Income |
| Stockholders' Equity |
| Noncontrolling Interest |
| Total Equity | |||||||
Balance January 1, 2024 | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | | | $ | |
Net Loss | | | — | | | — | | | ( | | | — | | | ( | | | ( | | | ( |
Stock Repurchases | | | ( | | | ( | | | — | | | — | | | ( | | | — | | | ( |
Stock Issuance to Directors | | | — | | | | | | — | | | — | | | | | | — | | | |
Payment of Equity Issuance Costs | | | — | | | ( | | | — | | | — | | | ( | | | — | | | ( |
Cash Dividends ($ | | | — | | | — | | | ( | | | — | | | ( | | | ( | | | ( |
Other Comprehensive Income | | | — | | | — | | | — | | | | | | | | | | | | |
Balance March 31, 2024 | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | | | $ | |
For the three months ended March 31, 2023:
| | Common Stock at Par |
| Additional Paid-in Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Income |
| Stockholders' Equity |
| Noncontrolling Interest |
| Total Equity | |||||||
Balance January 1, 2023 |
| $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Net Income | | | — | | | — | | | | | | — | | | | | | | | | |
Stock Issuance to Directors | | | — | | | | | | — | | | — | | | | | | — | | | |
Stock Issuance, Net of Equity Issuance Costs | | | | | | | | | — | | | — | | | | | | — | | | |
Cash Dividends ($ | | | — | | | — | | | ( | | | — | | | ( | | | ( | | | ( |
Other Comprehensive Loss | | | — | | | — | | | — | | | ( | | | ( | | | — | | | ( |
Balance March 31, 2023 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| Three Months Ended | |||||
| | March 31, 2024 | | March 31, 2023 | ||
Cash Flow From Operating Activities: | | | | | | |
Net Income (Loss) | | $ | ( | | $ | |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: | | | | | | |
Depreciation and Amortization | | | | | | |
Amortization of Intangible Lease Assets and Liabilities to Lease Income | | | ( | | | ( |
Amortization of Deferred Financing Costs to Interest Expense | | | | | | |
Accretion of Commercial Loans and Investments Origination Fees | | | ( | | | — |
Gain on Disposition of Assets | | | — | | | ( |
Provision for Impairment | | | | | | — |
Non-Cash Compensation | | | | | | |
Decrease (Increase) in Assets: | | | | | | |
Straight-Line Rent Adjustment | | | ( | | | ( |
Other Assets | | | ( | | | ( |
Increase (Decrease) in Liabilities: | | | | | | |
Accounts Payable, Accrued Expenses, and Other Liabilities | | | | | | |
Prepaid Rent and Deferred Revenue | | | | | | |
Net Cash Provided By Operating Activities | | | | | | |
Cash Flow From Investing Activities: | | | | | | |
Acquisition of Real Estate, Including Capitalized Expenditures | | | ( | | | ( |
Proceeds from Disposition of Assets | | | — | | | |
Acquisition of Commercial Loans and Investments | | | ( | | | — |
Principal Payments Received on Commercial Loan Investments | | | | | | — |
Net Cash Provided By (Used In) Investing Activities | | | ( | | | |
Cash Flow from Financing Activities: | | | | | | |
Proceeds from Long-Term Debt | | | | | | |
Payments on Long-Term Debt | | | ( | | | ( |
Cash Paid for Loan Fees | | | — | | | ( |
Repurchase of Common Stock | | | ( | | | — |
Proceeds From Stock Issuance, Net | | | ( | | | |
Dividends Paid | | | ( | | | ( |
Net Cash Used In Financing Activities | | | ( | | | ( |
Net Increase (Decrease) in Cash and Cash Equivalents | | | ( | | | |
Cash and Cash Equivalents and Restricted Cash, Beginning of Period | | | | | | |
Cash and Cash Equivalents and Restricted Cash, End of Period | | $ | | | $ | |
| | | | | | |
Reconciliation of Cash to the Consolidated Balance Sheets: | | | | | | |
Cash and Cash Equivalents | | $ | | | $ | |
Restricted Cash | | | | | | |
Total Cash | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
7
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited, in thousands)
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Supplemental Disclosure of Cash Flow Information: | | | | | | |
Cash Paid for Interest | | $ | | | $ | |
| | | | | | |
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | | | | |
| $ | | | $ | ( | |
The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BUSINESS AND ORGANIZATION
BUSINESS
Alpine Income Property Trust, Inc. (the “Company” or “PINE”) is a real estate investment trust (“REIT”) that owns and operates a high-quality portfolio of commercial net lease properties. The terms “us,” “we,” “our,” and “the Company” as used in this report refer to Alpine Income Property Trust, Inc. together with our consolidated subsidiaries.
Our portfolio consists of
The Company operates in
The Company has
ORGANIZATION
The Company is a Maryland corporation that was formed on August 19, 2019. On November 26, 2019, the Company closed its initial public offering (“IPO”). We conduct the substantial majority of our operations through Alpine Income Property OP, LP (the “Operating Partnership”). Our wholly owned subsidiary, Alpine Income Property GP, LLC (“PINE GP”), is the sole general partner of the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. As of March 31, 2024, we have a total ownership interest in the Operating Partnership of
The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gain, to its stockholders (which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles). As a REIT, the Company is generally not subject to U.S. federal corporate income tax to the extent of its distributions to stockholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax on its taxable income at regular corporate rates and generally will not be permitted to qualify for treatment as a REIT for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. Even if the Company qualifies for taxation as a REIT, the Company may be subject to state and local taxes on its income and property and federal income and excise taxes on its undistributed income.
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and other entities in which we have a controlling interest. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.
SEGMENT REPORTING
Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 280, Segment Reporting, establishes standards related to the manner in which enterprises report operating segment information. The Company operates in
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period presented. Actual results could differ from those estimates.
Among other factors, fluctuating market conditions that can exist in the national real estate markets and the volatility and uncertainty in the financial and credit markets make it possible that the estimates and assumptions, most notably those related to PINE’s investment in properties, could change materially due to continued volatility in the real estate and financial markets, or as a result of a significant dislocation in those markets.
REAL ESTATE
The Company’s real estate assets are comprised of the properties in its portfolio, and are stated at cost, less accumulated depreciation and amortization. Such properties are depreciated on a straight-line basis over their estimated useful lives. Renewals and betterments are capitalized to the applicable property accounts. The cost of maintenance and repairs is expensed as incurred. The cost of property retired or otherwise disposed of, and the related accumulated depreciation or amortization, are removed from the accounts, and any resulting gain or loss is recorded in the statement of operations. The amount of depreciation of real estate, exclusive of amortization related to intangible assets, recognized for the three months ended March 31, 2024 and March 31, 2023, was $
LONG-LIVED ASSETS
The Company follows FASB ASC Topic 360-10, Property, Plant, and Equipment, in conducting its impairment analyses. The Company reviews the recoverability of long-lived assets, primarily real estate, and real estate held for sale, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Examples of situations considered to be triggering events include: a substantial decline in operating cash flows during the period, a current or projected loss from operations, a property not fully leased or leased at rates that are less than current market rates, and any other quantitative or qualitative events deemed significant by management. Long-lived assets are evaluated for impairment by using an undiscounted cash flow approach, which considers future estimated capital expenditures. Impairment of long-lived assets is measured at fair value less cost to sell.
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PURCHASE ACCOUNTING FOR ACQUISITIONS OF REAL ESTATE SUBJECT TO A LEASE
Investments in real estate are carried at cost less accumulated depreciation and impairment losses, if any. The cost of investments in real estate reflects their purchase price or development cost. We evaluate each acquisition transaction to determine whether the acquired asset meets the definition of a business. Under Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, an acquisition does not qualify as a business when there is no substantive process acquired or substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to acquisitions that are asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred. Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.
In accordance with FASB guidance, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless management believes that it is likely that the tenant will renew the lease upon expiration, in which case the Company amortizes the value attributable to the renewal over the renewal period. The value of in-place leases and leasing costs are amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off.
ASSETS HELD FOR SALE
Investments in real estate which are determined to be “held for sale” pursuant to FASB Topic 360-10, Property, Plant, and Equipment are reported separately on the consolidated balance sheets at the lesser of carrying value or fair value, less costs to sell. Real estate investments classified as held for sale are not depreciated.
SALES OF REAL ESTATE
When properties are disposed of, the related cost basis of the real estate, intangible lease assets, and intangible lease liabilities, net of accumulated depreciation and/or amortization, and any accrued straight-line rental income balance for the underlying operating leases are removed, and gains or losses from the dispositions are reflected in net income within gains on dispositions of assets. In accordance with the FASB guidance, gains or losses on sales of real estate are generally recognized using the full accrual method.
PROPERTY LEASE REVENUE
The rental arrangements associated with the Company’s property portfolio are classified as operating leases. The Company recognizes lease income on these properties on a straight-line basis over the term of the lease. Accordingly, contractual lease payment increases are recognized evenly over the term of the lease. The periodic difference between lease income recognized under this method and contractual lease payment terms (i.e., straight-line rent) is recorded as a deferred operating lease receivable and is included in straight-line rent adjustment on the accompanying consolidated balance sheets. The Company’s leases provide for reimbursement from tenants for variable lease payments including common area maintenance, insurance, real estate taxes and other operating expenses. A portion of our variable lease payment revenue is estimated each period and is recognized as rental income in the period the recoverable costs are incurred and accrued.
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The collectability of tenant receivables and straight-line rent adjustments is determined based on, among other things, the aging of the tenant receivable, management’s evaluation of credit risk associated with the tenant and industry of the tenant, and a review of specifically identified accounts using judgment. As of March 31, 2024 and December 31, 2023, the Company’s allowance for doubtful accounts totaled $
COMMERCIAL LOANS AND INVESTMENTS
Investments in commercial loans and investments held for investment are recorded at historical cost, net of unaccreted origination costs and current expected credit losses (“CECL”) reserve.
Pursuant to ASC 326, Financial Instruments - Credit Losses, the Company measures and records a provision for CECL each time a new investment is made or a loan is repaid, as well as if changes to estimates occur during a quarterly measurement period. We are unable to use historical data to estimate expected credit losses as we have incurred no losses to date. Management utilizes a loss-rate method and considers macroeconomic factors to estimate its CECL allowance, which is calculated based on the amortized cost basis of the commercial loans.
RECOGNITION OF INTEREST INCOME FROM COMMERCIAL LOANS AND INVESTMENTS
Interest income on commercial loans and investments includes interest payments made by the borrower and the accretion of loan origination fees, offset by the amortization of loan costs, if any. Interest payments are accrued based on the actual coupon rate and the outstanding principal balance and purchase discounts and loan origination fees are accreted into income using the effective yield method, adjusted for prepayments.
OPERATING LAND LEASE EXPENSE
The Company is the lessee under operating land leases for certain of its properties, which leases are classified as operating leases pursuant to FASB ASC Topic 842, Leases. The corresponding lease expense is recognized on a straight-line basis over the term of the lease and is included in real estate expenses in the accompanying consolidated statements of operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, bank demand accounts, and money market accounts having original maturities of 90 days or less. The Company’s bank balances as of March 31, 2024 and December 31, 2023 include certain amounts over the Federal Deposit Insurance Corporation limits. The carrying value of cash and cash equivalents is reported at Level 1 in the fair value hierarchy, which represents valuation based upon quoted prices in active markets for identical assets or liabilities.
RESTRICTED CASH
Restricted cash totaled $
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY
The Company accounts for its cash flow hedging derivatives in accordance with FASB ASC Topic 815-20, Derivatives and Hedging. Depending upon the hedge’s value at each balance sheet date, the derivatives are included in either other assets or accounts payable, accrued expenses, and other liabilities on the accompanying consolidated balance sheet at its fair value. On the date each interest rate swap was entered into, the Company designated the derivatives as a hedge of the variability of cash flows to be paid related to the recognized long-term debt liabilities.
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The Company documented the relationship between the hedging instruments and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transactions. At the hedges’ inception, the Company assessed whether the derivatives that are used in hedging the transactions are highly effective in offsetting changes in cash flows of the hedged items and will continue to do so on a quarterly basis.
Changes in fair value of the hedging instruments that are highly effective and designated and qualified as cash-flow hedges are recorded in other comprehensive income and loss, until earnings are affected by the variability in cash flows of the designated hedged items (see Note 13, “Interest Rate Swaps”).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company’s financial assets and liabilities including cash and cash equivalents, restricted cash, accounts receivable included in other assets, accounts payable, and accrued expenses and other liabilities at March 31, 2024 and December 31, 2023, approximate fair value because of the short maturity of these instruments. The carrying value of the Credit Facility, hereinafter defined, approximates current market rates for revolving credit arrangements with similar risks and maturities. The Company estimates the fair value of its commercial loans and investments and term loans based on incremental borrowing rates for similar types of borrowing arrangements with the same remaining maturity and on the discounted estimated future cash payments to be made for other debt. The discount rate used to calculate the fair value of debt approximates current lending rates for loans and assumes the debt is outstanding through maturity. Since such amounts are estimates that are based on limited available market information for similar transactions, which is a Level 2 non-recurring measurement, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument.
FAIR VALUE MEASUREMENTS
The Company’s estimates of fair value of financial and non-financial assets and liabilities is based on the framework established by GAAP. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. GAAP describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels:
| ● | Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques. |
CONCENTRATION OF CREDIT RISK
Certain individual tenants in the Company’s portfolio of properties accounted for more than 10% of lease income from the Company’s income properties during the three months ended March 31, 2024 and 2023.
During the three months ended March 31, 2024 and 2023, Walgreens accounted for
As of March 31, 2024 and December 31, 2023,
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RECLASSIFICATIONS
Certain items in the prior period’s consolidated balance sheet and consolidated statement of operations have been reclassified to conform to the presentation for the three months ended March 31, 2024. Specifically, tax, insurance, and capital expenditure reserve accounts related to the Company’s commercial loans and investments were previously included within Prepaid Rent and Deferred Revenue and are now included within Accounts Payable, Accrued Expenses, and Other Liabilities on the accompanying consolidated balance sheets. Additionally, interest income earned on deposits at financial institutions was previously included within Lease Income and is now included within Investment and Other Income on the accompanying consolidated statement of operations. There was no impact to retained earnings as a result of the reclassifications.
NOTE 3. PROPERTY PORTFOLIO
As of March 31, 2024, the Company’s property portfolio consisted of
Leasing revenue consists of long-term rental revenue from net leased commercial properties, which is recognized as earned, using the straight-line method over the life of each lease. Lease payments below include straight-line base rental revenue as well as the non-cash accretion of above and below market lease amortization. The variable lease payments are comprised of percentage rent payments and reimbursements from tenants for common area maintenance, insurance, real estate taxes, and other operating expenses.
The components of leasing revenue are as follows (in thousands):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Lease Income | | | | | | |
Lease Payments | | $ | | | $ | |
Variable Lease Payments | | | | | | |
Total Lease Income | | $ | | | $ | |
Minimum Future Rental Receipts. Minimum future rental receipts under non-cancelable operating leases, excluding percentage rent and other lease payments that are not fixed and determinable, having remaining terms in excess of one year subsequent to March 31, 2024, are summarized as follows (in thousands):
Year Ending December 31, |
| Amounts | |
Remainder of 2024 | | $ | |
2025 | | | |
2026 | | | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 and Thereafter (Cumulative) | | | |
Total | | $ | |
2024 Activity. During the three months ended March 31, 2024, the Company acquired
2023 Activity.
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NOTE 4. COMMERCIAL LOANS AND INVESTMENTS
On January 30, 2024, the Company originated a construction loan secured by the property and improvements to be constructed thereon for
On July 25, 2023, the Company originated a construction loan secured by the property and improvements to be constructed thereon for a
On October 30, 2023, the Company originated a construction loan secured by the property and improvements to be constructed thereon for a
On November 15, 2023, the Company originated a $
The Company’s commercial loans and investments were comprised of the following at March 31, 2024 (in thousands):
Description |
| Date of Investment |
| Maturity Date |
| Original Face Amount |
| Current Face Amount |
| Carrying Value |
| Coupon Rate | |||
Construction Loan – Wawa Land Development – Greenwood, IN | | July 2023 | | July 2025 | | $ | | | $ | | | $ | | | |
Construction Loan – Wawa Land Development – Antioch, TN | | October 2023 | | October 2025 | | | | | | | | | | | |
Mortgage Note – Portfolio | | November 2023 | | November 2026 | | | | | | | | | | | |
Construction Loan – Retail Outparcels – Lawrenceville, GA | | January 2024 | | January 2026 | | | | | | | | | | | |
| | | | | | $ | | | $ | | | $ | | | |
CECL Reserve | | | | | | | | | | | | | ( | | |
Total Commercial Loans and Investments | | | | | | | | | | | | $ | | | |
15
The Company’s commercial loans and investments were comprised of the following at December 31, 2023 (in thousands):
Description |
| Date of Investment |
| Maturity Date |
| Original Face Amount |
| Current Face Amount |
| Carrying Value |
| Coupon Rate | |||
Construction Loan – Wawa Land Development – Greenwood, IN | | July 2023 | | July 2025 | | $ | | | $ | | | $ | | | |
Construction Loan – Wawa Land Development – Antioch, TN | | October 2023 | | October 2025 | | | | | | | | | | | |
Mortgage Note – Portfolio | | November 2023 | | November 2026 | | | | | | | | | | | |
| | | | | | $ | | | $ | | | $ | | | |
CECL Reserve | | | | | | | | | | | | | ( | | |
Total Commercial Loans and Investments | | | | | | | | | | | | $ | | | |
The carrying value of the commercial loans and investments consisted of the following at March 31, 2024 and December 31, 2023 (in thousands).
| | As of | ||||
|
| March 31, 2024 |
| December 31, 2023 | ||
Current Face Amount | | $ | | | $ | |
Unaccreted Origination Fees | | | ( | | | ( |
CECL Reserve | | | ( | | | ( |
Total Commercial Loans and Investments | | $ | | | $ | |
NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying value and estimated fair value of the Company’s financial instruments not carried at fair value on the consolidated balance sheets at March 31, 2024 and December 31, 2023 (in thousands):
| | March 31, 2024 | | December 31, 2023 | ||||||||
|
| Carrying Value |
| Estimated Fair Value |
| Carrying Value |
| Estimated Fair Value | ||||
Cash and Cash Equivalents - Level 1 | | $ | | | $ | | | $ | | | $ | |
Restricted Cash - Level 1 | | $ | | | $ | | | $ | | | $ | |
Commercial Loans and Investments - Level 2 | | $ | | | $ | | | $ | | | $ | |
Long-Term Debt - Level 2 | | $ | | | $ | | | $ | | | $ | |
The estimated fair values are not necessarily indicative of the amount the Company could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts.
16
The following tables present the fair value of assets measured on a recurring basis by level as of March 31, 2024 and December 31, 2023 (in thousands). See Note 13, “Interest Rate Swaps” for further disclosure related to the Company’s interest rate swaps.
| | | | | Fair Value at Reporting Date Using | |||||||
|
| Fair Value |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Significant Other Observable Inputs (Level 2) |
| Significant Unobservable Inputs (Level 3) | ||||
March 31, 2024 | | | | | | | | | | | | |
2026 Term Loan Interest Rate Swap (1) | | $ | | | $ | — | | $ | | | $ | — |
2027 Term Loan Interest Rate Swap (2) | | $ | | | $ | — | | $ | | | $ | — |
Credit Facility Interest Rate Swap (3) | | $ | | | $ | — | | $ | | | $ | — |
December 31, 2023 | | | | | | | | | | | | |
2026 Term Loan Interest Rate Swap (1) | | $ | | | $ | — | | $ | | | $ | — |
2027 Term Loan Interest Rate Swap (2) | | $ | | | $ | — | | $ | | | $ | — |
Credit Facility Interest Rate Swap (3) | | $ | | | $ | — | | $ | | | $ | — |
| (1) | As of March 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of |
| (2) | As of March 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of |
| (3) | As of March 31, 2024, the Company utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of |
NOTE 6. INTANGIBLE ASSETS AND LIABILITIES
Intangible assets and liabilities consist of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their fair values. Intangible assets and liabilities consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):
| | As of | ||||
| | March 31, 2024 | | December 31, 2023 | ||
Intangible Lease Assets: | | | | | | |
Value of In-Place Leases | | $ | | | $ | |
Value of Above Market In-Place Leases | | | | | | |
Value of Intangible Leasing Costs | | | | | | |
Sub-total Intangible Lease Assets | | | | | | |
Accumulated Amortization | | | ( | | | ( |
Sub-total Intangible Lease Assets—Net | | | | | | |
Intangible Lease Liabilities: | | | | | | |
Value of Below Market In-Place Leases | | | ( | | | ( |
Sub-total Intangible Lease Liabilities | | | ( | | | ( |
Accumulated Amortization | | | | | | |
Sub-total Intangible Lease Liabilities—Net | | | ( | | | ( |
Total Intangible Assets and Liabilities—Net | | $ | | | $ | |
17
The following table reflects the net amortization of intangible assets and liabilities during the three months ended March 31, 2024 and 2023 (in thousands):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Amortization Expense | | $ | | | $ | |
Accretion to Properties Revenue | | | ( | | | ( |
Net Amortization of Intangible Assets and Liabilities | | $ | | | $ | |
The estimated future amortization expense (income) related to net intangible assets and liabilities is as follows (in thousands):
Year Ending December 31, | | Future Amortization Expense | | Future Accretion to Property Revenue | | Net Future Amortization of Intangible Assets and Liabilities | |||
Remainder of 2024 | | $ | | | $ | ( | | $ | |
2025 | | | | | | ( | | | |
2026 | | | | | | ( | | | |
2027 | | | | | | ( | | | |
2028 | | | | | | ( | | | |
2029 | | | | | | ( | | | |
2030 and Thereafter | | | | | | ( | | | |
Total | | $ | | | $ | ( | | $ | |
As of March 31, 2024, the weighted average amortization period of both the total intangible assets and liabilities was
NOTE 7. PROVISION FOR IMPAIRMENT
Income Properties. The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of long-lived assets required to be assessed for impairment is determined on a non-recurring basis using Level 3 inputs in the fair value hierarchy. These Level 3 inputs may include, but are not limited to, letters of intent on specific properties, executed purchase and sale agreements on specific properties, third person valuations, discounted cash flow models, and other model-based techniques.
There were
Commercial Loans and Investments. The Company evaluates the collectability of its commercial loans and investments on a quarterly basis or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company accounts for provisions for expected credit losses in accordance with ASC Topic 326, Measurement of Credit Losses on Financial Instruments. Changes in the Company’s allowance for credit losses are presented within change in provision for impairment in the accompanying consolidated statements of operations.
During the three months ended March 31, 2024, the Company recorded a charge of less than $
There were
18
NOTE 8. OTHER ASSETS
Other assets consisted of the following (in thousands):
| | As of | ||||
| | March 31, 2024 | | December 31, 2023 | ||
Tenant Receivables—Net of Allowance for Doubtful Accounts (1) | | $ | | | $ | |
Prepaid Insurance | | | | | | |
Deposits on Acquisitions | | | | | | |
Prepaid Expenses, Deposits, and Other | | | | | | |
Deferred Financing Costs—Net | | | | | | |
Interest Rate Swaps | | | | | | |
Operating Leases - Right-of-Use Asset (2) | | | | | | |
Total Other Assets | | $ | | | $ | |
| (1) | Includes a $ |
| (2) | See Note 9, “Operating Land Leases” for further disclosure related to the Company’s right-of-use asset balance as of March 31, 2024. |
NOTE 9. OPERATING LAND LEASES
The Company is the lessee under operating land leases for certain of its properties. FASB ASC Topic 842, Leases, requires a lessee to recognize right-of-use assets and lease liabilities that arise from leases, whether qualifying as an operating or finance lease. As of March 31, 2024 and December 31, 2023, the Company’s right-of-use assets totaled $
The Company’s operating land leases do not include variable lease payments and generally provide renewal options, at the Company’s election, to extend the terms of the respective leases. Renewal option periods are included in the calculation of the right-of-use assets and corresponding lease liabilities when it is reasonably certain that the Company, as lessee, will exercise the option to extend the lease.
Amortization of right-of-use assets for operating land leases is recognized on a straight-line basis over the term of the lease and is included within real estate expenses in the consolidated statements of operations. Amortization totaled less than $
The following table reflects a summary of operating land leases, under which the Company is the lessee, for the three months ended March 31, 2024 and 2023 (in thousands):
| | Three Months Ended | | ||||
| | March 31, 2024 | | March 31, 2023 | | ||
| | | | | | | |
Operating Cash Outflows | | $ | | | $ | | |
Weighted Average Remaining Lease Term | | | | | | ||
Weighted Average Discount Rate | | | | % | | | % |
19
Minimum future lease payments under non-cancelable operating land leases, having remaining terms in excess of one year subsequent to March 31, 2024, are summarized as follows (in thousands):
Year Ending December 31, | | | |
Remainder of 2024 | | $ | |
2025 | | | |
2026 | | | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 and Thereafter | | | |
Total Lease Payments | | $ | |
Imputed Interest | | | ( |
Operating Leases – Liability | | $ | |
NOTE 10. ASSETS HELD FOR SALE
Assets held for sale consisted of the following (in thousands):
| | As of | ||||
| | March 31, 2024 | | December 31, 2023 | ||
Real Estate—Net | | $ | | | $ | |
Intangible Lease Assets—Net | | | | | | |
Intangible Lease Liabilities—Net | | | ( | | | ( |
Straight-Line Rent Adjustment | | | | | | |
Other Assets | | | | | | |
Assets Prior to Provision for Impairment | | $ | | | $ | |
Less Provision for Impairment | | | ( | | | ( |
Total Assets Held for Sale | | $ | | | $ | |
NOTE 11. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER LIABILITIES
Accounts payable, accrued expenses, and other liabilities consisted of the following (in thousands):
| | As of | ||||
| | March 31, 2024 | | December 31, 2023 | ||
Accounts Payable | | $ | | | $ | |
Accrued Expenses | | | | | | |
Tenant Security Deposits | | | | | | |
| | | | | | |
Interest Rate Swaps | | | — | | | |
Loan Reserves | | | | | | |
Operating Leases - Liability (1) | | | | | | |
Total Accounts Payable, Accrued Expenses, and Other Liabilities | | $ | | | $ | |
| (1) | See Note 9, “Operating Land Leases” for further disclosure related to the Company’s operating lease liability balance as of March 31, 2024. |
20
NOTE 12. LONG-TERM DEBT
As of March 31, 2024, the Company’s outstanding indebtedness, at face value, was as follows (in thousands):
| | Face Value Debt | | Stated Interest Rate | | Maturity Date | |
Credit Facility (1) | | $ | | | SOFR + | | January 2027 |
2026 Term Loan (2) | | | | | SOFR + | | May 2026 |
2027 Term Loan (3) | | | | | SOFR + | | January 2027 |
Total Debt/Weighted-Average Rate | | $ | | | | | |
| (1) | As of March 31, 2024, the Company utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of |
| (2) | As of March 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of |
| (3) | As of March 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of |
Credit Facility. On September 30, 2022, the Company and the Operating Partnership entered into a credit agreement (the “2022 Amended and Restated Credit Agreement” or “Credit Facility”) with KeyBank National Association, as administrative agent, and certain other lenders named therein, which amended and restated the 2027 Term Loan Credit Agreement (hereinafter defined) to include, among other things:
| ● | the origination of a new senior unsecured revolving credit facility in the amount of $ |
| ● | an accordion option that allows the Company to request additional revolving loan commitments and additional term loan commitments, provided the aggregate amount of revolving loan commitments and term loan commitments shall not exceed $ |
| ● | the amendment of certain financial covenants; and |
| ● | the addition of a sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to |
Pursuant to the 2022 Amended and Restated Credit Agreement, the indebtedness outstanding under the Credit Facility accrues at a rate ranging from SOFR plus
The Company is subject to customary restrictive covenants under the 2022 Amended and Restated Credit Agreement and the 2026 Term Loan Credit Agreement (hereinafter defined), as amended, collectively referred to herein as the “Credit Agreements”, including, but not limited to, limitations on the Company’s ability to: (a) incur indebtedness; (b) make certain investments; (c) incur certain liens; (d) engage in certain affiliate transactions; and (e) engage in certain major transactions such as mergers. The Credit Agreements also contain financial covenants covering the Company, including but not limited to, tangible net worth and fixed charge coverage ratios.
At March 31, 2024, the commitment level under the Credit Facility was $
2026 Term Loan. On May 21, 2021, the Operating Partnership, the Company and certain subsidiaries of the Company entered into a credit agreement (the “2026 Term Loan Credit Agreement”) with Truist Bank, N.A. as administrative agent,
21
and certain other lenders named therein, for a term loan (the “2026 Term Loan”) in an aggregate principal amount of $
On October 5, 2022, the Company entered into an amendment which, among other things, amended certain financial covenants and added a sustainability-linked pricing component consistent with what is contained in the 2022 Amended and Restated Credit Agreement (the “2026 Term Loan Second Amendment”), effective September 30, 2022.
2027 Term Loan. On September 30, 2021, the Operating Partnership, the Company and certain subsidiaries of the Company entered into a credit agreement (the “2027 Term Loan Credit Agreement”) with KeyBank National Association as administrative agent, and certain other lenders named therein, for a term loan (the “2027 Term Loan”) in an aggregate principal amount of $
On September 30, 2022, the Company entered into the 2022 Amended and Restated Credit Agreement which amended and restated the 2027 Term Loan Credit Agreement to include the origination of a new revolving credit facility in the amount of $
Long-term debt as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
| | March 31, 2024 | | December 31, 2023 | ||||||||
| | Total |
| Due Within One Year |
| Total |
| Due Within One Year | ||||
Credit Facility | | $ | | | $ | — | | $ | | | $ | — |
2026 Term Loan | | | | | | — | | | | | | — |
2027 Term Loan | | | | | | — | | | | | | — |
Financing Costs, net of Accumulated Amortization | | | ( | | | — | | | ( | | | — |
Total Long-Term Debt | | $ | | | $ | — | | $ | | | $ | — |
Payments applicable to reduction of principal amounts as of March 31, 2024 will be required as follows (in thousands):
Year Ending December 31, | | Amount | |
Remainder of 2024 | | $ | |
2025 | | | |
2026 | | | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 and Thereafter | | | |
Total Long-Term Debt - Face Value | | $ | |
The carrying value of long-term debt as of March 31, 2024 consisted of the following (in thousands):
| | Total | |
Current Face Amount | | $ | |
Financing Costs, net of Accumulated Amortization | | | ( |
Total Long-Term Debt | | $ | |
22
In addition to the $
The following table reflects a summary of interest expense incurred and paid during the three months ended March 31, 2024 and 2023 (in thousands):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Interest Expense | | $ | | | $ | |
Amortization of Deferred Financing Costs to Interest Expense | | | | | | |
Total Interest Expense | | $ | | | $ | |
| | | | | | |
Total Interest Paid | | $ | | | $ | |
The Company was in compliance with all of its debt covenants as of March 31, 2024.
NOTE 13. INTEREST RATE SWAPS
The Company has entered into interest rate swap agreements to hedge against changes in future cash flows resulting from fluctuating interest rates related to the below noted borrowings. The interest rate agreements were
Information related to the Company’s interest rate swap agreements is noted below (in thousands):
Hedged Item | | Effective Date | | Maturity Date | | Rate | | Amount | | Fair Value as of March 31, 2024 | ||
2026 Term Loan (1) | | 5/21/2021 | | 5/21/2026 | |
| | $ | | | $ | |
2027 Term Loan (2) | | 9/30/2021 | | 11/29/2024 | |
| | $ | | | $ | |
2027 Term Loan (3) | | 9/30/2022 | | 1/31/2027 | |
| | $ | | | $ | |
2027 Term Loan (4) | | 11/29/2024 | | 1/31/2027 | |
| | $ | | | $ | |
Credit Facility (5) | | 3/1/2023 | | 3/1/2028 | |
| | $ | | | $ | |
| (1) | As of March 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of |
| (2) | As of March 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of |
| (3) | As of March 31, 2024, the Company has utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of |
| (4) | The interest rate swap agreement hedges $ |
| (5) | As of March 31, 2024, the Company has utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of |
23
The use of interest rate swap agreements carries risks, including the risk that the counterparties to these agreements are not able to perform. To mitigate this risk, the Company enters into interest rate swap agreements with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not currently anticipate that any of the counterparties to the Company’s interest rate swap agreements will fail to meet their obligations. As of March 31, 2024 and December 31, 2023, there were no events of default related to the Company's interest rate swap agreements.
NOTE 14. EQUITY
SHELF REGISTRATION
On December 1, 2020, the Company filed a shelf registration statement on Form S-3, relating to the registration and potential issuance of its common stock, preferred stock, warrants, rights, and units with a maximum aggregate offering price of up to $
On September 27, 2023, the Company filed a shelf registration statement on Form S-3, relating to the registration and potential issuance of common stock, preferred stock, debt securities, warrants, rights, and units with a maximum aggregate offering price of up to $
FOLLOW-ON PUBLIC OFFERING
In June 2021, the Company completed a follow-on public offering of
ATM PROGRAM
On December 14, 2020, the Company implemented a $
On October 21, 2022, the Company implemented a $
In the aggregate, under the 2020 ATM Program and 2022 ATM Program, during the year ended December 31, 2022, the Company sold
24
The Company was not active under the 2022 ATM Program during the three months ended March 31, 2024.
NONCONTROLLING INTEREST
As of March 31, 2024, CTO holds, directly and indirectly, an
DIVIDENDS
The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under the Code. To qualify as a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, and must distribute 100% of its taxable income (including net capital gains) to eliminate U.S. federal corporate income taxes payable by the Company. Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and other items), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows. During the three months ended March 31, 2024 and 2023, the Company declared and paid cash dividends on its common stock and OP Units of $
NOTE 15. COMMON STOCK AND EARNINGS PER SHARE
Basic earnings per common share are computed by dividing net income attributable to the Company for the period by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share are determined based on the assumption of the redemption of OP Units on a one-for-one basis using the treasury stock method at average market prices for the periods.
The following is a reconciliation of basic and diluted earnings per common share (in thousands, except share and per share data):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | | $ | ( | | $ | |
| | | | | | |
Weighted Average Number of Common Shares Outstanding | | | | | | |
Weighted Average Number of Common Shares Applicable to OP Units using Treasury Stock Method (1) | | | | | | |
Total Shares Applicable to Diluted Earnings per Share | | | | | | |
| | | | | | |
Per Common Share Data: | | | | | | |
Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | | | | | | |
Basic | | $ | ( | | $ | |
Diluted | | $ | ( | | $ | |
| (1) | Includes the weighted average of |
NOTE 16. SHARE REPURCHASES
In May 2023, the Board approved a $
25
In July 2023, the Board approved a $
There were
NOTE 17. STOCK-BASED COMPENSATION
Each non-employee member of the Board has the option to receive his or her annual retainer fee in shares of Company common stock rather than cash. The number of shares issued to the directors making such election is calculated quarterly by dividing the amount of the quarterly retainer fee payment due to such director by the
Stock compensation expense for the three months ended March 31, 2024 and 2023 is summarized as follows (in thousands):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Stock Compensation Expense – Director Restricted Stock | | $ | — | | $ | — |
Stock Compensation Expense – Director Retainers Paid in Stock | | | | | | |
Total Stock Compensation Expense | | $ | | | $ | |
| (1) | Director retainers are issued through additional paid in capital in arrears. Therefore, the change in additional paid in capital during the three months ended March 31, 2024 and 2023 reported on the consolidated statements of stockholders’ equity does not agree to the total non-cash compensation reported on the consolidated statements of cash flows. |
NOTE 18. RELATED PARTY MANAGEMENT COMPANY
We are externally managed by the Manager, a wholly owned subsidiary of CTO. Subsequent to the IPO, through March 31, 2024, CTO has purchased an aggregate of
As of March 31, 2024, CTO owns, in the aggregate,
26
Management Agreement
On November 26, 2019, the Operating Partnership and PINE entered into a management agreement with the Manager (the “Management Agreement”). Pursuant to the terms of the Management Agreement, our Manager manages, operates and administers our day-to-day operations, business and affairs, subject to the direction and supervision of the Board and in accordance with the investment guidelines approved and monitored by the Board. We pay our Manager a base management fee equal to
Our Manager has the ability to earn an annual incentive fee based on our total stockholder return exceeding an
The initial term of the Management Agreement will expire on November 26, 2024 and will automatically renew for an unlimited number of successive
Our independent directors review our Manager’s performance and the management fees annually and, following the initial term, the Management Agreement may be terminated annually upon the affirmative vote of -thirds of our independent directors or upon a determination by the holders of a majority of the outstanding shares of our common stock, based upon (i) unsatisfactory performance by the Manager that is materially detrimental to us or (ii) a determination that the management fees payable to our Manager are not fair, subject to our Manager’s right to prevent such termination due to unfair fees by accepting a reduction of management fees agreed to by -thirds of our independent directors. We may also terminate the Management Agreement for cause at any time, including during the initial term, without the payment of any termination fee, with
We pay directly or reimburse our Manager for certain expenses, if incurred by our Manager. We do not reimburse any compensation expenses incurred by our Manager or its affiliates. Expense reimbursements to our Manager are made in cash on a quarterly basis following the end of each quarter. In addition, we pay all of our operating expenses, except those specifically required to be borne by our Manager pursuant to the Management Agreement.
The Company incurred management fee expenses totaling $
The following table represents amounts due to (from) CTO (in thousands):
| | As of | ||||
Description |
| March 31, 2024 |
| December 31, 2023 | ||
Management Fee due to CTO | | $ | | | $ | |
Other | | | | | ( | |
Total (1) | | $ | | | $ | |
| (1) | Included in accrued expenses, see Note 11, “Accounts Payable, Accrued Expenses, and Other Liabilities”. |
27
ROFO Agreement
On November 26, 2019, PINE also entered into an Exclusivity and Right of First Offer Agreement with CTO (the “ROFO Agreement”). During the term of the ROFO Agreement, CTO will not, and will cause each of its affiliates (which for purposes of the ROFO Agreement will not include our company and our subsidiaries) not to, acquire, directly or indirectly, a single-tenant, net leased property, unless CTO has notified us of the opportunity and we have affirmatively rejected the opportunity to acquire the applicable property or properties.
The terms of the ROFO Agreement do not restrict CTO or any of its affiliates from providing financing for a third party’s acquisition of single-tenant, net leased properties or from developing and owning any single-tenant, net leased property.
Pursuant to the ROFO Agreement, neither CTO nor any of its affiliates (which for purposes of the ROFO Agreement does not include our company and our subsidiaries) may sell to any third party any single-tenant, net leased property that was owned by CTO or any of its affiliates as of the closing date of the IPO or that is developed and owned by CTO or any of its affiliates after the closing date of the IPO, without first offering us the right to purchase such property.
The term of the ROFO Agreement will continue for so long as the Management Agreement with our Manager is in effect.
On April 6, 2021, the Company entered into a purchase and sale agreement with a certain subsidiary of CTO for the purchase of
On April 2, 2021, the Company entered into a purchase and sale agreement with certain subsidiaries of CTO for the purchase of
On January 5, 2022, the Company entered into a purchase and sale agreement with a certain subsidiary of CTO for the purchase of
The entry into these purchase and sale agreements, and subsequent completion of the related acquisitions, are a result of the Company exercising its right to purchase the aforementioned properties under the ROFO Agreement.
Conflicts of Interest
Conflicts of interest may exist or could arise in the future with CTO and its affiliates, including our Manager, the individuals who serve as our executive officers and executive officers of CTO, any individual who serves as a director of our company and as a director of CTO and any limited partner of the Operating Partnership. Conflicts may include, without limitation: conflicts arising from the enforcement of agreements between us and CTO or our Manager; conflicts in the amount of time that executive officers and employees of CTO, who are provided to us through our Manager, will spend on our affairs versus CTO’s affairs; and conflicts in future transactions that we may pursue with CTO and its affiliates. We do not generally expect to enter into joint ventures with CTO, but if we do so, the terms and conditions of our joint venture investment will be subject to the approval of a majority of disinterested directors of the Board.
In addition, we are subject to conflicts of interest arising out of our relationships with our Manager. Pursuant to the Management Agreement, our Manager is obligated to supply us with our senior management team. However, our Manager is not obligated to dedicate any specific CTO personnel exclusively to us, nor are the CTO personnel provided to us by our Manager obligated to dedicate any specific portion of their time to the management of our business. Additionally, our Manager is a wholly owned subsidiary of CTO. All of our executive officers are executive officers and employees of CTO and one of our officers (John P. Albright) is also a member of CTO’s board of directors. As a result, our Manager and the CTO personnel it provides to us may have conflicts between their duties to us and their duties to, and interests in, CTO.
We may acquire, sell, or finance net leased properties that would potentially fit the investment criteria for our Manager or its affiliates. Similarly, our Manager or its affiliates may acquire, sell, or finance net leased properties that would
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potentially fit our investment criteria. Although such acquisitions or dispositions could present conflicts of interest, we nonetheless may pursue and consummate such transactions. Additionally, we may engage in transactions directly with our Manager or its affiliates, including the purchase and sale of all or a portion of a portfolio of assets. If we acquire a net leased property from CTO or one of its affiliates or sell a net leased property to CTO or one of its affiliates, the purchase price we pay to CTO or one of its affiliates or the purchase price paid to us by CTO or one of its affiliates may be higher or lower, respectively, than the purchase price that would have been paid to or by us if the transaction were the result of arm’s length negotiations with an unaffiliated third party.
In deciding whether to issue additional debt or equity securities, we will rely, in part, on recommendations made by our Manager. While such decisions are subject to the approval of the Board, our Manager is entitled to be paid a base management fee that is based on our “total equity” (as defined in the Management Agreement). As a result, our Manager may have an incentive to recommend that we issue additional equity securities at dilutive prices.
All of our executive officers are executive officers and employees of CTO. These individuals and other CTO personnel provided to us through our Manager devote as much time to us as our Manager deems appropriate. However, our executive officers and other CTO personnel provided to us through our Manager may have conflicts in allocating their time and services between us, on the one hand, and CTO and its affiliates, on the other. During a period of prolonged economic weakness or another economic downturn affecting the real estate industry or at other times when we need focused support and assistance from our Manager and the CTO executive officers and other personnel provided to us through our Manager, we may not receive the necessary support and assistance we require or that we would otherwise receive if we were self-managed.
Additionally, the ROFO Agreement does contain exceptions to CTO’s exclusivity for opportunities that include only an incidental interest in single-tenant, net leased properties. Accordingly, the ROFO Agreement will not prevent CTO from pursuing certain acquisition opportunities that otherwise satisfy our then-current investment criteria.
Our directors and executive officers have duties to our company under applicable Maryland law in connection with their management of our company. At the same time, PINE GP has fiduciary duties, as the general partner, to the Operating Partnership and to the limited partners under Delaware law in connection with the management of the Operating Partnership. These duties as a general partner to the Operating Partnership and its partners may come into conflict with the duties of our directors and executive officers to us. Unless otherwise provided for in the relevant partnership agreement, Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards under which it owes its limited partners the highest duties of loyalty and care and which generally prohibits such general partner from taking any action or engaging in any transaction as to which it has a conflict of interest. The partnership agreement provides that in the event of a conflict between the interests of our stockholders on the one hand and the limited partners of the Operating Partnership on the other hand, PINE GP will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or the limited partners; provided, however, that so long as we own a controlling interest in the Operating Partnership, any such conflict that we, in our sole and absolute discretion, determine cannot be resolved in a manner not adverse to either our stockholders or the limited partners of the Operating Partnership shall be resolved in favor of our stockholders, and we shall not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by the limited partners in connection with such decisions.
Revenue Sharing Agreement
On December 4, 2023, CTO entered into an asset management agreement directly with the borrower under the Mortgage Note (as described in Note 4, “Commercial Loans and Investments”) to manage the portfolio of assets secured by the Mortgage Note. The Company entered into a revenue sharing agreement with CTO whereby the Company is expected to receive a share of the asset management fees, disposition management fees, leasing commissions, and other fees related to CTO’s management and administration of the portfolio (the “Revenue Sharing Agreement”). The Company’s share of the fees under the Revenue Sharing Agreement will be based on fees earned by CTO associated with the single tenant properties within the portfolio. During the three months ended March 31, 2024, the Company recognized $
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NOTE 19. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
From time to time, the Company may be a party to certain legal proceedings, incidental to the normal course of business. The Company is not currently a party to any pending or threatened legal proceedings that we believe could have a material adverse effect on the Company’s business or financial condition.
CONTRACTUAL COMMITMENTS – EXPENDITURES
The Company is committed to fund
NOTE 20. BUSINESS SEGMENT DATA
The Company operates in
Our income property operations consist of lease income from income producing properties and our business plan is focused on investing in additional income-producing properties. Our income property operations accounted for
The Company’s chief operating decision maker evaluates segment performance based on operating income. The Company’s reportable segments are strategic business units that offer different products. They are managed separately because each segment requires different management techniques, knowledge, and skill.
Information about the Company’s operations in different segments for the three months ended March 31, 2024 and 2023 is as follows (in thousands):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Revenues: | | | | | | |
Lease Income | | $ | | | $ | |
Interest Income from Commercial Loans and Investments | | | | | | — |
Other Revenue | | | | | | — |
Total Revenues | | $ | | | $ | |
Operating Income (Loss): | | | | | | |
Lease Income | | $ | | | $ | |
Interest Income from Commercial Loans and Investments | | | | | | — |
Other Revenue | | | | | | — |
General and Corporate Expenses | | | ( | | | ( |
Provision for Impairment | | | ( | | | — |
Gain on Disposition of Assets | | | — | | | |
Gain (Loss) on Extinguishment of Debt | | | — | | | |
Total Operating Income | | $ | | | $ | |
Depreciation and Amortization: | | | | | | |
Income Properties | | $ | | | $ | |
Total Depreciation and Amortization | | $ | | | $ | |
Capital Expenditures: | | | | | | |
Income Properties | | $ | | | $ | |
Commercial Loans and Investments | | | | | | — |
Total Capital Expenditures | | $ | | | $ | |
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Identifiable assets of each segment as of March 31, 2024 and December 31, 2023 are as follows (in thousands):
| | As of | ||||
| | March 31, 2024 | | December 31, 2023 | ||
Identifiable Assets: | | | | | | |
Income Properties | | $ | | | $ | |
Commercial Loans and Investments | | | | | | |
Corporate and Other | | | | | | |
Total Assets | | $ | | | $ | |
Operating income represents income from continuing operations before interest expense, and investment and other income. General and corporate expenses are an aggregate of general and administrative expenses and depreciation and amortization expense. Identifiable assets by segment are those assets that are used in the Company’s operations in each segment. Corporate and other assets consist primarily of cash and restricted cash as well as the interest rate swaps.
NOTE 21. SUBSEQUENT EVENTS
Subsequent events and transactions were evaluated through April 18, 2024, the date the consolidated financial statements were issued.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When we refer to “we,” “us,” “our,” or “the Company,” we mean Alpine Income Property Trust, Inc. and its consolidated subsidiaries. References to “Notes to Financial Statements” refer to the Notes to the Consolidated Financial Statements of Alpine Income Property Trust, Inc. included in this Quarterly Report on Form 10-Q. Some of the comments we make in this section are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section below entitled “Special Note Regarding Forward-Looking Statements.” Certain factors that could cause actual results or events to differ materially from those the Company anticipates or projects are described in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Special Note Regarding Forward-Looking Statements
This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “will,” “could,” “may,” “should,” “plan,” “potential,” “predict,” “forecast,” “project,” and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Forward-looking statements are made based upon management’s expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management.
Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. These risks and uncertainties include, but are not limited to, the strength of the real estate market; the impact of a prolonged recession or downturn in economic conditions; our ability to successfully execute acquisition or development strategies; credit risk associated with us investing in commercial loans and investments; any loss of key management personnel; changes in local, regional, national and global economic conditions affecting the real estate development business and properties, including unstable macroeconomic conditions due to, among other things, geopolitical conflicts, inflation, and rising interest rates; the impact of competitive real estate activity; the loss of any major property tenants; the ultimate geographic spread, severity and duration of pandemics, actions that may be taken by governmental authorities to contain or address the impact of such pandemics, and the potential
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negative impacts of such pandemics on the global economy and our financial condition and results of operations; and the availability of capital. These risks and uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.
See “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of these risks, as well as additional risks and uncertainties that could cause actual results or events to differ materially from those described in the Company’s forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
OVERVIEW
Alpine Income Property Trust, Inc. is a Maryland corporation that conducts its operations so as to qualify as a REIT for U.S. federal income tax purposes. Substantially all of our operations are conducted through our Operating Partnership.
We seek to acquire, own and operate primarily freestanding, commercial retail real estate properties located in the United States primarily leased pursuant to long-term net leases. We target tenants in industries that we believe are favorably impacted by macroeconomic trends that support consumer spending, stable and growing employment, and positive consumer sentiment, as well as tenants in industries that have demonstrated resistance to the impact of the e-commerce retail sector or who use a physical presence as a component of their omnichannel strategy. We also seek to invest in properties that are net leased to tenants that we believe have attractive credit characteristics, stable operating histories, healthy rent coverage levels, are well-located within their respective markets and/or have rents at-or-below market rent levels. Furthermore, we believe that the size of our company allows us, for at least the near term, to focus our investment activities on the acquisition of single properties or smaller portfolios of properties that represent a transaction size that most of our publicly-traded net lease REIT peers will not pursue on a consistent basis.
Our strategy for investing in income-producing properties is focused on factors including, but not limited to, long-term real estate fundamentals, including those markets experiencing significant economic growth. We employ a methodology for evaluating targeted investments in income-producing properties which includes an evaluation of: (i) the attributes of the real estate (e.g., location, market demographics, comparable properties in the market, etc.); (ii) an evaluation of the existing tenant(s) (e.g., credit-worthiness, property level sales, tenant rent levels compared to the market, etc.); (iii) other market-specific conditions (e.g., tenant industry, job and population growth in the market, local economy, etc.); and (iv) considerations relating to the Company’s business and strategy (e.g., strategic fit of the asset type, property management needs, alignment with the Company’s structure, etc.).
During the three months ended March 31, 2024, the Company acquired one land parcel, for which the Company already owned the property leased to CVS in Baton Rouge, Louisiana, for a purchase price of $1.0 million. No properties were sold during the three months ended March 31, 2024.
As of March 31, 2024, we owned 138 properties with an aggregate gross leasable area of 3.8 million square feet, located in 35 states, with a weighted average remaining lease term of 6.9 years. Our portfolio was 99% occupied as of March 31, 2024.
We may also acquire or originate commercial loans and investments associated with commercial real estate located in the United States. Our investments in commercial loans are generally secured by real estate or the borrower’s pledge of its ownership interest in an entity that owns real estate. During the three months ended March 31, 2024, the Company originated one commercial loan with a total funding commitment of $7.2 million. As of March 31, 2024, the Company’s commercial loan investments portfolio included three construction loans and one mortgage note with a total carrying value of $38.0 million.
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The Company has no employees and is externally managed by Alpine Income Property Manager, LLC, a Delaware limited liability company and a wholly owned subsidiary of CTO (our “Manager”). CTO is a Maryland corporation that is a publicly traded diversified REIT and the sole member of our Manager.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
The following presents the Company’s results of operations for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 (in thousands):
| | Three Months Ended | | | |||||||
| March 31, 2024 | | March 31, 2023 | | $ Variance | | % Variance | ||||
Revenues: | | | | | | | | | | | |
Lease Income | | $ | 11,464 | | $ | 11,156 | | $ | 308 | | 2.8% |
Interest Income from Commercial Loan Investments | | | 903 | | | — | | | 903 | | 100.0% |
Other Revenue | | | 99 | | | — | | | 99 | | 100.0% |
Total Revenues | | | 12,466 | | | 11,156 | | | 1,310 | | 11.7% |
Operating Expenses: | | | | | | | | | | | |
Real Estate Expenses | | | 1,928 | | | 1,434 | | | 494 | | 34.4% |
General and Administrative Expenses | | | 1,542 | | | 1,515 | | | 27 | | 1.8% |
Provision for Impairment | | | 31 | | | — | | | 31 | | 100.0% |
Depreciation and Amortization | | | 6,382 | | | 6,335 | | | 47 | | 0.7% |
Total Operating Expenses | | | 9,883 | | | 9,284 | | | 599 | | 6.5% |
Gain on Disposition of Assets | | | — | | | 4,453 | | | (4,453) | | (100.0%) |
Gain on Extinguishment of Debt | | | — | | | 23 | | | (23) | | (100.0%) |
Net Income from Operations | | | 2,583 | | | 6,348 | | | (3,765) | | (59.3%) |
Investment and Other Income | | | 69 | | | 10 | | | 59 | | 590.0% |
Interest Expense | | | (2,935) | | | (2,613) | | | (322) | | 12.3% |
Net Income (Loss) | | | (283) | | | 3,745 | | | (4,028) | | (107.6%) |
Less: Net (Income) Loss Attributable to Noncontrolling Interest | | | 23 | | | (406) | | | 429 | | 105.7% |
Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | | $ | (260) | | $ | 3,339 | | $ | (3,599) | | (107.8%) |
Lease Income and Real Estate Expenses
Revenue from our property operations during the three months ended March 31, 2024 and 2023, totaled $11.5 million and $11.2 million, respectively. The $0.3 million increase in lease income is primarily attributable to an increase in reimbursable revenue. The direct costs of revenues for our income properties totaled $1.9 million and $1.4 million during the three months ended March 31, 2024 and 2023, respectively. The $0.5 million increase in the direct cost of revenues is reflective of increased reimbursable expenses as well as a portion of portfolio expenses being non-recoverable pursuant to tenant leases.
Commercial Loans and Investments
Interest income from commercial loans and investments totaled $0.9 million for the three months ended March 31, 2024. The income is attributable to three loans originated by the Company during the year ended December 31, 2023 as well as one loan originated during the three months ended March 31, 2024. There were no commercial loans and investments generating interest income during the three months ended March 31, 2023.
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Other Revenue
Other revenue totaled $0.1 million for the three months ended March 31, 2024. The revenue is attributable to fees earned from a revenue sharing agreement the Company entered into with CTO as further described in Note 18, “Related Party Management Company” in the Notes to the Financial Statements. There were no revenue sharing agreements generating income during the three months ended March 31, 2023.
General and Administrative Expenses
The following table represents the Company’s general and administrative expenses for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 (in thousands):
| | Three Months Ended | | | | | | ||||
| | March 31, 2024 | | March 31, 2023 | | $ Variance | | % Variance | |||
Management Fee to Manager | | $ | 1,046 | | $ | 1,098 | | $ | (52) | | (4.7%) |
Director Stock Compensation Expense | | | 79 | | | 80 | | | (1) | | (1.3%) |
Director & Officer Insurance Expense | | | 53 | | | 62 | | | (9) | | (14.5%) |
Additional General and Administrative Expense | | | 364 | | | 275 | | | 89 | | 32.4% |
Total General and Administrative Expenses | | $ | 1,542 | | $ | 1,515 | | $ | 27 | | 1.8% |
General and administrative expenses totaled $1.5 million during the three months ended March 31, 2024 and 2023. The $0.1 million decrease in the management fee is attributable to a decrease in the Company’s equity base. The $0.1 million increase in additional general and administrative expenses is attributable to increased activity in states with franchise fees as well as an increase in audit and tax fees.
Provision for Impairment
During the three months ended March 31, 2024, the Company recorded a $0.03 million impairment charge representing the provision for losses related to our income properties as further described in Note 7, “Provision for Impairment”. There were no impairment charges on the Company’s income property portfolio during the three months ended March 31, 2023.
Depreciation and Amortization
Depreciation and amortization expense totaled $6.4 million and $6.3 million during the three months ended March 31, 2024 and 2023, respectively. The $0.1 million increase in the depreciation and amortization expense is reflective of the increase in asset value of the Company's property portfolio.
Gain on Disposition of Assets
During the three months ended March 31, 2023, the Company sold ten properties for an aggregate sales price of $56.2 million generating aggregate gains on sale of $4.5 million. The Company did not sell any properties during the three months ended March 31, 2024.
Investment and Other Income
Investment and other income totaled $0.1 million and less than $0.1 million during the three months ended March 31, 2024 and 2023, respectively. The increase is attributable to higher interest rates on bank deposits.
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Interest Expense
Interest expense totaled $2.9 million and $2.6 million during the three months ended March 31, 2024 and 2023, respectively. The $0.3 million increase in interest expense is attributable to the higher average outstanding debt balance during the three months ended March 31, 2024.
Net Income (Loss)
Net loss totaled $0.3 million and net income totaled $3.7 million during the three months ended March 31, 2024 and 2023, respectively. The $4.0 million decrease in net income is attributable to the factors described above, most notably the decrease in the gain on disposition of assets of $4.5 million.
LIQUIDITY AND CAPITAL RESOURCES
Cash totaled $8.0 million as of March 31, 2024, including restricted cash of $2.8 million. See Note 2 “Summary of Significant Accounting Policies” under the heading Restricted Cash for the Company’s disclosure related to its restricted cash balance as of March 31, 2024.
Long-Term Debt. As of March 31, 2024, the Company had an outstanding balance of $73.0 million on the $250 million revolving Credit Facility. The Company also had $200.0 million in term loans outstanding as of March 31, 2024. See Note 12, “Long-Term Debt” for the Company’s disclosure related to its long-term debt balance at March 31, 2024.
Acquisitions and Dispositions. As further described in Note 3, “Property Portfolio,” the Company acquired one land parcel, for which the Company already owned the property leased to CVS in Baton Rouge, Louisiana, for a purchase price of $1.0 million. No properties were sold during the three months ended March 31, 2024.
ATM Program. During the three months ended March 31, 2024, the Company did not sell any shares under the 2022 ATM Program.
Capital Expenditures. As of March 31, 2024, the Company had no commitments related to capital expenditures for the maintenance of fixed assets, such as land, buildings, and equipment. The Company is committed to fund three construction loans as described in Note 4, “Commercial Loans and Investments”. The unfunded portion of the construction loans totaled $6.5 million as of March 31, 2024.
We believe we will have sufficient liquidity to fund our operations, capital requirements, maintenance, and debt service requirements over the next twelve months and into the foreseeable future, with cash on hand, cash flow from our operations, proceeds from the completion of the sale of assets utilizing the reverse like-kind 1031 exchange structure, $109.5 million of availability remaining under the 2022 ATM Program, and $177.0 million of available capacity on the existing $250.0 million Credit Facility.
The Board and management consistently review the allocation of capital with the goal of providing the best long-term return for our stockholders. These reviews consider various alternatives, including increasing or decreasing regular dividends, repurchasing the Company’s securities, and retaining funds for reinvestment. Annually, the Board reviews our business plan and corporate strategies, and makes adjustments as circumstances warrant. Management’s focus is to continue our strategy of investing in net leased properties by utilizing the capital we raise and available borrowing capacity from the Credit Facility to increase our portfolio of income-producing properties, providing stabilized cash flows with strong risk-adjusted returns primarily in larger metropolitan areas and growth markets.
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Non-GAAP Financial Measures
Our reported results are presented in accordance with GAAP. We also disclose FFO and AFFO, both of which are non-GAAP financial measures. We believe these two non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.
FFO and AFFO do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as reported on our statement of cash flows as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.
We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as GAAP net income or loss adjusted to exclude real estate related depreciation and amortization, as well as extraordinary items (as defined by GAAP) such as net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and impairments associated with the implementation of current expected credit losses on commercial loans and investments at the time of origination, including the pro rata share of such adjustments of unconsolidated subsidiaries. To derive AFFO, we further modify the NAREIT computation of FFO to include other adjustments to GAAP net income related to non-cash revenues and expenses such as loss on extinguishment of debt, amortization of above- and below-market lease related intangibles, straight-line rental revenue, amortization of deferred financing costs, non-cash compensation, and other non-cash income or expense. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We use AFFO as one measure of our performance when we formulate corporate goals.
FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains or losses on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other companies.
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Reconciliation of Non-GAAP Measures (in thousands, except share data):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
Net Income (Loss) | | $ | (283) | | $ | 3,745 |
Depreciation and Amortization | | | 6,382 | | | 6,335 |
Provision for Impairment | | | 31 | | | — |
Gain on Disposition of Assets | | | — | | | (4,453) |
Funds From Operations | | $ | 6,130 | | $ | 5,627 |
Adjustments: | | | | | | |
Gain on Extinguishment of Debt | | | — | | | (23) |
Amortization of Intangible Assets and Liabilities to Lease Income | | | (110) | | | (87) |
Straight-Line Rent Adjustment | | | (65) | | | (165) |
Non-Cash Compensation | | | 79 | | | 80 |
Amortization of Deferred Financing Costs to Interest Expense | | | 180 | | | 174 |
Other Non-Cash Expense | | | 29 | | | 29 |
Adjusted Funds From Operations | | $ | 6,243 | | $ | 5,635 |
| | | | | | |
Weighted Average Number of Common Shares: | | | | | | |
Basic | | | 13,621,208 | | | 14,000,553 |
Diluted | | | 14,845,062 | | | 15,704,047 |
Other Data (in thousands, except per share data):
| | Three Months Ended | ||||
| | March 31, 2024 | | March 31, 2023 | ||
FFO | | $ | 6,130 | | $ | 5,627 |
FFO per Diluted Share | | $ | 0.41 | | $ | 0.36 |
| | | | | | |
AFFO | | $ | 6,243 | | $ | 5,635 |
AFFO per Diluted Share | | $ | 0.42 | | $ | 0.36 |
OFF-BALANCE SHEET ARRANGEMENTS
None.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates include those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Our most significant estimate is as follows:
Purchase Accounting for Acquisitions of Real Estate Subject to a Lease. As required by GAAP, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value. The assumptions underlying the allocation of relative fair values are based on market information including, but not limited to: (i) the estimate of replacement cost of improvements under the cost approach, (ii) the estimate of land values based on comparable sales under the sales comparison approach, and (iii) the estimate of future benefits determined by either a reasonable rate of return over a single year’s net cash flow, or a forecast of net cash flows projected over a reasonable investment horizon under the income capitalization approach. The underlying assumptions are subject to uncertainty and thus any changes to the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have
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an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation and amortization as a result of the fair value allocation. There were no acquisitions subject to this estimate for the three months ended March 31, 2024.
See Note 2, “Summary of Significant Accounting Policies”, for further discussion of the Company’s accounting estimates and policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, an evaluation, as required by Rules 13(a)-15 and 15(d)-15 of the Exchange Act was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Interim Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act). Based on that evaluation, the CEO and CFO have concluded that the design and operation of the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company may be a party to certain legal proceedings, incidental to the normal course of business. The Company is not currently a party to any pending or threatened legal proceedings that we believe could have a material adverse effect on the Company’s business or financial condition.
ITEM 1A. RISK FACTORS
As of March 31,
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales of equity securities of the Company during the three months ended March 31, 2024.
38
Issuer Purchases of Equity Securities
The following share repurchases were made during the three months ended March 31, 2024:
|
| Total Number |
| Average Price |
| Total Number of |
| Maximum Number (or | ||
1/1/2024 - 1/31/2024 | | 45,768 | | | 16.90 | | 45,768 | | $ | — |
2/1/2024 - 2/29/2024 | | — | | | — | | — | | $ | — |
3/1/2024 - 3/31/2024 | | — | | | — | | — | | $ | — |
Total | | 45,768 | | $ | 16.90 | | 45,768 | | | |
| (1) | In July 2023, the Company’s Board of Directors approved a $15 million stock repurchase program under which $15.0 million of the Company’s stock had been repurchased as of March 31, 2024. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
39
ITEM 6. EXHIBITS
| (a) | Exhibits: |
| | |
| | |
Exhibit 3.1 | | |
| | |
Exhibit 3.2 | | |
| | |
Exhibit 4.1 | | |
| | |
Exhibit 31.1* | | Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
Exhibit 31.2* | | Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
Exhibit 32.1** | | |
| | |
Exhibit 32.2** | | |
| | |
Exhibit 101.INS | | Inline XBRL Instance Document |
| | |
Exhibit 101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
| | |
Exhibit 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
Exhibit 101.DEF | | Inline XBRL Taxonomy Definition Linkbase Document |
| | |
Exhibit 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
Exhibit 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
Exhibit 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| | |
* Filed herewith | | |
| | |
** Furnished herewith
40
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| ALPINE INCOME PROPERTY TRUST, INC. | ||
|
| (Registrant) | ||
| | | | |
April 18, 2024 |
| By: | | /s/ John P. Albright |
|
| | | John P. Albright President and Chief Executive Officer (Principal Executive Officer) |
| | | | |
April 18, 2024 |
| By: | | /s/ Lisa M. Vorakoun |
|
| | | Lisa M. Vorakoun, Vice President, Chief Accounting Officer and Interim Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
| | | | |
| | | | |
| | | | |
41
Exhibit 31.1
CERTIFICATIONS
I, John P. Albright, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Alpine Income Property Trust, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: April 18, 2024
By: |
| /s/ John P. Albright | | |
|
| John P. Albright | | |
|
| President and Chief Executive Officer | | |
|
| (Principal Executive Officer) | | |
Exhibit 31.2
CERTIFICATIONS
I, Lisa M. Vorakoun, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Alpine Income Property Trust, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: April 18, 2024
By: |
| /s/ Lisa M. Vorakoun | | |
|
| Lisa M. Vorakoun, Vice President, | | |
|
| Chief Accounting Officer and Interim Chief Financial Officer and Treasurer | | |
|
| (Principal Financial Officer and Principal Accounting Officer) | | |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alpine Income Property Trust, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. Albright, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 18, 2024
By: |
| /s/ John P. Albright | | |
|
| John P. Albright | | |
|
| President and Chief Executive Officer | | |
|
| (Principal Executive Officer) | | |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alpine Income Property Trust, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lisa M. Vorakoun, Vice President, Chief Accounting Officer and Interim Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 18, 2024
By: |
| /s/ Lisa M. Vorakoun | | |
|
| Lisa M. Vorakoun, Vice President, | | |
|
| Chief Accounting Officer and Interim Chief Financial Officer and Treasurer | | |
|
| (Principal Financial Officer and Principal Accounting Officer) | | |