Q1 2020 Earnings Call

April 28, 2020

Good day, and welcome to the Alpine income property trust quarter one 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a cock Specialists by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then 1 on your test tone to withdraw your question, please press * then two, please note this event is being recorded. I would now like to turn the conference over to mister John Albright president and CEO, please go ahead.

Operator 3: Good day, and welcome to the Alpine Income Property Trust Q1 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. John Albright, President and CEO. Please go ahead.

Operator: Good day, and welcome to the Alpine Income Property Trust Q1 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. John Albright, President and CEO. Please go ahead.

Thank you operator.

Good morning, and welcome to today's conference call to review the operating results of Alpine income property trust for the quarter ended March 31st. 2020. My name is John Albright president CEO of the company on a call with me is Mark Patton our CFO and Dan Smith our general counsel and corporate secretary Mark and I will review the details of our first-quarter financial results in in a moment for life turned over to Mark to provide you with a customer disclosures regarding our comments on this call today and a few points regarding the format of our call. Good morning. Everyone else during the call today will make certain statements that may be considered to be forward-looking statements under Federal Securities Law companies actual future results May differ significantly from the matters discussed in these forward-looking statements month and we may not release revision to these forward-looking statements to reflect changes after the statements were made factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time.

John P. Albright: Thank you, operator. Good morning, and welcome to today's conference call to review the operating results of Alpine Income Property Trust for the quarter ended 31 March 2020. My name is John Albright, President and CEO of the company. On the call with me is Philip Mays, our CFO, and Daniel E. Smith, our General Counsel and Corporate Secretary. Philip Mays and I will review the details of our Q1 financial results in a moment. First, I'll turn it over to Philip Mays to provide you with the customary disclosures regarding our comments on this call today, and a few points regarding the format of our call.

John Albright: Thank you, operator. Good morning, and welcome to today's conference call to review the operating results of Alpine Income Property Trust for the quarter ended 31 March 2020. My name is John Albright, President and CEO of the company. On the call with me is Mark Patten, our CFO, and Daniel E. Smith, our General Counsel and Corporate Secretary. Mark Mays and I will review the details of our Q1 financial results in a moment. First, I'll turn it over to Philip Mays to provide you with the customary disclosures regarding our comments on this call today, and a few points regarding the format of our call.

Philip Mays: Thanks, John. Good morning, everyone. During the call today, we'll make certain statements that may be considered to be forward-looking statements under federal securities law. Company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in our earnings release issued last night. Let me note that we filed our Q1 2020 investor presentation last night, which is now available on our website. Our investor presentation provides additional information you may find useful and that we may reference during this call. With that, I'll turn it back over to John.

Mark Patten: Thanks, John. Good morning, everyone. During the call today, we'll make certain statements that may be considered to be forward-looking statements under federal securities law. Company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in our earnings release issued last night. Let me note that we filed our Q1 2020 investor presentation last night, which is now available on our website. Our investor presentation provides additional information you may find useful and that we may reference during this call. With that, I'll turn it back over to John.

A greater detail in the company's filings with the SEC and in our earnings release issued last night. Let me note that we filed our queue 12020 investor presentation last night, which is now available on our website our home and provides additional information. You may find useful and then we may reference during this call with that. I'll turn it back over to Johnson. Thanks Bart. Needless to say the last two months have been extraordinary time in our country's history and certainly in the short history of our company prior to the onset of the covid-19 pandemic. Our acquisition activities were ahead of our expectations as we purchased nine single wage at least retail properties deploying approximately $47 and weighted average going in cap rate at 7.1% The weighted average lease term of nine properties with a month and half years as the end of the quarter our portfolio consists of 29 properties with over a million square feet of rentable space located in 13 states, and notably approximately dead.

John P. Albright: Thanks, Mark. Needless to say, the last two months have been an extraordinary time in our country's history and certainly in the short history of our company. Prior to the onset of the COVID-19 pandemic, our acquisition activities were ahead of our expectations as we purchased 9 single-tenant net lease retail properties deploying approximately $47 million at a weighted average going-in cap rate of 7.1%. The weighted average lease term of the 9 properties was 11.5 years. At the end of the quarter, our portfolio consists of 29 properties with over 1 million sq ft of rentable space located in 13 states. Notably, approximately 68% of our annualized base rent is located in the top 10 ULI, top 25 markets.

John Albright: Thanks, Mark. Needless to say, the last two months have been an extraordinary time in our country's history and certainly in the short history of our company. Prior to the onset of the COVID-19 pandemic, our acquisition activities were ahead of our expectations as we purchased 9 single-tenant net lease retail properties deploying approximately $47 million at a weighted average going-in cap rate of 7.1%. The weighted average lease term of the 9 properties was 11.5 years. At the end of the quarter, our portfolio consists of 29 properties with over 1 million sq ft of rentable space located in 13 states. Notably, approximately 68% of our annualized base rent is located in the top 10 ULI, top 25 markets.

68% of our annualized base rent is located in the top ten Uli top 25 markets while the additions to our portfolio and a quarter or retail properties off as we indicated cuz our Focus we're certainly pleased to have our two largest properties representing 34% of our portfolio least two office tenants given the impact that the government governmental response to the covid-19 pandemics had on the retail tenants in terms of our future acquisition activities at the onset of the covid-19 pandemic we felt it was offered it to take a more defensive posture until the uncertainties created by the pandemic were reduced and as a result. We terminated approximately 75 million dollars in pending acquisitions.

John P. Albright: While the additions to our portfolio in the quarter were retail properties, as we indicated was our focus, we are certainly pleased to have our two largest properties representing 34% of our portfolio leased to office tenants, given the impact that the governmental response to the COVID-19 pandemic has had on the retail tenants. In terms of our future acquisition activities at the onset of the COVID-19 pandemic, we felt it was prudent to take a more defensive posture until the uncertainties created by the pandemic were reduced. As a result, we terminated approximately $75 million in pending acquisitions. We withdrew our guidance for 2020. We're hopeful that the disruptions to the economy and our tenants' businesses specifically will soon subside.

John Albright: While the additions to our portfolio in the quarter were retail properties, as we indicated was our focus, we are certainly pleased to have our two largest properties representing 34% of our portfolio leased to office tenants, given the impact that the governmental response to the COVID-19 pandemic has had on the retail tenants. In terms of our future acquisition activities at the onset of the COVID-19 pandemic, we felt it was prudent to take a more defensive posture until the uncertainties created by the pandemic were reduced. As a result, we terminated approximately $75 million in pending acquisitions. We withdrew our guidance for 2020. We're hopeful that the disruptions to the economy and our tenants' businesses specifically will soon subside.

And we went through our guidance for 2020. We're hopeful that the disruptions to the economy and our tenants businesses specifically will soon subside.

I'll provide some additional perspective on actions. We have taken in response to the covid-19 outbreak, but first, I'll turn it over to Mark the Highlight a few elements of our first quarter operating results in some of our balance sheet activities makes John as John mentioned. We had a productive first quarter in terms of our acquisition activity the onset of the covid-19 pandemic in the back half of the quarter impacted our operation for the quarter which I'll mention in a moment as I release noted our total revenue for the quarter was approximately 4.2 million. Our ffo was approximately 2 million or approximately twenty two cents per share with an r a f f o was approximately 1.8 million or approximately twenty cents per share are operating results were impacted by are expensing of approximately $83,000 of deal costs wage were the result of the termination of the seventy-five million dollars worth of Acquisitions that John mentioned

John P. Albright: I'll provide some additional perspective on actions we have taken in response to the COVID-19 outbreak, but first, I'll turn it over to Mark to highlight a few elements of our Q1 operating results and some of our balance sheet activities.

John Albright: I'll provide some additional perspective on actions we have taken in response to the COVID-19 outbreak, but first, I'll turn it over to Mark to highlight a few elements of our Q1 operating results and some of our balance sheet activities.

Philip Mays: Thanks, John. As John mentioned, we had a productive Q1 in terms of our acquisition activity. The onset of the COVID-19 pandemic in the back half of the quarter impacted our operating results for the Q1, which I'll mention in a moment. As our release noted, our total revenue for the Q1 was approximately $4.2 million. Our FFO was approximately $2 million or approximately $0.22 per share. Our AFFO was approximately $1.8 million or approximately $0.20 per share. Our operating results were impacted by our expensing of approximately $83,000 of deal costs, which were the result of the termination of the $75 million worth of acquisitions that John mentioned.

Mark Patten: Thanks, John. As John mentioned, we had a productive Q1 in terms of our acquisition activity. The onset of the COVID-19 pandemic in the back half of the quarter impacted our operating results for the Q1, which I'll mention in a moment. As our release noted, our total revenue for the Q1 was approximately $4.2 million. Our FFO was approximately $2 million or approximately $0.22 per share. Our AFFO was approximately $1.8 million or approximately $0.20 per share. Our operating results were impacted by our expensing of approximately $83,000 of deal costs, which were the result of the termination of the $75 million worth of acquisitions that John mentioned.

We also had higher than expected.

Due to the recognition of approximately 288000 of cost associated with the audit Services related to our 2019 annual audit given the short stuff. 2019 subsequent. Dry po majority that out at work for that year occurred in the first quarter. So the expense was a bit larger than we expected while we expect going forward. This expense will be recognized more rapidly over the course. This particular circumstance. We think what unique to are coming out from our IPO lastly. Our interest expense was hired by about $19,000 which stems from our draw of $20 credit facility in mid-march, which was in connection with our more defensive Posh or posture that John mentioned which enabled us to further solidify our liquidity due to the uncertainty surrounding the covid-19. In terms of our liquidity position in addition to the twenty million dollars that we drew towards the end of the quarter are borrowing capacity on the credit facility stands, approximately Thirty million dollars providing us wage.

Philip Mays: We also had higher than expected G&A costs due to the recognition of approximately $288,000 of costs associated with the audit services related to our 2019 annual audit. Given the short stub period in 2019 subsequent to our IPO, the majority of that audit work for that year occurred in Q1, so the expense was a bit larger than we expected. While we expect going forward this expense will be recognized more ratably over the course of an annual period, this particular circumstance, we think, was unique to our coming out from our IPO.

Mark Patten: We also had higher than expected G&A costs due to the recognition of approximately $288,000 of costs associated with the audit services related to our 2019 annual audit. Given the short stub period in 2019 subsequent to our IPO, the majority of that audit work for that year occurred in Q1, so the expense was a bit larger than we expected. While we expect going forward this expense will be recognized more ratably over the course of an annual period, this particular circumstance, we think, was unique to our coming out from our IPO.

Philip Mays: Lastly, our interest expense was higher by about $19,000, which stemmed from our draw of $20 million on the credit facility in mid-March, which was in connection with our more defensive posture that John mentioned, which enabled us to further solidify our liquidity due to the uncertainty surrounding the COVID-19 pandemic. In terms of our liquidity position, in addition to the $20 million that we drew towards the end of the quarter, our borrowing capacity on the credit facility stands at approximately $30 million, providing us currently with approximately $50 million of liquidity.

Mark Patten: Lastly, our interest expense was higher by about $19,000, which stemmed from our draw of $20 million on the credit facility in mid-March, which was in connection with our more defensive posture that John mentioned, which enabled us to further solidify our liquidity due to the uncertainty surrounding the COVID-19 pandemic. In terms of our liquidity position, in addition to the $20 million that we drew towards the end of the quarter, our borrowing capacity on the credit facility stands at approximately $30 million, providing us currently with approximately $50 million of liquidity.

With approximately fifty million dollars of liquidity regarding the credit facility also note that just after the quarter closed. We execute an interest rate swap on 50 million dollars of our credit facility balance boxing the rate at Forty-Eight bits over five years, which puts us basically at a 1.83 point 1.83% to 2.43% range on rate of hathor credit facility. The rate swap goes into effect at the end of this month. We were very pleased with the execution on this swap lastly. I wanted to review the current status of our portfolio in terms of collections of old rent in our efforts in working with tenants that they contend with the impact of the covid-19 pandemic and the government-mandated basically shut down the economy as a Friday last week to collect at 62% of our April 2020 rent of the remaining 38% We have reached agreement with tenants on 13% of that total generally allowing for rent deferral typically of monthly rent the second month.

Philip Mays: Regarding the credit facility, I'll also note that just after the quarter close, we executed an interest rate swap on $50 million of our credit facility balance, fixing the rate at 48 bps over 5 years, which puts us basically at a 1.83% to 2.43% range on our rate of half of our credit facility. The rate swap goes into effect at the end of this month. We're very pleased with the execution on this swap. Lastly, I wanted to review the current status of our portfolio in terms of collections of April 2020 rent and our efforts in working with tenants as they contend with the impact of the COVID-19 pandemic and the government-mandated basically shutdown of the economy.

Mark Patten: Regarding the credit facility, I'll also note that just after the quarter close, we executed an interest rate swap on $50 million of our credit facility balance, fixing the rate at 48 bps over 5 years, which puts us basically at a 1.83% to 2.43% range on our rate of half of our credit facility. The rate swap goes into effect at the end of this month. We're very pleased with the execution on this swap. Lastly, I wanted to review the current status of our portfolio in terms of collections of April 2020 rent and our efforts in working with tenants as they contend with the impact of the COVID-19 pandemic and the government-mandated basically shutdown of the economy.

Philip Mays: As of Friday last week, we had collected 62% of our April 2020 rent. Of the remaining 38%, we have reached agreement with tenants on 13% of that total, generally allowing for rent deferral typically of monthly rent in Q2 of 2020, and with repayment of the deferred amounts ratably in the latter part of 2020. For the remaining 25% of that 38%, we're in active negotiations with tenants or otherwise holding firm and hope to have those agreements ironed out during the coming weeks. I'll also mention that 24 of our 29 properties remained open, either fully open or open under modified or limited operations since the onset of the pandemic. Those 24 properties represent approximately 78% of our ABR. Now I'll turn it back over to John.

Mark Patten: As of Friday last week, we had collected 62% of our April 2020 rent. Of the remaining 38%, we have reached agreement with tenants on 13% of that total, generally allowing for rent deferral typically of monthly rent in Q2 of 2020, and with repayment of the deferred amounts ratably in the latter part of 2020. For the remaining 25% of that 38%, we're in active negotiations with tenants or otherwise holding firm and hope to have those agreements ironed out during the coming weeks. I'll also mention that 24 of our 29 properties remained open, either fully open or open under modified or limited operations since the onset of the pandemic. Those 24 properties represent approximately 78% of our ABR. Now I'll turn it back over to John.

From 2020 and with repayment of the Deferred amounts radically in the latter part of 2020 for the remaining 25% of that 38% were inactive negotiations with tennis or otherwise took firm and hope to have those agreements ironed out during the coming weeks. I'll also mention that 24 of our 29 properties remained open either fully open. We're open under modified or limited operation months since the onset of the Pandemic those 24 properties represent approximately 78% of our ABR now turn it back over to John Thanks Martin closing our prepared remarks. I'd like to summarize some of the actions we have taken a response to the operate a few that we've mentioned already as Mark mentioned we have approximately fifty million dollars of the liquidity including the twenty million dollar drawn on our credit facility in the remaining available capacity just puts us in a strong position in sports or defensive posture during this period of uncertainty in the market wage.

John P. Albright: Thanks, Mark. In closing our prepared remarks, I'd like to summarize some of the actions we have taken in response to the outbreak, and a few that we've mentioned already. As Mark mentioned, we have approximately $50 million of the liquidity, including the $20 million drawn on our credit facility in the remaining available capacity. This puts us in a strong position and supports our defensive posture during this period of uncertainty in the market. Our stock was not spared with the severe dislocation in the equity markets. Given the significant discount of our stock price to our view of the company's NAV, our board approved a $5 million stock buyback in March.

John Albright: Thanks, Mark. In closing our prepared remarks, I'd like to summarize some of the actions we have taken in response to the outbreak, and a few that we've mentioned already. As Mark mentioned, we have approximately $50 million of the liquidity, including the $20 million drawn on our credit facility in the remaining available capacity. This puts us in a strong position and supports our defensive posture during this period of uncertainty in the market. Our stock was not spared with the severe dislocation in the equity markets. Given the significant discount of our stock price to our view of the company's NAV, our board approved a $5 million stock buyback in March.

Our stock was not fair.

With a severe dislocation and the equity markets and given the significant discount of our stock price to our view of the company's nav our board approved a $5 stock buyback in March and Thursday, April 24th. We have utilized nearly four million dollars of the program to acquire approximately three hundred fifty thousand three hundred fifty thousand shares at an average price of 1077.

John P. Albright: Through April 24, we have utilized nearly $4 million of the program to acquire approximately 350,000 shares at an average price of $10.77. In closing, I'd like to express our sincere hope that our shareholders, friends, and colleagues are all well and remain so during this challenging time in our nation's history. We remain optimistic that the impact of the COVID-19 pandemic will soon dissipate, and the strength of the US economy will return for the benefit of our tenants and our shareholders. That concludes our prepared remarks. At this time, operator, I'd like to open up for questions.

John Albright: Through April 24, we have utilized nearly $4 million of the program to acquire approximately 350,000 shares at an average price of $10.77. In closing, I'd like to express our sincere hope that our shareholders, friends, and colleagues are all well and remain so during this challenging time in our nation's history. We remain optimistic that the impact of the COVID-19 pandemic will soon dissipate, and the strength of the US economy will return for the benefit of our tenants and our shareholders. That concludes our prepared remarks. At this time, operator, I'd like to open up for questions.

In closing I'd like to express our sincere hope that our shareholders friends and colleagues are all well and remained. So during this challenging time in our nation's history month. We remain optimistic that the impact of the covid-19 pandemic will soon dissipate and the strength of the US economy return for the benefit of our tenants and our shareholders that concludes our prepared remarks and this month. I'm operator would like to open up the questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press star and then one on your touchtone. If you are using a speaker phone, please pick up your handset before pressing the key. If at anytime your question has been addressed and you would like to withdraw your question, please press * then two months. Our first questions today will come from very Oxford with Dee. Please give ahead. Great. Thanks guys when you look at the 25% of the tenants dead.

Operator 3: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question today will come from Barry Oxford with D.A. Davidson. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question today will come from Barry Oxford with D.A. Davidson. Please go ahead.

Kind of in negotiation with do all of them need some sort of rent deferral or or some of those just for lack of a better word form letters that have come that you probably won't give any deferment.

Barry Oxford: Great. Thanks, guys. When you look at the 25% of the tenants that you're kind of in negotiation with, do all of them need some sort of rent deferral, or are some of those just, for lack of a better word, form letters that have come that you probably won't give any deferment?

Yeah, thanks very yeah, definitely. Everyone can pay the rent. It's it's more of a form of negotiation and we're taking the approach that that we will agree to something only if we get something out of it, so we're we're kind of package economic animals as anyone else and so if we can make our position better than that's that's terrific, but if if tenants are just strictly looking for a rent a pearl without anything then we're we're fine with going to default route, right? So it's something along the lines of a blend and extend type of thing.

John P. Albright: Yeah. Thanks, Barry.

John Albright: Yeah. Thanks, Barry.

Barry Oxford: Yeah

John P. Albright: Definitely everyone can pay the rent. It's more of a form of negotiation and we're taking the approach that we will agree to something only if we get something out of it. So, we're kind of, you know, economic animals as anyone else. If we can make our position better, then that's terrific. If tenants are just strictly looking for a rent deferral without anything, then we're fine with going the default route.

John Albright: Definitely everyone can pay the rent. It's more of a form of negotiation and we're taking the approach that we will agree to something only if we get something out of it. So, we're kind of, you know, economic animals as anyone else. If we can make our position better, then that's terrific. If tenants are just strictly looking for a rent deferral without anything, then we're fine with going the default route.

I mean all kinds of different scenarios. So obviously lease extension would be something high up on our list if they want to defer it and pay a penalty rate and it kind of interest rate will will look at that. So it's kind of all across the board right right Switching gears to the Acquisitions that you had in the pipeline. Did you withdraw from that pipeline? Because you felt that pricing kind of had had moved and it was not favorable to kind of push forward or was this more look we want to rain in the horns and and and and kind of hoard cash at this particular moment a little bit of both. I mean clearly it's something under contract before the pandemic and lockdowns clearly there need to be a r e price adjustment. We didn't even we can go that route as far as talking about repricing we just dead.

Barry Oxford: Right. It's something along the lines of a blend-and-extend type of thing?

John P. Albright: I mean, all kinds of different scenarios. Obviously-

John Albright: I mean, all kinds of different scenarios. Obviously-

Barry Oxford: Right

John P. Albright: Lease extension would be something high up on our list. If they wanna defer it and pay a penalty rate, kind of an interest rate, we'll look at that. It's kind of all across the board.

John Albright: Lease extension would be something high up on our list. If they wanna defer it and pay a penalty rate, kind of an interest rate, we'll look at that. It's kind of all across the board.

Barry Oxford: Right. Switching gears to the acquisitions that you had in the pipeline, did you withdraw from that pipeline because you felt that pricing kind of had moved, and it was not favorable to kind of push forward? Was this more, look, we wanna rein in the horns and kinda hoard cash at this particular moment?

John P. Albright: A little bit of both. I mean, clearly, putting something under contract before the pandemic and lockdowns, clearly there need to be a reprice adjustment. We didn't go that route as far as talking about repricing. We just said, "Who knows how far this economic, you know, collapse goes?" Just a lot of the more conservative nature, let's kill off the pipeline, hold back. You know, we knew that tenants were going to have issues. We didn't know, you know, how broad that would be or how deep. We've

John Albright: A little bit of both. I mean, clearly, putting something under contract before the pandemic and lockdowns, clearly there need to be a reprice adjustment. We didn't go that route as far as talking about repricing. We just said, "Who knows how far this economic, you know, collapse goes?" Just a lot of the more conservative nature, let's kill off the pipeline, hold back. You know, we knew that tenants were going to have issues. We didn't know, you know, how broad that would be or how deep. We've

who knows how far this the

This economic, you know collapse go. So just a lot of the more conservative nature. Let's let's kill off the pipeline hold back, you know, we knew that 10 ounce we're going to have issues. And so we didn't know you know how broad that would be or how deep and so we've that's that's more of a conservative and and you know, not not wanting to you know by as us just to buy assets when there may be better opportunities and down the road right now that Thursday we makes sense then in light of that last question is when I'm looking at at the dividend and I guess the you know, the

John P. Albright: That's more of a conservative posture and, you know, not wanting to, you know, buy assets just to buy assets when there may be better opportunities and down the road.

John Albright: That's more of a conservative posture and, you know, not wanting to, you know, buy assets just to buy assets when there may be better opportunities and down the road.

Barry Oxford: Right. No, that absolutely makes sense. In light of that last question is when I'm looking at the dividend, and I guess you know, throughout 2020, as long as we're kind of in this environment for however how long, is it safe to say, look, Barry, kind of hold our dividend flat in here, you know, until we can kind of get back into acquisition mode? Is that a fair way to look at your dividend?

Route 20 20 as long as we're kind of in this environment forever, how long is it safe to say look very kind of hold our dividend flat in here, you know until we can kind of, you know, kind of get back into acquisition mode. Is that a fair way to look at your dividend?

Yeah, I mean look, we'll we'll you know, wait and see kind of how we end up with the tenants that we're negotiating with and see how how may is and and reassess but clearly the company, you know has the capital and it's just a matter of you know, how the cash flows look and so will you know, the boss will basically determine that after you know, seeing another another call at 30 days of activity here and and see where we are and see where the world is.

John P. Albright: Yeah. I mean, look, we'll you know, wait and see kind of how we end up with the tenants that we're negotiating with and see how May is and reassess. Clearly the company you know, has the capital. It's just a matter of you know, how the cash flows look. We'll you know, the board will basically determine that after you know, seeing another call of 30 days of activity here and see where we are and see where the world is.

John Albright: Yeah. I mean, look, we'll you know, wait and see kind of how we end up with the tenants that we're negotiating with and see how May is and reassess. Clearly the company you know, has the capital. It's just a matter of you know, how the cash flows look. We'll you know, the board will basically determine that after you know, seeing another call of 30 days of activity here and see where we are and see where the world is.

Makes sense. Thanks a lot guys. Appreciate it.

Our next question will come from Colin speaking with Raymond James, please go ahead. Hey, good morning. Thank you. First question for me is just on the durability of office rents out Ford specifically Hilton Grand Vacations has announced some cost savings measures. Just can you can you discuss if they have sought some form of rent relief and just your outlook on kind of the office component of your portfolio going forward.

Barry Oxford: Makes sense. Thanks a lot, guys. Appreciate it.

John P. Albright: Thank you.

Mark Patten: Thank you.

Collin Smith: Thanks, Barry.

John Albright: Thanks, Barry.

Operator 3: Our next question will come from Collin Smith with Raymond James. Please go ahead.

Operator: Our next question will come from Collin Smith with Raymond James. Please go ahead.

Collin Smith: Hey, good morning. Thank you. First question for me is just on the durability of office rents moving forward. Specifically, Hilton Grand Vacations has announced some cost savings measures. Just can you discuss if they have sought some form of rent relief and just your outlook on kind of the office component of your portfolio going forward?

Collin Mings: Hey, good morning. Thank you. First question for me is just on the durability of office rents moving forward. Specifically, Hilton Grand Vacations has announced some cost savings measures. Just can you discuss if they have sought some form of rent relief and just your outlook on kind of the office component of your portfolio going forward?

Sure, obviously, they paid April but you know, it's you know wouldn't be outlandish to assume that everyone's looking for something obviously as you can tell their you know, their market cap and their liquidity is certainly sufficient and this is these are these off as we have with them where they're let's see is our critical assets or mission-critical. Uh, and so we again it's kind of like walk-in Barry's question, you know, we may negotiate with them, but it's only two if we can enhance our position so, you know, that's kind of where we are off with withheld.

John P. Albright: Sure. Obviously, they paid April. You know, it's, you know, wouldn't be outlandish to assume that everyone's looking for something. Obviously, as you can tell, their, you know, their market cap and their liquidity is certainly sufficient. This is these office assets we have with them, where their lessee is our critical assets or mission critical. We again, it's kind of like in Barry's question, you know, we may negotiate with them, but it's only to if we can enhance our position. You know, that's kind of where we are with Hilton.

John Albright: Sure. Obviously, they paid April. You know, it's, you know, wouldn't be outlandish to assume that everyone's looking for something. Obviously, as you can tell, their, you know, their market cap and their liquidity is certainly sufficient. This is these office assets we have with them, where their lessee is our critical assets or mission critical. We again, it's kind of like in Barry's question, you know, we may negotiate with them, but it's only to if we can enhance our position. You know, that's kind of where we are with Hilton.

Okay, so I guess maybe maybe moving past the the Hilton Grand Vacation part of the portfolio. Can you just maybe elaborate on the extent? There's discussions with tenants that paid April rent off but are looking at the boring future rent or looking at other accommodations moving forward. I mean, is there a is there a bucket or a percentage John that you would think about? Hey, you got your April rent checks, but depending upon the duration and you kind of you at risk component of that kind of that 65% that actually paid April. Yeah outside of of Hilton which is obviously a larger tent wage. There's very little of those types of tenants that that paid April. I want to just have a discussion

Collin Smith: Okay. I guess maybe moving past just the Hilton Grand Vacations part of the portfolio, can you just maybe elaborate on, to the extent there's discussions with tenants that paid April rent but are looking at deferring future rent or looking at other accommodations moving forward? I mean, is there a bucket or a percentage, John, that you would think about, hey, you got your April rent checks, but depending upon the duration, you kind of view this as the at-risk component of that, of kind of that 60%+ that actually paid April.

Collin Mings: Okay. I guess maybe moving past just the Hilton Grand Vacations part of the portfolio, can you just maybe elaborate on, to the extent there's discussions with tenants that paid April rent but are looking at deferring future rent or looking at other accommodations moving forward? I mean, is there a bucket or a percentage, John, that you would think about, hey, you got your April rent checks, but depending upon the duration, you kind of view this as the at-risk component of that, of kind of that 60%+ that actually paid April.

John P. Albright: Yeah. Outside of Hilton, which is obviously a larger tenant with us, there's very little of those type of tenants that paid in April that wanna just have a discussion.

John Albright: Yeah. Outside of Hilton, which is obviously a larger tenant with us, there's very little of those type of tenants that paid in April that wanna just have a discussion.

Okay, that's helpful. So moving back to the to the dividend and recognized and there's a lot of uncertainty and and the current environment. I guess maybe more directly. Would you and Edward look at potentially Levering up modestly to continue to maintain the dividend, uh, the current run-rate or we if the operating cash flows aren't there. Would you look to reset the dividends to align with operating cash flows? Well it mean I think I think it's really, you know, the board it's going to look at all those sort of Alternatives but I would say that even you know, you say Levering up it's you know, because you know, the the cash flow is even from one of our tenants which you know, Wells Fargo, you know, there just is not even if even a lot of these tents, you know didn't pay you have it's not a huge amount on the dividend side, but of course we want to be prudent and wage.

Collin Smith: Okay. That's helpful. So moving back to the dividend and recognizing there's a lot of uncertainty in the current environment, I guess maybe more directly, would you and the board look at potentially levering up modestly to continue to maintain the dividend at the current run rate? Or would, if the operating cash flows aren't there, would you look to reset the dividend to align with operating cash flows?

Collin Mings: Okay. That's helpful. So moving back to the dividend and recognizing there's a lot of uncertainty in the current environment, I guess maybe more directly, would you and the board look at potentially levering up modestly to continue to maintain the dividend at the current run rate? Or would, if the operating cash flows aren't there, would you look to reset the dividend to align with operating cash flows?

John P. Albright: Well, I mean, I think it's really, you know, the board is gonna look at all those sort of alternatives. I would say that even, you know, when you say levering up, it's, you know, because, you know, the cash flows, even from one of our tenants, which is, you know, Wells Fargo, you know, even if a lot of these tenants, you know, didn't pay, it's not a huge amount on the dividend side. Of course, we wanna be prudent and, you know, have appropriate cash flow versus dividend. I think it's just kind of a discussion that, you know, the board will have later in May to make that determination.

John Albright: Well, I mean, I think it's really, you know, the board is gonna look at all those sort of alternatives. I would say that even, you know, when you say levering up, it's, you know, because, you know, the cash flows, even from one of our tenants, which is, you know, Wells Fargo, you know, even if a lot of these tenants, you know, didn't pay, it's not a huge amount on the dividend side. Of course, we wanna be prudent and, you know, have appropriate cash flow versus dividend. I think it's just kind of a discussion that, you know, the board will have later in May to make that determination.

You know have appropriate cash flow vs dividend. And so I think it's just kind of a discussion that you know, the board will have later in May to make that determination, but I would say that, you know paying the dividend, you know, our company our size is not a not a a large amount.

Okay, so it sounds like if I if I take those, it sounds like there's a there's a willingness where even if the payout ratio for a quarter or to exceed one hundred percent there might be some willingness just to kind of establish that track record to continue to maintain the dividend. But again, obviously the situation is evolving. So is that a that a fair case that's fair to say if the page the skies are clearing and and things are getting better and we just have this moment in time. I don't think we're going to do something drastic just to meet a couple months problem.

John P. Albright: I would say that, you know, paying the dividend, you know, our company our size is not a large amount.

John Albright: I would say that, you know, paying the dividend, you know, our company our size is not a large amount.

Collin Smith: Okay. It sounds like if I take those comments, it sounds like there's a willingness where even if the payout ratio for a quarter or two exceeds 100%, there might be some willingness just to kind of establish that track record to continue to maintain the dividend. But again, it obviously the situation's evolving. Is that a fair takeaway from that comment?

Collin Mings: Okay. It sounds like if I take those comments, it sounds like there's a willingness where even if the payout ratio for a quarter or two exceeds 100%, there might be some willingness just to kind of establish that track record to continue to maintain the dividend. But again, it obviously the situation's evolving. Is that a fair takeaway from that comment?

John P. Albright: Yeah. That's fair to say. If the skies are clearing and things are getting better and we just have this moment in time, I don't think we're gonna do something drastic just to meet a couple month problem.

John Albright: Yeah. That's fair to say. If the skies are clearing and things are getting better and we just have this moment in time, I don't think we're gonna do something drastic just to meet a couple month problem.

Okay, that that's helpful and then going kind of sticking with capital allocation share repurchases $5000000 buy back in place just maybe talk about the willingness or lack the capacity just in context of of your borrowings and things like that to maybe move Beyond Ugg the 5 million dollar buyback moving forward.

Collin Smith: Okay. That's helpful. Sticking with capital allocation, share repurchases, $5 million buyback in place. Just maybe talk about the willingness or capacity, just in context of your borrowings and things like that to maybe move beyond the $5 million buyback moving forward.

Collin Mings: Okay. That's helpful. Sticking with capital allocation, share repurchases, $5 million buyback in place. Just maybe talk about the willingness or capacity, just in context of your borrowings and things like that to maybe move beyond the $5 million buyback moving forward.

Yeah, I think.

Really, you know when I went it was a little bit more of a moment in time or we hope it's moment in time where the stock it was a ridiculous price and clearly the best, uh page allocation is buying back the socket at uh, you know, these implied cap rates and discount the nav and all that kind of stuff. So so I went say that that's going to be programmatic going for them and less for some reason, you know things revert back.

John P. Albright: Yeah, I think really, you know, when it was a little bit more of a moment in time, or we hope it's a moment in time, where the stock it was a ridiculous price, and clearly the best capital allocation is buying back the stock at, you know, these implied cap rates and discount to the NAV and all that kind of stuff. So I wouldn't say that that's gonna be programmatic going forward, unless for some reason, you know, things revert back.

John Albright: Yeah, I think really, you know, when it was a little bit more of a moment in time, or we hope it's a moment in time, where the stock it was a ridiculous price, and clearly the best capital allocation is buying back the stock at, you know, these implied cap rates and discount to the NAV and all that kind of stuff. So I wouldn't say that that's gonna be programmatic going forward, unless for some reason, you know, things revert back.

Okay, and one one one more for me and then I'll turn it over but just Mark just as far as all the borrowing base commentary and the press release. Is there a way to think about what that money would be reduced down to if it kind of a scenario where if call it the remaining 25% of tenants that there is no deferral agreement with and there's no April rent. How would that off borrowing base look like um, if you call it the 25% of the tenants just don't pay and you run into that that kind of 60 day past few situation recognize this is moving pieces here, right because of the properties not required during the corridor entering the borrowing base. Is there a way to just kind of quantify or think about that in that scenario?

Collin Smith: Okay. One more from me, and then I'll turn it over. Just, Philip Mays, just as far as all the borrowing base commentary in the press release, is there a way to think about what that borrowing base would be reduced down to if in kind of a scenario where, call it the remaining 25% of tenants that there is no deferral agreement with and there's no April rent, what would the borrowing base look like if, call it if the 25% of the tenants just don't pay and you run into that kind of 60-day past due situation?

Collin Mings: Okay. One more from me, and then I'll turn it over. Just, Philip Mays, just as far as all the borrowing base commentary in the press release, is there a way to think about what that borrowing base would be reduced down to if in kind of a scenario where, call it the remaining 25% of tenants that there is no deferral agreement with and there's no April rent, what would the borrowing base look like if, call it if the 25% of the tenants just don't pay and you run into that kind of 60-day past due situation?

I mean there's a way to think about it. I think that's probably since that's the most extreme of my first reaction to it would be that we've got nine assets that we've acquired that took you have to be put on to the morning base so I could buffer that 25% if you take the extreme, although I do think the extremes probably, you know, not the the measure way too long. But first things first is is other assets that would replace them. You could also if you you know, when we resume acquisition activity in earnest money, that's another way to buffer that but I think the other thing we tried to point out but using your scenario if they went 60 days past due they come off, you know, so he took real hard not to have that occur and you've got a couple of different laborers to do it again, I think for me if if all 25% were for some reason fall off.

Collin Smith: Recognizing that there's some moving pieces here, right, because of the properties that were acquired during the quarter entering the borrowing base, is there a way to just kinda quantify or think about that in that scenario?

Collin Mings: Recognizing that there's some moving pieces here, right, because of the properties that were acquired during the quarter entering the borrowing base, is there a way to just kinda quantify or think about that in that scenario?

John P. Albright: I mean, there's a way to think about it. I think that's probably the most extreme. My first reaction to it would be that we've got nine assets that we've acquired that are yet to be put onto the borrowing base. I could buffer that 25% if you take the extreme, although I do think the extreme's probably, you know, not the measured way to look at it. First things first is other assets that would replace them. You could also, you know, when we resume acquisition activity in earnest. I think that's another way to buffer that. I think the other thing we tried to point out, by using your scenario, if they went 60 days past due, they'd come off.

John Albright: I mean, there's a way to think about it. I think that's probably the most extreme. My first reaction to it would be that we've got nine assets that we've acquired that are yet to be put onto the borrowing base. I could buffer that 25% if you take the extreme, although I do think the extreme's probably, you know, not the measured way to look at it. First things first is other assets that would replace them. You could also, you know, when we resume acquisition activity in earnest. I think that's another way to buffer that. I think the other thing we tried to point out, by using your scenario, if they went 60 days past due, they'd come off.

John P. Albright: You know, you try real hard not to have that occur, and you've got a couple of different levers to do it. Again, I think for me, if all 25% were to, for some reason, fall off, the first thing we'd be looking to do is backfill it with the acquired assets.

John Albright: You know, you try real hard not to have that occur, and you've got a couple of different levers to do it. Again, I think for me, if all 25% were to, for some reason, fall off, the first thing we'd be looking to do is backfill it with the acquired assets.

The first thing we'd be looking to do is back fill it with the the actual acquired assets.

Got it. So it sounds like you feel good even in a more severe scenario where the borrowing base would remain around that eighty million dollars number eight hundred number that you don't get the get the full capacity, but you don't necessarily seeing given the moving pieces are being able to bring in some recently acquired assets. You don't necessarily seeing a a dramatic reduction in the borrowing base relative to what it was at quarter-end that that's a fair take away from the ministry of you.

Collin Smith: Got it. It sounds like you feel that even in a more severe scenario, where the borrowing base would remain around that $80 million number, $80 to 90 million number, where maybe you don't get the full capacity, but you don't necessarily see, given the moving pieces there, being able to bring in some recently acquired assets, a dramatic reduction in the borrowing base relative to what it was at quarter end. Is that a fair take?

Collin Mings: Got it. It sounds like you feel that even in a more severe scenario, where the borrowing base would remain around that $80 million number, $80 to 90 million number, where maybe you don't get the full capacity, but you don't necessarily see, given the moving pieces there, being able to bring in some recently acquired assets, a dramatic reduction in the borrowing base relative to what it was at quarter end. Is that a fair take?

Okay, I'll turn it over and drop back in a few. Thanks guys.

thanks for calling

Our next question will come from RJ Milligan with bear, please go ahead. Hey, good morning guys in the press release you mentioned that you know, depending on the duration and magnitude of the current shutdown and and what's likely to be the ensuing recession that you know, there's still a possibility to hit acquisition guidance for the year or previously previous acquisition guidance of the surgeon withdrawn, but, you know just over a hundred million dollars and I'm curious. You know, what your thoughts are on obviously you have the liquidity right now, but looking to preserve liquidity. So how do you judge the the idea of preserving that liquidity versus continuing to to look out and and acquire assets?

John P. Albright: Right.

John Albright: Right.

Collin Smith: away from those statements?

Collin Mings: away from those statements?

John P. Albright: That's fair.

John Albright: That's fair.

Collin Smith: Okay.

Collin Mings: Okay.

John P. Albright: Yes.

Collin Smith: Okay. I'll turn it over and jump back in the queue. Thanks, guys.

John Albright: Yes.

Collin Mings: Okay. I'll turn it over and jump back in the queue. Thanks, guys.

John P. Albright: Thanks, Collin Smith.

John Albright: Thanks, Collin Smith.

Operator 3: Our next question will come from R.J. Milligan with Baird. Please go ahead.

Operator: Our next question will come from R.J. Milligan with Baird. Please go ahead.

RJ Milligan: Hey, good morning, guys. In the press release, you mentioned that, you know, depending on the duration and magnitude of the current shutdown and what's likely to be the ensuing recession, you know, there's still a possibility to hit acquisition guidance for the year or previous acquisition guidance that has since been withdrawn but, you know, just over $100 million. I'm curious, you know, what your thoughts are on, obviously you have the liquidity right now, but looking to preserve liquidity. How do you judge the idea of preserving that liquidity versus continuing to look out and acquire assets?

Thanks, you know obviously as you mentioned you have plenty of capacity in in liquidity, so we don't even that feels like things are dead, you know opening up a bit. We're certainly looking at Acquisitions and and pursuing opportunities, you know, really trying to find where we can you know, really get some, you know, phenomenal properties location that would really look look great with our portfolio of our portfolio. So so we have no problem of being in the market right now and and we are looking at at opportunities, but it's just we're not going to be patient because we think they'll they'll be some uh, some dislocation. They'll be some buyers. The private rates probably are out of the market the 10:31 dead.

John P. Albright: Thanks. You know, obviously, as you mentioned, we have, you know, plenty of capacity and liquidity. Given that it feels like things are, you know, opening up a bit, we're certainly looking at acquisitions and pursuing opportunities, you know, really trying to find where we can, you know, really get some, you know, phenomenal properties, locations, that would really look great with our portfolio or fit well with our portfolio. We have no problem of being in the market right now, and we are looking at opportunities. It's just, we're gonna be patient, because we think there'll be some dislocation. There'll be some buyers, the private REITs probably are out of the market.

John Albright: Thanks. You know, obviously, as you mentioned, we have, you know, plenty of capacity and liquidity. Given that it feels like things are, you know, opening up a bit, we're certainly looking at acquisitions and pursuing opportunities, you know, really trying to find where we can, you know, really get some, you know, phenomenal properties, locations, that would really look great with our portfolio or fit well with our portfolio. We have no problem of being in the market right now, and we are looking at opportunities. It's just, we're gonna be patient, because we think there'll be some dislocation. There'll be some buyers, the private REITs probably are out of the market.

Market is kind of you know getting taken care of as far as what's out there with 10:31 buyers. Once those buyers have satisfied their 1031 needs wage is not a huge, uh, you know, uh pipeline of more 1031 money. So once that, uh hire pool goes away wapper eights. We think the cap rate will will be interesting for high-quality properties.

John P. Albright: The 1031 exchange market is kind of, you know, getting taken care of as far as what's out there with 1031 exchange buyers. Once those buyers have satisfied their 1031 exchange needs, there's not a huge, you know, pipeline of more 1031 exchange money. Once that buyer pool goes away, evaporates, we think, the cap rates will be interesting for high-quality properties.

John Albright: The 1031 exchange market is kind of, you know, getting taken care of as far as what's out there with 1031 exchange buyers. Once those buyers have satisfied their 1031 exchange needs, there's not a huge, you know, pipeline of more 1031 exchange money. Once that buyer pool goes away, evaporates, we think, the cap rates will be interesting for high-quality properties.

Okay, that's helpful. And then in earlier this year the the bulk if not all of the external growth pipeline the the deals you were looking at were retail assets and I think now that we've found on you know through two months of this obviously the the office and Industrial exposure just in terms of the general you have been paying more in rent than than the retail catalog. I'm curious if you're now considering looking at some more office because it's actually viewed as a little bit more defensive here in this current environment. And if you think there's going to be any opportunities there on the office side.

RJ Milligan: Okay, that's helpful. Earlier this year, the bulk, if not all of the external growth pipeline, the deals you were looking at were retail assets. I think now that we've gone, you know, through two months of this, obviously the office and industrial exposure, just in terms of the general US, have been paying more in rent than the retail category. I'm curious if you're now considering looking at some more office because it's actually viewed as a little bit more defensive here in this current environment, and if you think there's gonna be any opportunities there on the office side.

To answer or the the ladder for sure there's going to be opportunity on the office side and and and ask answer. Your former question is life. Definitely we would consider office because as you mentioned that has held up very well, you know strong component of our portfolio and and hopefully investors will see that as kind of, you know a big plus for our company. So we we definitely keep an eye out for those special situations where where office meets all the criteria great location great tennis long-term lease, but we do have you know, still looking at some of the retail price. I will say that the retail that we're looking at our tenants who have been open during this whole time. So we have have the survivors in the in the world of whether it's dead.

John P. Albright: To answer your latter, for sure there's gonna be opportunity on the office side. To answer your former question is definitely we would consider office because, as you mentioned, that has held up very well, you know, a strong component of our portfolio, and hopefully investors will see that as kind of, you know, a big plus for our company. We definitely keep an eye out for those special situations where office meets all the criteria, great location, great tenant, long-term lease. We do have, you know, still looking at some of the retail.

John Albright: To answer your latter, for sure there's gonna be opportunity on the office side. To answer your former question is definitely we would consider office because, as you mentioned, that has held up very well, you know, a strong component of our portfolio, and hopefully investors will see that as kind of, you know, a big plus for our company. We definitely keep an eye out for those special situations where office meets all the criteria, great location, great tenant, long-term lease. We do have, you know, still looking at some of the retail.

You know just necessary.

John P. Albright: I would say that the retail that we're looking at are tenants who have been open during this whole time period, so you know, kind of the survivors in the world of whether it's you know just necessary retail, that sort of thing. That's kind of where our outlook is right now.

John Albright: I would say that the retail that we're looking at are tenants who have been open during this whole time period, so you know, kind of the survivors in the world of whether it's you know just necessary retail, that sort of thing. That's kind of where our outlook is right now.

That sort of thing. So that's that's kind of where we're Outlook is right now.

My final question is are there any categories within in terms of Industry type within the portfolio today that longer-term you're concerned about the the long-term health of that that specific category not necessarily retailer.

RJ Milligan: My final question is, are there any categories within, in terms of industry type, within the portfolio today that longer term you're concerned about the long-term health of that specific category, not necessarily retailer?

Yeah, I mean look, I think I think you know some of the the tenants that we have as far as casual dining, you know theater, you know, you want to see us acquiring more of that page and and I think that we'll have you know, I think they'll have their challenges obviously not all of its going to go away luckily, you know locations in the basis of the properties we have we're going to be fine about but we're not looking to to you know, get into a sector that that may have, you know more challenges in the future. So so you can see the smoke away from those actors.

John P. Albright: Yeah. I mean, look, I think you know some of the tenants that we have as far as casual dining, theater, you know, you won't see us acquiring more of that. I think they'll have their challenges. Obviously, not all of it's gonna go away. Luckily, you know, the locations and the basis of the properties we have, we're gonna be fine. We're not looking to, you know, get into a sector that may have, you know, more challenges in the future. You can see us moving away from those sectors.

John Albright: Yeah. I mean, look, I think you know some of the tenants that we have as far as casual dining, theater, you know, you won't see us acquiring more of that. I think they'll have their challenges. Obviously, not all of it's gonna go away. Luckily, you know, the locations and the basis of the properties we have, we're gonna be fine. We're not looking to, you know, get into a sector that may have, you know, more challenges in the future. You can see us moving away from those sectors.

Great. Thanks guys. Thanks RJ.

This will conclude today's question-and-answer session as well as today's conference. Thank you for attending today's presentation and you may now disconnect.

RJ Milligan: Great. Thanks, guys.

John P. Albright: Thanks, R.J.

John Albright: Thanks, R.J.

Operator 3: This will conclude today's question and answer session, as well as today's conference. Thank you for attending today's presentation. You may now disconnect.

Operator: This will conclude today's question and answer session, as well as today's conference. Thank you for attending today's presentation. You may now disconnect.

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