Q2 2022 Alpine Income Property Trust Inc Earnings Call

July 22, 2022

John Albright: The retail property dispositions were largely focused on non-rated or below-investment grade tenants, where we had elevated exposure to both the tenant and the sectors in which they operate. The sold properties were leased to Sportsman's Warehouse, At Home, Hobby Lobby, and Cheddar's Scratch Kitchen, allowing us to reduce concentrations in the sporting goods, home furnishings, general merchandise, and casual dining sectors.

John Albright: On the acquisition front, we've emphasized discount and value-oriented retailers that should benefit from consumers becoming more price-conscious as they look to maximize their buying power as they grapple with significant inflation pressures and rising cost of capital. During the quarter, we acquired 19 properties located in 9 states, leased to industry-leading operators such as Best Buy, Little Caesars, LA Fitness, Dollar General, Harbor Freight, Dollar Tree, and Family Dollar. Our Q2 acquisitions were purchased at a weighted average cap rate of just over 7%, resulting in a very attractive net investment spread relative to the 5.8% cap rate on our retail property dispositions. Year-to-date, we've acquired 35 net lease properties for $109 million at a weighted average going-in cash cap rate of 6.9% in a weighted average remaining lease term at acquisition of 9.4 years.

Operator: The conference will begin shortly. Raise your hand during Q&A, you can dial star one.

Raise your hand during Q&A, you can dial star one.

[music]

John Albright: During the quarter, we acquired 19 properties located in 9 states, leased to industry-leading operators such as Best Buy, Little Caesars, LA Fitness, Dollar General, Harbor Freight, Dollar Tree, and Family Dollar. Our Q2 acquisitions were purchased at a weighted average cap rate of just over 7%, resulting in a very attractive net investment spread relative to the 5.8% cap rate on our retail property dispositions.

Operator: Good day and thank you for standing by. Welcome to the Alpine Income Property Trust Second Quarter 2022 Earnings Call.

Yeah.

Good day, and thank you for standing by.

And to the Alpine income property Trust second quarter 2022 earnings call.

John Albright: Year-to-date, we've acquired 35 net lease properties for $109 million at a weighted average going-in cash cap rate of 6.9% in a weighted average remaining lease term at acquisition of 9.4 years.

Operator: At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a Question and Answer session. To ask a question during this session, you will need to press star one on your telephone.

After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one on your telephone.

To ask a question during this session, you will need to press star one on your telephone.

John Albright: Subsequent to the end of the quarter, we sold our Scrubbles Car Wash in Jacksonville, Florida for a 4.8% cap rate, and we have invested the remaining disposition proceeds that were on our balance sheet in the form of 1031 restricted cash into a property lease to Lowe's. Today, our portfolio consists of 143 properties totaling 3.4 million sq ft, with tenants operating in 26 sectors in 35 states. Taking into account these Q3 transactions, our top three tenants are now Walgreens, Lowe's, and Dollar General, which all have investment-grade credit ratings. With all the ins and outs related to our year-to-date transaction activity, our 100% retail portfolio is now much more comparable to our peers who currently have much higher valuation multiples.

Operator: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Partridge, Senior Vice President, Chief Financial Officer and Treasurer. Please go ahead.

[noise] to hand, the conference over to your speaker today that Partridge, Senior Vice President Chief Financial Officer and Treasurer. Please go ahead.

Okay.

Matt Partridge: Good morning everyone. And thank you for joining us today for the Alpine Income Property Trust Second Quarter 2022 Operating Results Conference Call. With me today is our CEO and President, John Albright. Before we begin, I'd like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements and we undertake no duty to update these statements.

John Albright: Taking into account these Q3 transactions, our top three tenants are now Walgreens, Lowe's, and Dollar General, which all have investment-grade credit ratings. With all the ins and outs related to our year-to-date transaction activity, our 100% retail portfolio is now much more comparable to our peers who currently have much higher valuation multiples.

Statements under Federal Securities Law, the company's actual future results may differ significantly from the matters discussed in these forward looking statements and we undertake no duty to update these statements.

Matt Partridge: Factors and risks that could cause actual results to differ materially from expectations are disclosed from time-to-time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings. You can find our SEC reports, earnings release and most recent investor presentation which contain reconciliations of non-GAAP financial measures we use on our website at alpinereit.com. With that, I will now turn the call back over to John.

John Albright: As we continue to sell at low cap rates and reinvest at higher yields, we're confident we'll be able to incrementally de-lever our balance sheet, improve our overall property metrics, and drive higher quality FFO and AFFO per share. I'll now let Matt talk about our performance in the quarter, capital market activities, and increased guidance.

You can find our SEC report earnings release, and most recent investor presentation, which contain reconciliations of non-GAAP financial measures. We use on our website at alpine <unk> dot com with that I'll now turn the call over to John Thanks.

John Albright: Thanks, Matt. And good morning, everyone. As we discussed there in our first quarter earnings call, we believe we will have an opportunity to acquire high quality properties at more favorable pricing in the back half of the year as the rising interest rate environment, challenged debt market, in volatile macroeconomics backdrop puts upward pressure on cap rates.

Matt Partridge: Thanks, John. Operationally, our portfolio remains 100% occupied, and with nearly 85% of our rents coming from publicly rated or publicly traded companies, we have excellent visibility into our tenants' corporate-level operating trends and credit metrics, which have remained strong throughout the year. Q2 2022 FFO was $0.47 per share, a $0.09 per share or 23.7% increase compared to Q2 2021. Q2 2022 AFFO was also $0.47 per share, an $0.08 per share, or 20.5% increase over Q2 2021. Year to date, FFO was $0.97 per share and AFFO was $0.95 per share, representing a year-over-year per share growth of 23% and 16% respectively when compared to H1 2021.

Matt Partridge: Q2 2022 FFO was $0.47 per share, a $0.09 per share or 23.7% increase compared to Q2 2021. Q2 2022 AFFO was also $0.47 per share, an $0.08 per share, or 20.5% increase over Q2 2021. Year to date, FFO was $0.97 per share and AFFO was $0.95 per share, representing a year-over-year per share growth of 23% and 16% respectively when compared to H1 2021.

On cap rates.

John Albright: As a result, we emphasize capital recycling in the second quarter where we locked in attractive pricing on our asset dispositions and then redeployed the proceeds into better risk adjusted opportunity with stronger tenant credits and more favorable cap rates.

John Albright: During the quarter, we sold $73 million of properties at a blended cap rate of 7.1%, generating gains on sale of $15.6 million or $1.15 per share. This includes the previously announced sale of our loan remaining office property that generate a gain of $7 million.

Matt Partridge: Our general and administrative expenses for the quarter, which includes the $948,000 management fee to our external manager, totaled $1.5 million. This was a year-over-year increase of 15%, largely driven by increases to our management fee from our H2 2021 and year-to-date 2022 equity capital markets activities, and was positively offset by Q2 year-over-year revenue growth of 71%. G&A, as a percentage of revenues in the Q2, was down to 13.1%, down from 13.3% in the Q1, and a year-over-year decrease of approximately 640 basis points.

John Albright: If we remove the office property from our disposition statistics, we sold $34 million of retail assets at a blended cap rate of 5.8%, generating more than $8.5 million of gains.

Generally more than $8 $5 million of gains.

John Albright: Given that office investments are no longer part of our portfolio, we think that retail only execution is a more relevant mark-to-market of our portfolio and highlight the excellent quality of our real estate we've been able to acquire over two and a half years.

John Albright: The retail property dispositions were largely focused on non-rated or below investment grade tenants where we had elevated exposure to both the tenant and the sectors in which they operate.

Matt Partridge: For Q2 2022, the company paid a cash dividend of $0.27 per share, representing an 8% year-over-year increase over the company's Q2 2021 cash dividend and a current annualized yield of approximately 6%. Q2 FFO and AFFO payout ratios were very healthy at 57%, and we anticipate announcing our regular quarterly cash dividend for Q3 towards the end of August. During Q2, we issued 87,000 shares of common stock through our ATM program for total net proceeds of $1.6 million at an average issuance price of $19.09 per share.

John Albright: The sold properties were leased to Sportsman's Warehouse, At Home, Hobby Lobby, and Cheddar’s Scratch Kitchen, allowing us to reduce concentrations in the sporting goods, home furnishing, general merchandise and casual dining sectors.

John Albright: On the acquisition front, we've emphasized discounts in value oriented retailers that should benefit from consumers becoming more price conscious as they look to maximize their buying power, as they grapple with significant inflation pressures and a rising cost of capital.

Matt Partridge: We ended the quarter with net debt to total enterprise value of 54%, net debt to pro forma EBITDA of 8.3x, which was down a half a turn from the end of Q1, and we continue to maintain a very healthy fixed charge coverage ratio of nearly 5x. While we do anticipate a broader markets economic slowdown in H2 of the year, we did increase our full year FFO and AFFO per share guidance. Our prior guidance assumed more de-leveraging in Q2 than materialized, which is driving a lower projected weighted average share count for the year, offset by further increases to our interest rate assumptions to account for a steepening of the yield curve.

John Albright: During the quarter we acquired 19 properties located in nine states leased to industry leading operators such as Best Buy, Little Caesars, LA Fitness, Dollar General,Harbor Freight , Dollar Tree and Family Dollar.

Matt Partridge: While we do anticipate a broader markets economic slowdown in H2 of the year, we did increase our full year FFO and AFFO per share guidance. Our prior guidance assumed more de-leveraging in Q2 than materialized, which is driving a lower projected weighted average share count for the year, offset by further increases to our interest rate assumptions to account for a steepening of the yield curve.

John Albright: Our second quarter acquisitions were purchased at a weighted average cap rate of just over 7%, resulting in a very attractive net investment spread relative to the 5.8% cap rate on our retail property dispositions.

John Albright: Year-to-date, we've acquired 35 net lease properties for $109 million at a weighted average going in cash cap rate of 6.9% in a weighted average remaining lease term at acquisition of 9.4 years.

Matt Partridge: We've brought down the top end of our acquisition guidance to account for the Q2 results, and we're meaningfully increasing our disposition guidance to reflect continued confidence in our ability to sell assets of attractive valuations, allowing us to generate positive net investment spreads on the redeployment of proceeds. We begin Q3 2022 with portfolio-wide in-place annualized straight-line base rent of $39.6 million and in-place annualized cash base rent of $38.7 million. These values are before the sale of the Scrubbles Car Wash and acquisition of the Lowe's that occurred in July that John referenced earlier.

John Albright: Subsequent to the end of the quarter, we sold our scrobbles carwash in Jacksonville, Florida for a 4.8% cap rate and we have invested the remaining disposition proceeds that were on our balance sheet in the form of 1031 restricted cash into a property leased to Lowe's.

Matt Partridge: We begin Q3 2022 with portfolio-wide in-place annualized straight-line base rent of $39.6 million and in-place annualized cash base rent of $38.7 million. These values are before the sale of the Scrubbles Car Wash and acquisition of the Lowe's that occurred in July that John referenced earlier.

John Albright: Today our portfolio consists of 143 properties, totaling 3.4 million square feet with tenants operating in 26 sectors and 35 states.

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Matt Partridge: We now expect to acquire between $215 million and $235 million of retail net lease properties during 2022. Which is subject to market conditions, and for which we still believe acquisitions will occur at a similar or better blended yield than our 2021 full year acquisition cap rates. As we look to match fund our acquisition activity through accretive capital recycling, our disposition guidance has been increased by $50 million at the low end to $125 million and $75 million at the high end to $175 million.

John Albright: Taking into account these third quarter transactions, our top three tenants are now Walgreens, Lowe's and Dollar General which all have investment grade credit ratings.

John Albright: With all the ins and outs related to our year-to-date transaction activity, our 100% of retail portfolio is now much more comparable to our peers who currently have much higher valuation multiples.

John Albright: As we continue to sell at low cap rates and reinvest at higher yields, we're confident we'll be able to incrementally delever our balance sheet, improve our overall property metrics and drive higher quality FFO and AFFO per share.

Matt Partridge: Our full year 2022 FFO and AFFO guidance ranges were increased by $0.05 at the low and high end, with the weighted average share count for the year being lowered by 1 million shares at the low end and 2 million shares at the high end. 2022 FFO is now projected to be between $1.50 and $1.65 per share. Our full year 2022 AFFO guidance range was increased to $1.58 to $1.63 per share. I'll now pass it back to John for his closing remarks.

Multiple speakers: I'll now let Matt talk about our performance in the quarter, capital market activities and increased guidance. [Matt Partridge] Thanks, John. Operationally, our portfolio remains 100% occupied, and with nearly 85% of our rents coming from publicly traded or publicly traded companies, we have excellent visibility into our tenant’s corporate level operating trends, and credit metrics, which have remained strong throughout the year.

John Albright: Thanks, Matt. The liquidity of our assets, attractiveness of our real estate, transparency and performance of our tenants, and the stability of our cash flows have us well positioned. We've built what we believe is the highest quality real estate focused portfolio in the public net lease sector. The quality of these assets is bearing itself out in the valuation we've been able to achieve with our property sales, and we're confident our portfolio will continue to perform well even in the volatile, broader economic environment. We appreciate all of our team's hard work and continued support of our shareholders. At this time, we'll open it up for questions.

And credit metrics, which have remained strong throughout the year.

Matt Partridge: Second quarter 2022 FFO was $0.47 per share, a $0.09 per share, or 23.7% increase compared to the second quarter of 2021. Second quarter 2022 AFFO was also $0.47 per share, an $0.08 per share, or 20.5% increase over the second quarter of 2021.

Second quarter 2022, <unk> was also <unk> 47 per share and <unk> <unk> per share or 25% increase over the second quarter of 2021.

John Albright: The quality of these assets is bearing itself out in the valuation we've been able to achieve with our property sales, and we're confident our portfolio will continue to perform well even in the volatile, broader economic environment. We appreciate all of our team's hard work and continued support of our shareholders. At this time, we'll open it up for questions.

Matt Partridge: Year-to-date FFO was $0.97 per share and AFFO was $0.95 per share, representing a year-over-year per share growth of 23% and 16% respectively, when compared to the first six months of 2021.

Matt Partridge: General and administrative expenses for the quarter, which includes the $948,000 management fee to our external manager, totaled $1.5 million.

Operator: As a reminder, to ask a question, you will need to press star one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Matthew Erdner with Jones Trading. You may begin.

Matt Partridge: This was a year-over-year increase of 15%, largely driven by increases to our management fee from our second half of 2021 and year-to-date 2022 equity capital markets activities and was positively offset by second quarter year-over-year revenue growth of 71%.

Matt Partridge: G&A as a percentage of revenues in the second quarter was down to 13.1%, down from 13.3% in the first quarter and year-over-year and a year-over-year decrease of approximately 640 basis point.

Matthew Erdner: Hey, guys. Congrats on a good quarter. Filling in for Jason Stewart this morning. In terms of rent escalation, what's the visibility? I know last quarter, you guys said about 50% of the portfolio can be increased 75 to 125 basis points. Is it still kind of in that range, or is it trending towards the lower side given the macro environment?

Matt Partridge: For the second quarter of 2022, the company paid a cash dividend of $0.27 per share, representing an 8% year-over-year increase over the company's Q2 2021 cash dividend and a current annualized yield of approximately 6%.

Matt Partridge: Matt, it's Matt. Good to hear from you. In general, I think the 75 to 125 is a good range. It's gonna depend year to year on what lease is rolling over. I don't think that range has changed with the transaction activity, so I think that's a good run rate going forward.

Matt Partridge: Second quarter FFO and AFFO pay-out ratios were very healthy at 57% and we anticipate announcing our regular quarterly cash dividend for the third quarter towards the end of August.

Matt Partridge: During the second quarter, we issued 87,000 shares of common stock through our ATM program for total net proceeds of $1.6 million, and an average issuance price of $19.09 per share. We ended the quarter with net debt to total enterprise value of 54%, net debt to pro form and EBITDA of 8.3 times, which was down a half a turn from the end of the first quarter, and we continue to maintain a very healthy fixed charge coverage ratio of nearly five times.

Matthew Erdner: Awesome. Another one on dispositions. Are you guys still looking to rotate out of the low credit kind of tenants and then roll those into, better opportunities going forward?

End of the first quarter and we continue to maintain a very healthy fixed charge coverage ratio of nearly five times.

John Albright: Yeah, I think, you know, you can expect us to do more of the same here moving forward. We have quite a bit more opportunity to keep on generating some really healthy gains on some properties at low cap rates and then recycle that into higher cap rates and higher quality tenants.

Matt Partridge: While we do anticipate a broader markets economic slowdown, in the back half of the year we did increase a full year FFO and AFFO per share guidance.

Matt Partridge: Our prior guidance assumed more deleveraging in the second quarter than materialized, which is driving a lower projected weighted average share count for the year offset by further increases to our interest rate assumptions to account for steepening of the yield curve.

Matthew Erdner: Gotcha. Are you still kind of seeing the cap rates in that 5.5%, 6% range on dispositions?

John Albright: Yeah, I mean, it's been amazing. We thought maybe we'd see a little bit more expansion on the cap rates, but on these smaller property sales, you're really seeing a lot of high net worth and some institutional investors, you know, buying these properties at cap rates that really haven't changed too much from, you know, six months ago. We're still seeing a good opportunity to recycle here.

Matt Partridge: We brought down the top end of our acquisition guidance to account for the second quarter results. And we're meaningfully increasing our disposition guidance to reflect continued confidence in our ability to sell assets at attractive valuations allowing us to generate positive net investment spreads on the redeployment of proceeds.

Matt Partridge: We begin the third quarter of 2022 with portfolio wide in place annualized straight line base rent of $39.6 million and in place annualized cash base rent of $38.7 million. These values are before the sale of the scrubbles, carwash and acquisition of the lows that occurred in July that John referenced earlier.

Matthew Erdner: Gotcha. Are those in specific locations, or is it just kind of depends?

John Albright: No, not anything locational. It's really where do we see ability to get really some low cap rate executions or are there opportunities to get a decent cap rate execution, but with a, you know, but selling off a lower credit sort of tenant, which just improving the portfolio going forward. We'll do kind of the barbell effect. We'll sell properties with really low cap rates, but then we'll sell some of the lower credits and improve the portfolio, and in that mixture, we'll still have a very attractive disposition cap rate and then a recycling opportunity into higher credit.

Matt Partridge: We now expect to acquire between $215 million and $235 million of retail net leased properties during 2022, which is subject to market conditions and for which we still believe acquisitions will occur at a similar or better blended yield than our 2021 full year acquisition cap rates.

Matt Partridge: As we looked at match funder acquisition activity through Creative Capital recycling, our disposition guidance has been increased by $50 million at the low end to $125 million at $75 million at the high end to $175 million.

John Albright: We'll do kind of the barbell effect. We'll sell properties with really low cap rates, but then we'll sell some of the lower credits and improve the portfolio, and in that mixture, we'll still have a very attractive disposition cap rate and then a recycling opportunity into higher credit.

And $75 million at the high end to $175 million.

Matt Partridge: Our full year 2022 FFO and AFFO guidance ranges were increased by $0.05 at the low end - high end, with the weighted average share count for the year being lowered by 1 million shares at the low end and 2 million shares at the high end.

At the low and high end with a weighted average share count for the year being lowered by 1 million shares at the low end and 2 million shares at the high end two.

Matthew Erdner: Awesome. Thank you, guys.

Matt Partridge: 2022 FFO is now projected to be between $1.50 and $1.65 per share. And our full year 2022 AFFO guidance range was increased to $1.58 to $1.63 per share. I'll now pass it back to John for his closing remarks.

Operator: Thank you. Our next question comes from Anthony Hau with Truist.

And $1 65 per share.

And our full year 2022, <unk> guidance range was increased to $1 58 to $1 53 per share I'll now pass it back to John for his closing remarks. Thanks.

Anthony Hau: Guys-

Operator: Anthony, your line is open.

Anthony Hau: Good morning, guys. Hey, John. The high end of the disposition guidance represents a third of the current portfolio. If getting the portfolio to a pristine state doesn't close the valuation gap that you hope for by year end or early next year, what is the next step for PINE? Is strategic alternative, that is, something that the board needs to explore?

John Albright: Thanks Matt. The liquidity of our assets, attractiveness of our real estate, transparency and performance of our tenants and the stability of our cash flows have us well positioned. We built what we believe is the highest quality real estate focused portfolio in the public net lease sector. The quality of the assets is very itself out and the valuation we've been able to achieve with our property sales. And we're confident our portfolio will continue to perform well, even in the volatile, broader economic environment. We appreciate all of our team's hard work and continued support of our shareholders. At this time, we'll open it up for questions.

John Albright: Look, if we have, as mentioned, you know, more to go. Yeah, if we get this into a extremely pristine condition and we're still trading kind of where we're trading, of course. I mean, we'll explore those alternatives because it makes no sense to just, you know, try to you know, keep going if we're not really, you know, connecting with investors. Investors, you know, we have a lot of great value investors. But, you know, the folks that need bigger companies aren't showing a lot of appreciation for the portfolio value, if you will. We're, you know, trading at discount NAV. If we keep on creating a better and better portfolio, of course, we would look at those sort of scenarios.

And the valuation we've been able to achieve with our property sales and we're confident in our portfolio will continue to perform well even in the volatile broader economic environment. We appreciate all of our teams hard work and continued support of our shareholders. At this time, we'll open it up for questions.

Operator: As a reminder, to ask a question you will need to press star one on your telephone. Please standby while we compile the Q&A roster.

A reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.

John Albright: Investors, you know, we have a lot of great value investors. But, you know, the folks that need bigger companies aren't showing a lot of appreciation for the portfolio value, if you will. We're, you know, trading at discount NAV. If we keep on creating a better and better portfolio, of course, we would look at those sort of scenarios.

Operator: Our first question comes from Matthew Erdner with Jones Trading. You may begin.

Our first question comes from Matthew <unk>.

With Jones trading you may begin.

Matthew Erdner: Hey, guys, congrats on a good quarter. Filling in for Jason Stewart this morning. So in terms of rent escalation, what's the visibility? I know last quarter, you guys said about 50% of the portfolio can be increased 75 to 125 basis points. Is it still kind of in that range? Or is it trending towards the lower side given the macro environment?

So in terms of rent escalation, what's the visibility I know last quarter, you guys said about 50% of the portfolio can be.

Anthony Hau: Is there a timeline that you guys would give yourself?

John Albright: No, we're not.

Anthony Hau: Um, before-

John Albright: You know, I think it'll be, you know, self-evident after a couple quarters of more recycling and improving the portfolio. If you look at our slide deck investor presentation, you know, we're the lowest multiple. If you look at our credit composition, we have the same credit composition as the highest multiple companies out there. We have better locations. Just, you know, given a small company, you can do that.

Increased 75 to 125 basis points is it still kind of in that range or is it trending towards the lower side given the macro environment.

Matt Partridge: Hey, Matt, it's Matt. Good to hear from you. In general, I think that 75 to 125 is a good range. It's going to depend year-to-year on what lease is rolling over. I don't think that range has changed with the transaction activity. So I think that's a good run rate going forward.

Matt its Matt good to hear from you in General I think that 75 to 125 is a good range, it's going to depend year to year on what leases rolling over.

I don't think that range has changed with the <unk> transaction activity. So I think thats a good run rate going forward.

John Albright: If we don't resonate with people that, you know, you're able to buy this portfolio at $159 a foot, and the peer average is $250 a foot, and, you know, our implied cap rate is 7, and the others are whatever's in your model, you know, then it's clear we need to kind of look at other alternatives.

Matthew Erdner: Awesome. And then another one on dispositions. Are you guys still looking to rotate out of the low credit kind of tenants and then roll those into better opportunities going forward?

Tenants and then roll those into better opportunities going forward.

John Albright: Yes, I think maybe you can, you can expect us to do more of the same here going moving forward. So we have quite a bit more opportunity to keep on generating some really healthy gains on some properties that low cap rates and then recycle that into higher cap rates and in higher quality tenants.

Anthony Hau: How much more disposition can you guys do after this year? Because, you know, $175 at the high end represents a third of the portfolio.

John Albright: Yeah. I don't think, you know, there would be a ton more than beyond that. I think you know, we're going for the low-hanging fruit, and it won't cut into the core for sure. This is really trimming around the edges. Even though it's a third of the portfolio, just trimming around the edges and showing, you know, all the embedded profit in these properties. You know, look, it resonates with the value folks. Obviously we had awesome performance last year and fairly decent performance this year. It's not like, you know, we don't have any unhappy investors. You know, people would like to see it move to a better multiple, which we share that. We think we can get there by keep on showing.

Higher quality tenants.

Matthew Erdner: Got you. So you're still kind of seeing the cap rates, not 5.5% to 6% range on dispositions?

John Albright: Yes, I mean, they're, it's been amazing, we thought maybe we'd see a little bit more expansion on the cap rates, but on the smaller property sales, you're really seeing a lot of high net worth in and some institutional investors buying these properties at Cap rates that really haven't changed too much from six months ago, so we're still seeing a good opportunity to recycle here.

It's been amazing we thought maybe we'd see.

Little bit more expansion on the cap rates on the smaller.

Property sales Youre really seeing a lot of high net worth.

John Albright: You know, look, it resonates with the value folks. Obviously we had awesome performance last year and fairly decent performance this year. It's not like, you know, we don't have any unhappy investors. You know, people would like to see it move to a better multiple, which we share that. We think we can get there by keep on showing.

And some institutional investors buying these properties at.

At cap rates that really havent changed too much from six months ago. So so we're still seeing a good opportunity to recycle here.

Matthew Erdner: Got you. And then are those in specific locations? Or is it just kind of depends?

Multiple speakers: [John Albright] No it's not anything locational. It's really, where do we see ability to get really some incredible cap or low cap rate execution. Or are there opportunities to get a decent cap rate execution, but selling off a lower credit, sort of tenant, which just improving the portfolio going forward. So we'll do kind of the barbell effect, we'll sell properties with really low cap rates, but then we'll sell some of the lower credits and improve the portfolio. And in that mixture, we'll still have a very attractive disposition cap rate, and then a recycling opportunity and higher credit. [Matthew Erdner] Awesome. Thank you guys.

John Albright: You know, look at our top three tenants now, you know, after buying the Lowe's. I mean, you know, you just do the comparison and it's kind of, you know, kind of hits you right in the forehead, you know?

Incredible cap low cap rate execution or are there opportunities to get a decent cap rate execution, but with.

Anthony Hau: Yeah. Thanks, guys.

John Albright: Thanks.

But selling off a lower credit sort of tenant, which just improving the portfolio going forward. So so we will do kind of the barbell effect will sell properties with really low cap rates.

Operator: Our next question comes from Rob Stevenson with Janney Montgomery Scott. Rob Stevenson, your line is open.

Rob Stevenson: Good morning, guys. Is At Home and Hobby Lobby now off the top ten tenants with the sale, or did you own multiple locations of those?

But then we will sell some of the.

Lower credits and improve the portfolio and that mixture, we will still have a very.

Attractive disposition cap rate and then recycling opportunity in the higher credit.

Matt Partridge: They're still in the top ten. They've moved towards the bottom end of the top ten, but we own multiple locations.

Awesome. Thank you guys.

Rob Stevenson: Okay. The Lowe's, was that a ground lease or a sort of building and land? What was the remaining lease term there? What type of cap rate did you guys buy that at?

Operator: Thank you. Our next question comes from Anthony Hau with Truist. Anthony, your line is open.

Our next question comes from Anthony Hau with choice.

Anthony Your line is open.

John Albright: Matt, do you want to?

Matt Partridge: It was not a ground lease, Rob. It was building and land. There was approximately 10 years remaining on the lease, and it was called a low-to-mid sixes cap rate.

Anthony Hau: Good morning, guys. Hey, John. So the high end of the disposition guidance represents a third of the current portfolio. If getting the portfolio to your pristine state doesn't close the valuation gap that you hoped for by year end or early next year, what is the next step for pine? Is strategic alternative that, is something that the board needs exploring?

Matt Partridge: It was not a ground lease, Rob. It was building and land. There was approximately 10 years remaining on the lease, and it was called a low-to-mid sixes cap rate.

Hey, John So the high end of the disposition guidance represents a third of the current portfolio. Getting the portfolio to a pristine state doesn't close the valuation gap that you hope for by year end or early next year. What is the next step for Pine is strategic alternative that is something that the board needs to explore.

Getting the portfolio to a pristine state doesn't close the valuation gap that you hope for by year end or early next year. What is the next step for Pine is strategic alternative that is something that the board needs to explore.

Rob Stevenson: Okay. I guess the question winds up being, is that indicative of where you wanna be putting your money today? I mean, low-to-mid sixes for somebody like Lowe's versus what's your alternative if you go and deploy a similar dollar amount or similar sized asset with somebody that's, you know, not investment grade. I mean, what are you getting if you were to buy, you know, an At Home or something like that today versus that type of a return on Lowe's?

John Albright: Look, we have, as mentioned more to go. So yes, if we get this into a extremely pristine condition, and we're still trading kind of where we're trading, of course, I mean, we'll explore those alternatives because it makes no sense to just try to keep going if we're not really connecting with investors. We have a lot of great value investors, but the folks that need bigger companies aren't showing a lot of appreciation for the portfolio value, if you will. So we're trading at a discount to NAV and if we keep on creating a better and better portfolio, of course, we would look at those sorts of scenarios.

Mentioned more to go so yes, if we get this into a extremely bursting condition.

And we're still trading kind of where we're trading of course it will.

We'll explore those alternatives because it makes no sense to.

To just try to.

John Albright: Yeah. Rob, I think it's again a little bit of the barbell. We'll definitely do more of the Lowe's type transactions where we see that opportunity. We're not bashful about buying something that's a really junky credit if the property is a terrific property as far as alternatives and it's below market lease rate. You know, those have been really successful for us. You know, for instance, the At Home that we sold, you know, we bought that when At Home was not even the credit it is now. You know, it just had so many alternative type of uses for the property. It'll be a mixture.

Keep going if we're not really.

Connecting with investors or investors.

We have a lot of great value investors.

But.

The folks that need a bigger companies are showing a lot of.

Depreciation for the portfolio.

Value if you will so we're trading at a discount to NAV.

If we keep on creating a better and better portfolio of course, we would look at those sort of scenarios.

Anthony Hau: And is there a timeline that you guys would give yourself?

John Albright: I think it will be self-evident after a couple quarters of more recycling, and improving the portfolio. If you look at our slide deck, investor presentation, and we're the lowest multiple. And if you look at our credit composition, we have the same credit composition as the highest multiple of companies out there, and we have better locations, just given a small company, you can do that. So if we don't resonate with people that you're able to buy this portfolio at 159 a foot and the pure average is 250 a foot and, our implied cap rate is 7 and the others or whatever's in your model, then it's clear, we need to kind of look at other alternatives.

Rob Stevenson: Okay. Matt, what was the, you know, the rough timing of the bulk of the Q2 dispositions? Did the dispositions come at the very end of the quarter?

If you look at our slide deck and Investor presentation were the lowest multiple and if you look at our credit composition.

We have the same credit composition as the higher highest multiple companies out there.

Matt Partridge: No, I think they were spread out throughout the quarter. I would say a couple hit towards the end. You know, you have the office sale that occurred in April even before the Q1 earnings release. It was pretty well spread out on average.

Better locations, just given a small company you can do that so.

So if we don't resonate with with people that you are able to buy this portfolio at 159 a foot.

The peer average is $2 50 a foot.

Rob Stevenson: Okay. What is the annualized base rent in the portfolio today?

And our implied cap rate of seven and the others are whatever's in your model.

Matt Partridge: After the acquisition of the Lowe's, the annualized base rent is $40.2 million.

Then is it.

Clear, we need to kind of look at look at it.

There are alternatives.

Rob Stevenson: Okay. Because I guess the question winds up being, you know, that I'm leading to is, you know, if the dispositions weren't, you know, at the very end, and, you know, you're sort of. You did have some sales, etc. But how, you know, how do you go from. Is there anything abnormal about the H2 to take you from, call it $0.47 in Q2? Obviously, there's some impact of dispositions, but the high end of the guidance essentially implies something around $0.34, $0.35 for each of the last two quarters of the year. Is that the acceleration of dispositions? How do you get there just with what you've done year to date?

Anthony Hau: And how much more disposition can you guys do after this year? Because, 175 at the high end represents a third of the portfolio.

John Albright: Yes, I don't think, there'll be a ton more than beyond that. I think, we're going for the low hanging fruit, and it won't cut into the core for sure. So, this is really trimming around the edges, even though it's a third of the portfolio, just trimming around the edges and in showing all the embedded profit in these properties.

So this is really trimming around the edges, even though it's a third of the portfolio just trimming around the edges.

Rob Stevenson: Obviously, there's some impact of dispositions, but the high end of the guidance essentially implies something around $0.34, $0.35 for each of the last two quarters of the year. Is that the acceleration of dispositions? How do you get there just with what you've done year to date?

Showing all the embedded profit in these properties.

John Albright: And so, look it resonates with the value folks, and obviously, we had awesome performance last year, and fairly decent performance this year. So it's not like we don't have any unhappy investors, people would like to see it, move to a better multiple, which we share that, but we think we can get there by keep on showing look at our top three tenants now, after buying the Lowe's. I mean, you just do the comparison, and it's kind of hits you right in the forehead.

The value folks and obviously, we had awesome performance last year.

Im fairly decent performance this year, so it's not like.

Matt Partridge: Yeah. I think it's fair to assume that there's an acceleration of dispositions, and we wanna maximize cap rates that we can achieve in the market. If we're assuming, which we've said, that there's gonna be a slowdown in H2 and an expansion of cap rates, we wanna get those dispositions done sooner. On top of that, there is assumed equity raises in the guidance, sort of end of Q3, beginning of Q4 to further de-lever. You know, the disposition guidance is a pretty wide range, and the share count does assume a decent amount of shares on average coming in towards the end of the year. That's what's driving the lower sequential earnings per share.

We don't have any unhappy investors people would like to see it move to a better multiple on which we share that but we think we can get there by coupon showing look at our top three tenants now after buying the Lowe's I mean.

You just you didn't see the comparison it was kind of kind of hit your right in the forehead.

Anthony Hau: Thanks, guys.

Thanks, guys.

Operator: Our next question comes from Rob Stevenson with Janney. Rob Stevenson, your line is open.

Matt Partridge: You know, the disposition guidance is a pretty wide range, and the share count does assume a decent amount of shares on average coming in towards the end of the year. That's what's driving the lower sequential earnings per share.

Our next question.

It comes from Rob Stevenson with.

Davidson Your line is open.

Multiple speakers: [Rob Stevenson] Good morning, guys. Is the -- is at home and Hobby Lobby now off the top 10 tenants with the sale? Or did you own multiple locations of those? [John Albright] They're still in the top 10. They've moved towards the bottom end of the top 10. But we own multiple locations.

Is the at home and hobby lobby now off the top 10 tenants with the sale of our did you own multiple locations of those.

Rob Stevenson: Okay. Are we not likely to see any material level, certainly not as much as you did in Q2 of acquisitions in Q3, that the acquisitions when they happen, are more likely to be, you know, Q4 weighted then? You're gonna be a-

They are still in the top 10, they've moved towards the bottom end of the top 10, but we are in multiple locations.

Rob Stevenson: Okay. And then the Lowe's, was that a ground lease or sort of building and land. What was the remaining lease term there? And what type of cap rate did you guys buy that at?

Matt Partridge: Yeah

Rob Stevenson: ... high net disposition Q3 and then a net acquisition Q4?

Sort of building and land most of the remaining lease term there and what type of cap rate did you guys buy that.

Matt Partridge: Other than the lows, I would say that most of the acquisitions will probably occur towards the end of Q3. Then obviously we're firming up the pipeline for Q4. We're assuming that they're gonna be back-end weighted, which is usually how the transaction market works.

John Albright: No, yes, so it was not a ground lease Rob. It was building and land. There was approximately 10 years remaining on the lease, and it was called a low to mid sixes cap rate.

Rob Stevenson: Okay. Just finally given that comment, what was the rough dollar amount or the dollar amount of the Lowe's transaction? How material was that, you know, $10 million, $20 million? What are we looking at?

Multiple speakers: [Rob Stevenson] Okay. And I guess the question winds up being is it? I mean, is that indicative of where you want to be putting your money today, I mean, low to mid sixes for somebody like Lowe's versus what's your alternative if you go and deploy a similar dollar amount or similar sized asset with somebody that's, not investment grade? I mean, what are you getting, if you were to buy an add home or something like that today versus that type of a return on Lowe's? [John Albright] Yes, so Rob, I think it's, it's, again, a little bit of a barbell, we'll definitely do more of the Lowe's type transactions, where we see that opportunity, but we're not we're not bashful about buying something that's a really junky credit, if the property is a terrific property as far as alternatives, and it's a below market lease rate. Those have been really successful for us.

Low to mid sixes for somebody like Lowe's versus what's your alternative if you go and deploy a similar dollar amount or similar sized asset with somebody that's.

Matt Partridge: It was $14 million.

Rob Stevenson: $14 million.

Matt Partridge: Yeah.

Rob Stevenson: All right. Perfect. Thanks, guys. Appreciate the time.

John Albright: Thanks.

Matt Partridge: Thanks, Rob.

Non investment grade I mean, what are you getting if you for but to buy it at home or something like that today versus.

Operator: Our next question comes from R.J. Milligan with Raymond James. Your line is now open.

RJ Milligan: Hey, good morning, guys. Just one question. Most of my questions have been answered. Matt, in your comments, you talked about that incorporated in guidance is sort of the expectation of a broader economic slowdown, which we've already started to see. Just curious, I mean, clearly you guys have been upgrading the portfolio, improving diversification, sort of preparing for this potential slowdown. Just curious if there are any categories you'd like to further reduce or any categories you sort of got on the watch list.

That type of a return on Loews, Yeah. So Rob I think it's again, a little bit of a barbell will definitely.

Do more of the lowest type transactions, where we see that opportunity, but we're not we're not bashful about buying something thats, a really junky credit if the property is.

Terrific property as far as alternatives and it's a below market lease rate.

Those have been really successful for us.

John Albright: And, for instance, At Home that we sold, we bought that when At Home was not even, the credit is now and, just had so many alternative type of uses for the property. So, it'll be a mixture.

John Albright: I'll take that, RJ. I mean, we'll certainly reduce where it makes sense as far as whether it's casual dining, that sort of sector. You know, the ones that we have are really terrific locations, and the lease rates are very below market. Actually, we've had tenants come to us for early renewals, and we've declined them. It's really about the portfolio, kind of where they're located and case by case.

Hi.

We bought that when at home was not even the credit is now.

And.

Just had so many alternative.

Type of uses for the property so it will be a mixture.

Rob Stevenson: Okay. And then Matt, what was the rough timing of the bulk of the second quarter dispositions? Did those dispositions come at the very end of the quarter?

The bulk of the second quarter dispositions to those dispositions come at the very end of the quarter.

Matt Partridge: Let’s see here. No I think they kind of -- they were spread out throughout the quarter. I would say a couple hit towards the end. But you have the office sale that occurred in April, even before the Q1 earnings, really. So it was pretty well spread out on average.

John Albright: Where there's a situation where it's maybe a little bit more tertiary location and a tenant that would be kind of, you know, something that would be challenged during a recession, we'll certainly look to move through that sooner rather than later. Really, you know, we go through this quite often and, you know, we're in pretty good shape. There's nothing that really stands out at us that we're not already kind of contemplating and working on. You'll probably see more of this, you know, next quarter as far as, you know, what we've addressed and at, you know, pretty good cap rates, we think. We're working on those.

But you have the office sale that occurred in April even before the Q1 earnings release, so it was pretty well spread out on average.

Rob Stevenson: Okay. What is the annualized base rent in the portfolio today?

Matt Partridge: After the acquisition of the Lowe's, the annualized base rent is $40.2 million.

Rob Stevenson: Okay. Because I guess the question winds up being, that I'm leading to is, if the dispositions weren't at the very end, and you're sort of -- you did have some sales, et cetera. But how do you go from, is there anything abnormal about the back half of the year to take you from call it a 47 in the second quarter. Obviously, there's some impact of dispositions. But the high end of the guidance essentially implies something around $0.34 or $0.35 for each of the last two quarters of the year. Is that the acceleration of dispositions? How do you get there, just with what you've done year-to-date ?

John Albright: There's nothing that really stands out at us that we're not already kind of contemplating and working on. You'll probably see more of this, you know, next quarter as far as, you know, what we've addressed and at, you know, pretty good cap rates, we think. We're working on those.

And.

And you're sort of you did have some sales et cetera, but how how do you go from is there anything abnormal about the back half of the year to take you from call. It a 47 in the second quarter. Obviously, there is some impact of dispositions, but the.

Matt Partridge: Yeah. RJ, just from a

John Albright: I guess.

Matt Partridge: Sorry. I was gonna say from a targeted sectors perspective, I mean, we do like the off-price, we like the discount retailers, like the dollar stores, and obviously we like the home improvement space, which has seen multiple years of tailwind. I would say those are a few of the sectors where we're putting dollars to work.

The high end of the guidance essentially implies something around $34 35 for each of the last two quarters of the year.

Is that the acceleration of dispositions, how do you get how do you get there just with what you've done year to date.

RJ Milligan: Thanks. Then just as a follow-up, can you talk about sort of what you're seeing out there in terms of competition? Obviously, you know, you commented that the disposition market's still pretty attractive in terms of finding some, you know, high net worth individuals. Obviously we've heard that a lot of the levered buyers have left the market just given the increased debt costs. I'm just curious what you guys are seeing out there in terms of competition and sort of where do you think the market shakes out as we move into 2023 about the competitive landscape.

John Albright: Yes, so I think it's fair to assume that there's an acceleration of dispositions, and we want to maximize cap rates that we can achieve in the market. And if we're assuming which we've said that there's going to be a slowdown in the back half of the year and an expansion of cap rates, we want to get those dispositions done sooner. And then on top of that, there is assumed equity raises in the guidance, sort of end of Q3 beginning of Q4 to further delever. So the disposition guidance is a pretty wide range, and the share count does assume a decent amount of shares on average coming in towards the end of the year. So that's what's driving the lower sequential earnings per share.

RJ Milligan: Obviously we've heard that a lot of the levered buyers have left the market just given the increased debt costs. I'm just curious what you guys are seeing out there in terms of competition and sort of where do you think the market shakes out as we move into 2023 about the competitive landscape.

<unk> assumed equity raises in the guidance.

Sort of end of Q3, beginning of Q4 to further delever. So.

John Albright: Yeah. We hope that, you know, it'd be better hunting where, you know, there'd be less competition. Actually, the market is pretty strong, I mean, very strong if you consider the macro backdrop. We are kind of where we're focusing a lot of attention is, you know, developers who may have debt that's gonna be harder for them to roll over, or they're acquiring properties and they wanna sell off some pad sites because, you know, it's very challenging for them to get acquisition financing on the secured side. That's where we're gonna see more kind of opportunity to bring in, you know, great properties, versus, you know, as far as the just general market is still very strong. You're seeing a very efficient market.

The disposition guidance has a pretty wide range in that.

The share count.

Yes, it does assume a decent amount of shares on average coming in towards the end of the year. So that's what's driving the lower sequential earnings per share.

Rob Stevenson: Okay, and are we not likely to see any material level, certainly not as much as you did in the second quarter of acquisitions in the third quarter, that the acquisitions when they happen are more likely to be fourth quarter weighted then. So you're going to be high disposition, net disposition, third quarter, and then a net act acquire in the fourth quarter.

Disposition net disposition third quarter, and then net acquirer in the fourth quarter.

John Albright: That's where we're gonna see more kind of opportunity to bring in, you know, great properties, versus, you know, as far as the just general market is still very strong. You're seeing a very efficient market. We were a little surprised. We thought there'd be a little bit more, disconnect.

Multiple speakers: [John Albright] Other than the lows, I would say that most of the acquisitions will probably occur towards the end of Q3. And then obviously, we're firming up the pipeline for Q4, but we're assuming that they're going to be back end weighted, which is usually how the transaction market works. [Rob Stevenson] Okay. And then just finally, given that comment, what was the rough dollar amount or the dollar amount of the lowest transaction? How material was that? $10 million, $20 million, what are we looking at? [John Albright] $14 million. [Rob Stevenson] Okay, $14 million. Alright, perfect. Thanks, guys I appreciate the time.

We're assuming that they're going to be back end weighted which is usually the transaction market works. Okay. And then just finally given that comment what was the rough dollar amount or the dollar amount of the lowest transaction how material was that $10 million $20 million.

John Albright: We were a little surprised. We thought there'd be a little bit more, disconnect.

RJ Milligan: Thank you, guys.

Operator: Thank you. As a reminder, to ask a question at this time, please press star then one on your touchtone telephone. Our next question comes from Craig Kucera with B. Riley Securities. Your line is now open.

What are we looking at $8 million and $14 million Yeah alright.

Alright, perfect. Thanks, guys I appreciate the time thanks, Thanks, Rob.

Craig Kucera: Yeah. Hey, good morning, guys. Looking at your top tenants list, there was some movement. Did you entirely exit exposure to any tenants in Q2 from sales such as Sportsman's Warehouse?

Operator: Our next question comes from RJ Milligan with Raymond James. Your line is now open.

RJ Milligan: Hey, good morning, guys. Just one question. Most of my questions have been answered. But, Matt, in your comments you talked about that incorporated in guidance is sort of the expectation of a broader economic slowdown, which we've already started to see. But just curious, I mean, clearly, you guys have been upgrading the portfolio and proving diversification, sort of preparing for this potential slowdown. And just curious if there are any categories you'd like to further reduce, or any categories, you sort of got on the watch list?

John Albright: No, we still have one more Sportsman's Warehouse and we still continue to have exposure to Darden, At Home, and Hobby Lobby.

Matt in your comments you talked about that incorporated in guidance is sort of the expectation of a broader economic slowdown, which we are already starting to see but just curious I mean, clearly you guys have been upgrading the portfolio improving diversification sort of preparing for this potential slowdown and I'm. Just curious if there are any categories you would like to further reduce.

Craig Kucera: Got it. I guess, was this the last quarter, Matt, that you're expecting to receive any form of COVID repayment?

John Albright: Yes. We have received all of the deferred rent repayment agreements that were put in place.

Matt Partridge: Yes. We have received all of the deferred rent repayment agreements that were put in place.

Or any categories you sort of you got on the watch list.

Craig Kucera: Great. I'm just curious, you've had this out parcel you got, I believe in Jacksonville that you were looking to potentially develop. Has the change in the economy changed any of the timing or sort of underwriting or considerations for that potential development?

John Albright: I'll take that RJ. So, I mean, we'll certainly reduce where it makes sense, as far as, whether it's casual dining, that sort of sector, but the ones that we have are really terrific locations, and the lease rates are very below market. And so, in actually, we've had tenants come to us for early renewals, and we've declined them. So it's really about the portfolio, kind of where they're located. And in case by case, so where there's a situation where it's maybe a little bit more tertiary location, and a tenant that would be kind of, something that would be challenged or in a recession, we'll certainly look to move through that sooner rather than later. But really, we go through this quite often and, we're in pretty good shape. So there's, there's nothing that really stands out at us that we're not already kind of contemplating and working on. So you'll probably see more of this, next quarter, as far as what we've addressed in it. Pretty good cap rates, we think so, we're working on those.

Okay.

I'll take that.

So I mean, we'll certainly.

Reduce where it makes sense as far as.

John Albright: Yeah, you know, that one, you know, the tenant definitely still wants to be there and we're still in conversations. Where we're not seeing any help is on construction costs. Construction costs are still elevated. It's really a conversation with the tenant that, you know, they need to pay more rent for us to get the yield we would want. That's an ongoing conversation, a very constructive conversation. They're trying to figure out how to value engineer it or, you know, just having a slightly higher rent to make it all work. That's an ongoing conversation, but hopefully construction costs come down and kinda help us on that side as well.

Whether it's.

Casual dining.

Sort of sector, but the ones that we have are really.

Terrific locations and the lease rates are very below market and so it actually had tenants come to us for early renewals and we declined them. So it's really about the portfolio.

Kind of where they're located and case by case, so where there is a situation where it's maybe a little bit more tertiary location and a 10.

John Albright: That's an ongoing conversation, a very constructive conversation. They're trying to figure out how to value engineer it or, you know, just having a slightly higher rent to make it all work. That's an ongoing conversation, but hopefully construction costs come down and kinda help us on that side as well.

Tenant that would be kind of.

That would be challenged during the recession, we will certainly look to move through that sooner rather than later, but really.

We go through this quite often.

Craig Kucera: Okay, great. Thanks, guys.

We're in pretty good shape. So there's nothing that really stands out at us that we're not already kind of contemplating and working on so youll probably see more of this next quarter as far as what we've addressed in.

John Albright: Thank you.

Matt Partridge: Thanks, Craig Kucera.

Operator: Our next question comes from Mary Chris Coco with FactSet. Your line is now open. Mary Chris, your line is now open. Please press your mute button. I'm currently showing no further questions at this time. I'd like to turn the call back over to John Albright for closing remarks.

Pretty good cap rates, we think so.

We're working on those.

Matt Partridge: Yes, RJ. Sorry I was going to say, from a targeted sectors perspective, I mean we do like the off price, we like the discount retailers, we like the dollar stores. And obviously, we like the home improvement space, which has seen multiple years of tail wind. And so, I would say those are a few of the sectors where we're putting dollars to work.

Sorry, I was going to say from a targeted sectors perspective, I mean, we do like the off price, we like the discount retailers like the dollar stores and obviously, we like the home improvement space, which is has seen multiple years of a tailwind. So I would say those are a few of the sectors, where where we're putting dollars to work.

John Albright: Thank you, operator. Thank you, everyone for attending today's call, and we look forward to following up with you, post-call. Thank you.

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

RJ Milligan: Thanks. And then just as a follow up, can you talk about sort of the what you're seeing out there in terms of competition, obviously, you're coming into the disposition, markets, still pretty attractive in terms of finding some, high net worth individuals. But obviously, we've heard that a lot of the levered buyers have left the market, just given the increased debt costs. And I'm just curious what you guys are seeing out there in terms of competition and sort of where do you think the market shakes out as we move into 2023 about the competitive landscape?

Can you talk about sort of what youre seeing out there in terms of competition. Obviously you commented that the disposition market is still pretty attractive in terms of finding some high net worth individuals.

Operator: The conference will begin shortly. To raise your hand during Q&A, you can dial star one.

But obviously, we've heard that a lot of the levered buyers have left the market just given the increased debt costs and I'm. Just curious what you guys are seeing out there in terms of competition and sort of whether you think the market shakes out as we move into 2023 about the competitive landscape.

John Albright: Yes, we hope that, it'd be better hunting where there would be less competition, but actually, the market is pretty strong. I mean, very strong, if you consider the macro backdrop. So we are kind of where we're focusing a lot of attention is, developers who may have had debt, that's going to be harder for them to roll over. Or they're acquiring properties, and they want to sell off some pad sides. Because there, it's very challenging for them to get acquisition financing on the secured side. So that's where we're going to see more kind of opportunity to bring in great properties, versus as far as they just general market is still very strong. So you're seeing a very, very efficient market where we were a little surprised, we thought there'd be a little bit more disconnect.

The market is pretty strong I mean, very strong if you consider the macro backdrop.

So we are kind of where we're focusing a lot of attention is.

Developers, who may have had that that's going to be harder for them to rollover.

Are there acquiring properties and they want to sell off some some pad sites because it's very challenging for them to get acquisition financing on the secured side. So that's where we're going to see more kind of odd.

Opportunity to to bring in great properties versus.

As far as just general market is still very strong so youre seeing a very.

Very efficient market.

Little surprised we thought there'd be a little bit more disconnect.

RJ Milligan: Thank you guys.

Operator: Thank you. As a reminder, to ask a question at this time, please press star then one on your touch tone telephone. Our next question comes from Craig Kucera with B. Riley Securities. Your line is now open.

Thank you.

Reminder, to ask a question at this time. Please press Star then one on your Touchstone telephone.

Our next question comes from Craig <unk> with B Riley Securities. Your line is now open.

Craig Kucera: Yes, hey, good morning, guys. Looking at your top tenants list, there was some movement. Did you entirely exit exposure to any tenants in the second quarter from sales such as sportsman's warehouse?

Looking at your top tenants list there was some movement did.

Did you entirely exited exposure to any tenants in the second quarter from sales such as sportsman warehouse.

John Albright: No, we still have one more Sportsman's warehouse. And we still continue to have exposure to Darden, At Home and Hobby Lobby.

We still continue to have exposure to darden at home and hobby lobby.

Craig Kucera: Got it? And I guess was this the last quarter, Matt, that you're expecting to receive any form of COVID repayment?

And I guess was this the last quarter, Matt that you are expecting to receive any form of Covid repayment.

Matt Partridge: Yes, we have received all of the deferred rent repayment agreement that were put in place.

Craig Kucera: Great. And I'm just curious, you've had this out parcel you got, I believe in Jacksonville that you were looking to potentially develop as the change in the economy change any of the timing or sort of underwriting or considerations for that potential development?

I'm just curious you've had this out parcel you got I believe in Jacksonville that you were looking to potentially develop as the change in the economy changed any of the timing of war or sort of underwriting or considerations for that potential development.

John Albright: Yes, so that one, the tenant definitely still wants to be there. And we're still in conversations, where we're not seeing any help is on construction costs. Construction costs are still elevated. And so it's really conversation with the tenant is that they need to pay more rent for us to get the yield we would want. And so that's an on-going conversation, a very, very constructive conversation. They're trying to figure out how to value engineer it, or just, having a slightly higher rent and make it all work so that's an on-going conversation, but hopefully construction costs come down and going to help us on that side as well.

The tenant definitely still wants to be there and.

And we're still in conversations.

Where we're not seeing any help us on construction costs construction costs are still elevated.

And so it's really a conversation with a tenant is that they need to pay more rent for us to get the yield we would want.

And so.

Ongoing conversation a very.

Constructive conversation theyre trying to figure out whether how to value engineer it or just.

Having a slightly higher higher rand to make it all work so.

It's an ongoing conversation, but hopefully construction costs come down and going to help us on that side as well.

Craig Kucera: Okay, great. Thanks, guys.

Multiple speakers: Thanks, Craig.

Operator: Our next question comes from [indiscernible] with Factset. Your line is now open. [Technical difficulties]

Yes.

Our next question comes from.

With Factset your line is now open.

Chris Your line is now.

Mute button.

Operator: And I'm currently showing no further questions at this time. I'd like to turn the call back over to John Albright for closing remarks.

Alright for closing remarks.

Multiple speakers: [John Albright] Thank you, operator. Thank you everyone for attending today's call and we look forward to following up with you post call. Thank you. [Operator] This concludes today's conference call. Thank you for participating. You may now disconnect.

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

Operator: The conference will begin to shortly. To raise your hand during Q&A you can dial star one.

We will begin to Ot to raise your hand during Q&A you can dial star one.

[music]

Okay. [music].

[music].

Yes. Okay.

Okay.

[music].

Q2 2022 Alpine Income Property Trust Inc Earnings Call

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