Q3 2023 Alpine Income Property Trust Inc Earnings Call
Speaker 1: Good day and thank you for standing by. Welcome to the Alpine Q3 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Partridge, Chief Financial Officer.
Good day and thank you for standing by welcome to the Alpine Q3 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
To ask a question during this session. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Matt Partridge, Chief Financial Officer.
Speaker 2: Good morning, everyone, and thank you for joining us today for the Alpine Income Property Trust third quarter 2023 operating results conference call. With me today is our CEO
Good morning, everyone and thank you for joining us today for the Alpine income property Trust third quarter 2023 operating results conference call.
With me today is our CEO and President John Albright before we begin I'd like to remind everyone that many of our comments today are considered forward looking statements under federal Securities law.
Speaker 2: 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.
Actual future results may differ significantly from the matters discussed in these forward looking statements and we undertake no duty to update these statements.
Speaker 2: Factors and risks that could cause actual results to differ materially from expectations or disclosed from time to time in greater detail in the company's Form 10-K , Form 10-Q and other SEC filings.
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.
Speaker 2: 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 alpinereef.com. I'll now hand the call over to John for his prepared remarks.
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 I'll now hand, the call over to John for his prepared remarks.
Speaker 1: Thanks, Matt. And good morning, everyone. Jumping right in, investments during the quarter totaled $27.2 million, made up of $19.4 million in net lease acquisitions and a $7.8 million loan advance.
Thanks, Matt.
Good morning, everyone jumping right in investments during the quarter totaled $27 2 million made up of $19 4 million of net lease acquisitions, and a $7 $8 million loan investment.
Speaker 1: Dispositions during the quarter totaled 20.6 million.
As physicians during the quarter totaled $20 6 million during.
Speaker 1: During the quarter, the cash cap rate on our acquisitions was 9%, the initial yield on our loan investment was 8.5%, and the exit cap rate on our disposition was 6.3%.
During the quarter, the cash cap rate on our acquisitions with 9% initial yield on our loan investment was eight 5% and the exit cap rate on our dispositions was six 3%.
Speaker 1: Contributing to our outsides acquisition yield is the coals we purchased in Chandler, Arizona. This property is set to have its rent roll down 25% in the first quarter of 2024. The roll down is negotiated prior to our purchase in order to meaningful extent the term of the property.
Contributing to our outsized acquisition yielded the coals we purchase in Chandler, Arizona. This property is set to have its rent roll down 25% in the first quarter of 2020 for.
The roll down was negotiated prior to our purchase in order to meaningfully extend the term of the property.
Speaker 1: The acquisition cap rate on our Q3 activity posts rent reset is 7.5%, which is the second highest cap rate for quarterly acquisition volume in our company's history and more than 50 basis points above our historical average.
The acquisition cap rate on our Q3 activity post rent reset is seven 5%, which is the second highest cap rate for quarterly acquisition volume in our company's history.
More than 50 basis points above our historical average.
Speaker 1: The mortgage we originated during the quarter is our first loan investment at Pine. The project is a 33 acre development outside of any anapolis that includes five net lease out parcels, including wall law, as the anchor tenant, and a multifamily development parcel.
The mortgage we originated during the quarter as our first loan investment at time.
Project is a 33 acre development outside of Indianapolis that includes five net lease out parcels, including wawa as the anchor tenant in our multifamily development parcel wire alone is secured by the entire land assemblage proceeds from our loan our further development of the single tenant parcels there.
Speaker 1: where a loan is secured by the entire land assemblage proceeds from our loan or further development of the single-tenant parcels.
Speaker 1: The loan has a term of two years, and initially you'll elevate and half percent in year one, and increase rate of nine and a quarter percent in year two. And we receive origination fees as part of the financing. The outstanding balance of the quarter and- and increase rate of nine and a quarter percent in year two.
<unk> has a term of two years at initial yield of eight 5% in the year, one an increased rate of 9.25% in year two.
You'll receive origination fees as part of the financing.
The outstanding balance at quarter end was $6 9 million.
Speaker 1: As we discussed in our last call, we'd be these first mortgage investments as an opportunity to invest in properties with high quality tenants and strong sponsorship and outsides risk adjuster returns.
As we discussed on our last call. We view. These first mortgage investments has the opportunity to invest in properties with high quality tenants and strong sponsorship at outsized risk adjusted returns.
Speaker 1: These investments are going to be a minority component of our strategy, but they do provide attractive short-term yields while we seek longer-term core investment opportunities.
These investments are going to be a minority component of our strategy, but they do provide attractive short term yields while we see longer term core investment opportunities.
Speaker 1: In addition to our investment activity, we continued our strategic asset recycling program during the quarter, selling eight properties leased to non-investment grade 10s, the majority of which were franchise restaurant operator.
In addition to our investment activity, we continued our strategic asset recycling program during the quarter selling eight properties leased to non investment grade tenants. The majority of which were franchise restaurant operators.
Speaker 1: These at that cell is generated total gains of 2.6 million.
These asset sales generated total gains of $2 6 million.
Speaker 1: Our net investment spread during the quarter, which is the difference between the yield on our investments and less the yield on our property, so with 266 basis points, or 118 basis points when adjusted for the cold's rolled out.
Our net investment spread during the quarter, which is the difference between the.
The yield on our investment and less of the yield on our property sold with 266 basis points or 118 basis points when adjusted for the cold rolled out.
Speaker 1: The 118 basis points is more than twice our long-term average and our highest quarterly spread since the third quarter of 2022. Overall, we're pleased with this quarter's transaction activity as we believe we have improved portfolio quality while generating attractive risk adjusted returns.
The 118 basis points is more than twice, our long term average and our highest quarterly spread since the third quarter of 2022.
Overall, we're pleased with this quarter's transaction activity as we believe we have improved portfolio quality, while generating attractive risk adjusted returns.
Speaker 1: Year to date, we've invested $87 million at a 7.5% initial yield. Sixty-one percent of the acquired base rents come from tenants with investment grade credit rating, and 87% of the acquired base rents come from tenants that are publicly traded or whose debt is publicly traded.
Year to date, we've invested $87 million at a seven 5% initial yield 61% of the acquired base rents come from tenants with investment grade credit rating and 87% of the acquired base rents coming from tenants that are publicly traded or who that is publicly traded.
Speaker 1: Additionally, during the first nine months of the year, we've sold 22 properties for 100 million generating gains of sales of 7.8 million.
Additionally, during the first nine months of the year, we sold 22 properties for $100 million generating gains of cells.
$7 8 million.
Speaker 1: 14 of the 22 properties sold were occupied by tenants who are not publicly traded or whose debt is not publicly rated
14 of the 22 properties sold were occupied by tenants who are not publicly traded or is that is not publicly rated.
Speaker 1: Today, 64% of our portfolios base rent comes from investment grade rated 10 ounces and 93% of our tenants are either publicly traded or have debt that is publicly rated.
Today, 64% of our portfolio's base rent comes from investment grade rated tenants and 93% of our tenants are either publicly traded or have debt that is publicly traded.
Speaker 1: Our top tenants remain unchanged from the second quarter, which includes notable industry leading operators, such as Walgreens, Lowe's, Dick's Boarding Goods, Dollar General, Dollar Tree, Family Dollar, Walmart, Best Buy, Hobby Lobby, and Home Depot.
Our top tenants remain unchanged for the second quarter, which includes notable inch industry, leading operators such as Walgreens Lowe's Dick's Sporting goods dollar General dollar tree family dollar Walmart best buy hobby lobby and home depot.
Speaker 1: From a portfolio management perspective, we did have seven Valero branded convenience store properties become vacant during the quarter as a result of bankruptcy and a subsequent liquidation of the operator mountain express.
From a portfolio management perspective, we did have seven Valero branded convenience store properties become vacant during the quarter as a result of bankruptcy and subsequent liquidation of the operator Mountain Express these.
Speaker 1: These properties are relatively small in size and the rents are modest in the context of our entire portfolio, but nevertheless the lost rent and resulting marginal increase in our borrowing costs due to this bankrupt C, as well as projected timing of the transaction activity, are all contributing factors to our revised guidance.
These properties are relatively small in size and our rents are modest in the context of our entire portfolio, but nevertheless, the lost rent and resulting marginal increase in our borrowing costs due to the bankruptcy as well as projected timing of the transaction activity are all contributing factors to our revised guidance the impact of the <unk>.
Speaker 1: The impact of the bankruptcy should largely be contained to our third quarter and fourth quarter operating results as we anticipate putting this issue behind us by filling the properties in the coming months in reinvesting the proceeds.
<unk> should largely be contained to our third quarter and fourth quarter operating results as we anticipate putting this issue behind us by selling the properties in the coming months and reinvesting the proceeds.
Speaker 1: And finally, we did buy back nearly $5 million dollars for common stock during the third quarter. And we believe to be a creative pricing as our stock is trading near and implied 8% cap rate. And well below our book value.
And finally, we did buyback nearly $5 million of our common stock during the third quarter and what we believe to be accretive pricing as our stock is trading near an implied a 8% cap rate and well below our book value.
Speaker 1: We'll continue to be active on our $15 million buyback program as long as our stock trades that what we believe is a meaningful discount to the underlying value of our portfolio and operating platform.
We will continue to be active on our $15 million buyback program as long as our stock trades at what we believe is at a meaningful discount to underlying value of our portfolio and operating platform.
Speaker 2: Now I'll turn the call over to Matt to discuss our quarterly results, balance sheet and revised guidance. Thanks, Sean. As of the end of the quarter, our portfolio is 99% occupied and consistent of 138 properties totaling 3.9 million square feet with tenants operating in 23 sectors within 35 states.
Now I'll turn the call over to Matt to discuss our quarterly results balance sheet and revised guidance. Thanks, Sean as of the end of the quarter. Our portfolio is 99% occupied and consisted of 138 properties totaling $3 9 million square feet with tenants operating in 23 sectors within 35 states.
Speaker 2: Occupancy ticked down as a result of the mountain expressed bankruptcy, but as John mentioned, our top tenants generally remain unchanged and continue to be made up of well-diversified mix of industry leading operators, the majority of which have investment grade credit ratings and are publicly rated or publicly traded.
Occupancy ticked down as a result of the mountain express bankruptcy, but as John mentioned, our top tenants generally remain unchanged and continue to be made up of a well diversified mix of industry, leading operators. The majority of which have investment grade credit ratings and our publicly rated or publicly traded.
Speaker 2: Third quarter 2023 FFO was 37 cents per share, representing a 7.5% decrease compared to the third quarter of 2022. And third quarter 2023 AFFO was 38 cents per share, representing a 9.5% decrease over the third quarter of 2022.
Third quarter 2023, <unk> 37 per share representing a seven 5% decrease compared to the third quarter of 2022 and third quarter of 2023, <unk> was <unk> 38 per share representing a nine 5% decrease over the third quarter of 2022.
Speaker 2: Our quarterly results were negatively impacted by the non-performing tenant issues, timing of investments in dispositions, and higher interest expense from year-over-year increases in interest rates.
Our quarterly results were negatively impacted by the nonperforming tenant issues timing of investments and dispositions and higher interest expense from year over year increases in interest rates.
Speaker 2: These items were partially offset by regular rent increases within the own portfolio, the tracking that investment spreads from our asset recycling program, increased interest income from cash from restricted cash on balance sheet, and the benefits of an incrementally lower share count resulting from our share repurchase program.
These items were partially offset by regular rent increases within the owned portfolio attractive net investment spreads from our asset recycling program increased interest income from cash from restricted cash on balance sheet and the benefits of an incrementally lower share count, resulting from our share repurchase program or.
Speaker 2: Our general and administrative expenses for the quarter totaled $1.7 million, which included the $1.1 million management fee to our external manager. Our GNA increased 13% year over year, largely driven by increases to the management fee, driven by our net equity capital market activities over the past 12 months.
Our general and administrative expenses for the quarter totaled $1 7 million, which included the $1 $1 million management fee to our external manager our G&A increased 13% year over year, largely driven by increases to the management fee driven by our net equity capital markets activities over the past 12 months.
Speaker 2: The current annual run rate for the management fee before any assumed new equity issuances or repurchases is $4.3 million. In GNA as a percentage of total revenues in the third quarter was 14.3% down from 14.6% in the second quarter of 2023.
The current annual run rate for the management fee before any assume new equity issuances or repurchases of $4 3 million in G&A as a percentage of total revenues in the third quarter was 14, 3% down from 14, 6% in the second quarter of 2023.
Speaker 2: As a result of the Mountain Express bankruptcy, we took a $2.9 million impairment during the quarter and subsequently classified the seven properties as held for sale. The impairment was largely offset by the $2.6 million gain on this position of assets during the quarter. Both items are adjusted for as part of our FFO and AFFO calculations.
As a result of the Mountain Express bankruptcy, we took a $2 $9 million impairment during the quarter and subsequently classified the seven properties as held for sale. The impairment was largely offset by the $2 $6 million gain on disposition of assets during the quarter.
These items are adjusted for as part of our <unk> calculations.
Speaker 2: Year to date, FFO is $1.10 per share and AFFO is $1.11 per share, representing year over year per share decreases of approximately 19% when compared to the first nine months of 2022.
Year to date <unk> is $1 10 per share and <unk> was $1 11 per share representing year over year per share decreases of approximately 19% when compared to the first nine months of 2022.
Speaker 2: As previously announced, the company paid a third quarter cash dividend of 27 and a half cents per share, representing a current annualized yield of approximately 6.6%.
As previously announced the company paid a third quarter cash dividend of <unk> 27, five per share representing a current annualized yield of approximately six 6%.
Speaker 2: Our third quarter FFO and AFFO payout ratios remained well covered at 74% and 72% respectively.
Our third quarter, <unk>, and <unk> payout ratios remained well covered at 74% and 72% respectively.
Speaker 2: We anticipate announcing our regular quarterly cash common stock dividend for the fourth quarter during the end of November .
We anticipate announcing a regular quarterly cash common stock dividends for the fourth quarter during the end of November .
Speaker 2: As John previously referenced, we were active during the quarter on our board approved $15 million share repurchase program. We're purchasing over 280,000 shares of our common stock for a total cost of $4.7 million at an average price of $16.78 per share.
As John previously referenced we were active during the quarter on our board approved a $50 million share repurchase program repurchasing over 280000 shares of our common stock for a total cost of $4 7 million at an average price of $16 78 per share.
Speaker 2: Year to date, we have repurchased over 300,000 shares of our common stock for total cost of $5.1 million at an average price of $16.66 per share.
Year to date, we have repurchased over 300000 shares of our common stock for total cost of $5 1 million at an average price of $16 66 per share.
Speaker 2: We ended the quarter with net debt to total enterprise value of 48%, net debt to proforma EBITDA of 6.9 times, and we continue to maintain a strong fixed charge coverage ratio of 3.4 times.
We ended the quarter with net debt to total enterprise value of 48% net debt to pro forma EBITDA is six nine times and we continue to maintain a strong fixed charge coverage ratio of three four times.
Speaker 2: Our balance sheet has no floating interest rate exposure, no debt maturities until 2026, and total liquidity a quarter in through cash, restricted cash, and undrawn revolver commitments was more than $217 million.
Our balance sheet has no floating interest rate exposure no debt maturities until 2026, and total liquidity at quarter end through cash restricted cash and undrawn revolver commitments with more than $217 million.
Speaker 2: Finally, as we transition into the fourth quarter of 2023, we begin the quarter with portfolio-wide, in-place, annualized straight-line and cash-based rents of approximately $39.2 million. We have updated our full year 2023 guidance to account for our third quarter performance and lost rents from the Mountain Express bankruptcy, projected timing of dispositions and investments, forecasted capital markets activities, and other various assumptions.
And finally, as we transition into the fourth quarter of 2023, we began the quarter with portfolio wide in place annualized straight line and cash base rents of approximately $39 2 million. We've updated our full year 2023 cash 2023 guidance to account for our third quarter performance and lost rents from the Mountain Express bankruptcy.
Projected timing of dispositions and investment forecast the capital markets activities and other various assumptions, we have reduced our full year <unk> guidance ranges to $1 45 to $1 47 per share and $1 46, and $1 48 per share respectively.
Speaker 2: We have reduced our full year FFO and AFFO guidance ranges to $1.45 to $1.47 per share and $1.46 and $1.48 per share respectively.
Speaker 2: forecasted weighted average share count for the year was increased by 100,000 shares at the low end and decreased by 400,000 shares at the high end to account for our third quarter and expected fourth quarter net equity capital markets activity.
The forecasted weighted average share count for the year was increased by 100000 shares at the low end and decreased by 400000 shares at the high end to account for our third quarter and expected fourth quarter net equity capital markets activities.
Speaker 2: And we've maintained our overall dispositions and investment guidance, the latter of which does incorporate our Loan Investment Act.
And we've maintained our overall dispositions and investment guidance, the latter of which does incorporate our loan investment activity.
Speaker 2: While we do have the tenant credit issue to work through during the fourth quarter, we're confident our portfolio will continue to perform well in any economic environment as it benefits from nearly two-thirds of rents coming from investment grade rated tenants and strong financial transparency with nearly 93% of rents coming from publicly traded and publicly rated tenants.
While we do have a tenant credit issue to work through during the fourth quarter. We're confident in our portfolio will continue to perform well in any economic environment. Its benefits from nearly two thirds of rents coming from investment grade rated tenants and strong financial transparency with nearly 93% of rents coming from publicly traded and publicly rated tenants combined.
Speaker 2: Combined with our creative asset recycling strategy, de-risk balance sheet and opportunistic share repurchase program, we believe we're strongly positioned for 2024. With that, we'll now open the call up for questions. Operator.
Combined with our accretive asset recycling strategy derisk balance sheet and opportunistic share repurchase program. We believe we are strongly positioned for 2024 with that we'll now open the call up for questions operator.
Speaker 3: Thank you as a reminder task a question, please press star 11 on your telephone and wait for your name to be announced to withdraw your question. Please press star 11 again. 1 moment for questions.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.
Speaker 3: Our first question comes from Matthew Erdner with Jones Trading. You may proceed.
Our first question comes from Matthew <unk> with Jones trading you May proceed.
Speaker 4: Hey, good morning guys. Thanks for taking the question. So it seems like for the remainder of the year, the disposition activity is going to come from the Mountain Express and then maybe an acquisition opportunistically somewhere if you find something that fits. But thinking ahead to 2024, are you guys expecting to be net buyers or net sellers?
Hey, good morning, guys. Thanks for taking the question. So it seems like for the remainder of the year. The disposition activity is going to come from the Mountain Express and then maybe an acquisition opportunistically somewhere if we find something that fits but thinking ahead to 2024 are you guys expecting to be net buyers or net sellers.
Speaker 1: Well, we hope to be obviously net buyers for sure. It's obviously capital markets dependent and recycling dependent. But clearly we're starting to see more interesting opportunities.
Well, we hope to be obviously net buyers for sure.
Obviously capital markets dependent and recycling independent but.
Clearly, we're starting to see more interesting opportunities.
Speaker 1: And so we're obviously taking advantage of where we can continue to sell down properties and credits at good prices and kind of be in position to purchase. So we're patiently looking at opportunities and yeah, so obviously we'd love to be a net acquirer next year.
And so we're we'll obviously take advantage of where.
Where we can kind of continue to sell down.
Properties in credits at good prices and kind of be in position to to purchase so.
We are patiently looking at opportunities.
So obviously, we'd love to be a net acquirer next year.
Speaker 4: Yeah, and then as a follow up to that, 93% currently publicly rated or traded is the goal eventually to get to 100% there.
And then as a follow up to that 93% currently publicly rated are traded.
Eventually they get to a 100% there.
Speaker 1: Not necessarily, but we think it's a great indication that obviously a publicly traded company has more access to capital than a private company. And so just a kind of a good data point, I think, for investors. Gotcha. Thank you. Thank you.
No not necessarily but we think it's a great indication that obviously a publicly traded company has more access to capital than than a private company.
And so just to kind of a good data point I think for investors.
Thank you.
Thanks.
Thank you one moment for questions.
Speaker 3: Our next question comes from Rob Stevenson with Jenny Montgomery Scott. You may proceed.
Our next question comes from Rob Stevenson with Janney Montgomery Scott You May proceed.
Speaker 5: Matt, what's the monthly or quarterly revenue impact from the bankrupt tenant?
Hey, good morning, guys.
Matt, what's the monthly or quarterly revenue impact from the bankrupt.
Bankrupt tenant.
Speaker 2: for you guys? It's a little under a hundred fifty thousand a quarter of base rent and then obviously there's carrying costs related to those assets for real estate taxes and maintenance and so on and so forth. I think what you can expect though is that we'll hopefully exit those before the end of the year..
For you guys.
It's a little under 150000 a quarter.
Base rent and then obviously <unk> carrying costs related to those assets for real estate taxes, and maintenance and so on and so forth. So.
I think what you can expect though is that it will hopefully exit those before the end of the year.
Speaker 5: Okay. And then John , why Kohl's? I mean, non-investment grade tenant at this point having or at least had operational issues, stocks a third of what it was 18 months ago. What's the allure there even on a longer term lease from them given the opportunities otherwise that were out there for you during the quarter?
Okay.
Then John why Coles non investment grade tenant at this point, having or at least had operational issues stocks a third of what it was 18 months ago, what's the allure there even on a longer term lease from them given the opportunities otherwise that were out there for you during the.
Speaker 1: Chandler, Arizona, amazing infill location, very appropriately priced rent with a rent roll down. So you got just a very strong demographics there.
<unk>.
Chandler, Arizona Amazing infill location.
Very appropriately price ramp with a rent roll down so you've got yes.
Very strong demographics there.
Speaker 1: and in a market where, as you see, all these chip manufacturers are going crazy building fabrication plants there. So very infill location, you can't build it for this, the cost basis.
In a market where as you see all these chip manufacturers are going crazy building fabrication plants. There. So very infill location you can't build it for this cost basis and so if something happens. There then I think there'll be plenty of.
Speaker 1: And so if something happens to them, I think there will be plenty of takers for the box or subdivided box.
Takers for the box are subdivided box.
Speaker 5: Okay, that's helpful. And then last one for me, how are you guys thinking about capital deployment in the fourth quarter? Buy back more stock, reduce debt? Are there more dispositions teed up and acquisitions as well given where you are relative to the guidance? How likely is that stuff to close in the fourth quarter versus something more out into 24?
Okay. That's helpful and then last one for me.
How are you guys thinking about capital deployment in the fourth quarter.
Buy back more stock reduced debt.
Are there more dispositions teed up.
And acquisitions as well given.
Where you are relative to the guidance, how likely is that stuff to close in the fourth quarter versus something more out into 'twenty four.
Speaker 1: So a little bit all of the above. Obviously we're buying stock, we think opportunistically. We're looking at some interesting investment opportunities. And we have assets on the market and in the process of selling to recycle. So we're super active on all fronts.
So a little bit all of the above.
Obviously, we are buying stock, we think opportunistically, we're looking at some.
Interesting investment opportunities and we have.
Unknown Executive: Good day, and thank you for standing by.
Unknown Executive: Welcome to the Alpine Q3 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Assets on the market and in the process of selling.
To recycle so were super active on all fronts.
Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
Speaker 3: OK. Thanks guys and have a great weekend. Thanks you too.
Okay, Thanks, guys and have a great weekend. Thanks.
Thanks, you too.
Thank you one moment for questions.
Speaker 3: Our next question comes from Wesley Galladay with Bear, you may proceed.
Unknown Executive: Please be advised that today's conference is being recorded.
Our next question comes from Wesley Golladay with Baird You May proceed.
Matthew Partridge: I would not like to hand the conference over to your speaker today, Matt Partridge, Chief Financial Officer. Good morning, everyone, and thank you for joining us today for the Alpine Income Property Trust third quarter 2023 operating results conference call. With me today's 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.
Speaker 6: Hey, good morning, guys. Question on that 118 basis point spread, maybe looking forward. Do you have a sense of what kind of spread you can get going forward? And then maybe can you comment on the growth rate of the assets you're buying versus selling?
Hey, Good morning, guys. A question on the 118 basis point spread maybe looking forward do you have a sense of what kind of spreads you can get going forward and then maybe can you comment on the growth rate of the assets you are buying versus selling.
Speaker 1: Yeah, I mean, I would say that there's definitely some interesting spread opportunities of what we can sell versus what we can buy.
Yes, I would say that there is definitely some interesting spread opportunities of what we can to sell versus what we can buy.
Speaker 1: I don't know whether they'll come to fruition. There's also maybe a flatter trade of selling some non-investment grade properties and buying investment grade properties where there's not as much.
I don't know, whether they will come to fruition.
There is also maybe a flat our trade of selling.
Non investment grade properties, and buying investment grade properties, where theres not as much.
Matthew Partridge: Actors and risks that can cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10K, Form 10Q, and other SEC filings. You can find our SEC reports, earnings release, and most recent investor presentation, which contain recommendations of non-gap financial measures we use on our website at alpineread.com.
Speaker 1: you know, spread there, but you're upgrading the portfolio. So it's a little bit of a combination where there is some definitely some spread opportunity and then some that are kind of a little bit neutral.
Spread there, but you're upgrading the portfolio. So it's a little bit of a combination where there is some definitely some some spread opportunity and then some that are kind of little bit neutral, yes, and on the growth West I would say about half of what we bought this year has contractual rent increases.
Speaker 2: Yeah, and on the growth, Wes, I would say about half of what we bought this year has contractual rent increases.
John Albright: I'll now hand the call over to John for his prepared remarks. Thanks, Matt, and good morning, everyone. Jumping right in, investors during the quarter totaled 27.2 million made up of 19.4 million net leaf acquisitions and a $7.8 million loan investment. Dispositions during the quarter totaled 20.6 million. During the quarter, the cash cap rate on our acquisitions was 9%, the initial yield on our loan investment was 8.5%, and the exit cap rate on our disposition was 6.3%.
Speaker 2: Obviously, the Coles has a roll down, but that notwithstanding, it's going to be investment specific because depending on what lease is available on the market at the time that we buy it, it may or may not have rent growth.
Obviously, the Kohl's has a roll down but that notwithstanding.
It's going to be it's going to be investment specific because depending on what leases available on the market at the time that we buy it may or may not have rent growth.
Speaker 2: And if it's a shorter term lease, there might not be contractual increases in the existing term, but if we're buying it right, then there should be growth on the option.
And if it's a shorter term lease there might not be contractual increases on the existing term, but if we're buying it right then there should be growth on the options.
Speaker 6: Okay, fantastic. And then can you comment on your watch list? Now? You definitely care about some of your smaller tenants and then maybe could you comment on what happened with this bankruptcy? It looks like an liquidation. Uh, and I probably wouldn't have been your base case at the start of the year. I'll let my voice fly away for another.....
Okay Fantastic and then can you comment on your watch list now you're definitely pared back some of your smaller tenants and then maybe could you comment on what happened with the bankruptcy and liquidation.
John Albright: Contributing to our outsized acquisition yield is the coals we purchased in Chandler, Arizona. This property is set to have its rent roll down 25% in the first quarter of 2024. The roll down was negotiated prior to our purchase in order to meaningfully extend the term of the property. The acquisition cap rate on our Q3 activity post rent reset is 7.5%, which is the second highest cap rate for quarterly acquisition volume in our company's history and more than 50 basis points above our historical average.
I, probably would've been your base case at the start of the year.
I'll, let Matt.
Speaker 1: kind of discussed some of that, but in general on the liquidation, that company, Mountain Express, was teed up to be sold. There was a standoff between the private equity and the lenders, and private equity has basically decided to just liquidate the company. So, kind of a startling...
Kind of discuss some of that but.
In general on the liquidation.
That company Mountain Express with teed up to be sold there is a standoff between the private equity and the lenders and private equity has basically decided that is liquidate the company so kind of a startling change, but we've had multiple parties.
Speaker 1: change but we've had multiple parties that have followed that process that have come to us interested in these properties.
John Albright: The mortgage we originated during the quarter is our first loan investment at Pine. The project is a 33 acre development outside of any anapolis that includes five net leaf out parcels including wall law as the anchor tenant and a multifamily development parcel. Our loan is secured by the entire land assemblage proceeds from our loan are for the development of the single tenant parcels. The loan has a term of two years and initial yield of 8.5% in year one and increased rate of 9.4% in year two, and we receive origination fees as part of the financing.
That had followed that process that have come to us interested in these properties. So we are actively in discussion on getting those sold on the watch list clearly as you know the west who had been very active on.
Speaker 1: So we're actively in discussion on getting those sold. On the watch list, clearly as you know, the West we've been very active on.
Speaker 1: starting this sale process over a year ago and focusing on a lot of credits that could be an issue and we're continuing that process.
Starting this sale process over a year ago and focusing on a lot of a lot of credits that could be an issue and we're continuing that process.
Speaker 2: But I'll let Matt discuss a little bit more granular. Yeah, just to expand on that, if you look at what we sold in the third quarter, a lot of its friends, restaurant operators, where well we're not trying to get to that 100%.
But ill, let Matt discuss a little bit more granular, yes, just to expand on that if you look at what we sold in the third quarter a lot of its franchise restaurant operators where.
John Albright: The outstanding balance of the quarter end was 6.9 million. As we discussed in our last call, it would be these first mortgage investments as an opportunity to invest in properties with high quality tenants and strong sponsorship and outside risk adjuster returns. These investments are going to be a minority component of our strategy, but they do provide attractive short-term yields while we seek longer-term core investment opportunities. In addition to our investment activity, we continued our strategic asset recycling program during the quarter, selling eight properties leads to non-investment grade tenets, the majority of which were franchise restaurant operators.
While we're not trying to get to that 100%.
Speaker 2: publicly traded or publicly rated route that John referenced earlier, we are focused on investing in tenants that have clear transparency when it comes to their financials. And so there are other tenants within our portfolio, small amounts that we'll look to exit opportunistically if the market gives us appropriate pricing.
Publicly traded or publicly rated route that John referenced earlier, we are focused on investing in tenants that have clear transparency when it comes to their financials and so there are other tenants within our portfolio a small amount that we will look to exit opportunistically if.
If the market gives us appropriate pricing.
Speaker 6: Okay, and then just one final one for you met on the balance sheet. It was that interest expense did pop for the balance of the year. You expect to be at the lower pricing grid at the start of the next year.
Okay, and then just one final one for you Matt on the balance sheet. It looks like interest expense did pop for the balance of the year do you expect to be at the lower pricing grid at the start of next year.
Speaker 2: Yeah, so we'll see how disposition...
John Albright: These asset sales generated total gains of 2.6 million are net investment spread during the quarter, which is the difference between the yield on our investments and less the yield on our properties sold with 266 basis points or 118 basis points when adjusted for the coals rolled out. The 118 basis points is more than twice our long-term average and our highest quarterly spread since the third quarter of 2022.
Yes.
We'll see how dispositions materialized through the end of the year, but the goal is to is to reduce leverage to a point that we slide back into a lower spread on our on all of our debt by year end.
Speaker 6: materialize through the end of the year, but the goal is to is to reduce leverage to a point that we we slide back into a lower spread on our on all of our debt by year-end. Great, thanks for the time everyone.
Great. Thanks for the time everyone.
Thanks Rajiv.
Thank you one moment for questions.
Speaker 3: Our next question comes from RJ Milligan with Raymond James, he may proceed.
Our next question comes from RJ Milligan with Raymond James You May proceed.
John Albright: Overall, we're pleased with this quarter's transaction activity as we believe we have improved portfolio quality while generating attractive risk adjusted returns. Year-to-day, we've invested $87 million at a 7.5% initial yield. 61% of the acquired base ramps come from tenants with investment grade credit rating. In 87% of the acquired base ramps come from tenants that are publicly traded or whose debt is publicly traded. Additionally, during the first nine months of the year, we've sold 22 properties for 100 million generating gains of sales of 7.8 million.
Speaker 6: Hey, good morning, guys. Two quick follow-ups. Matt, I think you said $150,000 a quarter for the tenant bankruptcy. I'm just curious how much you got in the third quarter for modeling purposes.
Hey, good morning, guys.
Two quick follow ups, Matt I think you said $150000 a quarter for the tenant bankruptcy I'm just curious how much you've got in the third quarter for modeling purposes.
Speaker 2: For modeling purposes, we got most of it in the third quarter.
For modeling purposes, we got most of it in the third quarter.
Speaker 6: Okay. And then with the Kohl's roll down, what's the effective cap rate on the acquisitions in the quarter?
Okay.
And then with the Coles roll down.
What's the effective cap rate on the acquisitions in the quarter.
Speaker 2: Yeah, the effective cap rate once the roll down happens is a 7.5% cash cap rate.
Yes, the effective cap rate once the rollout happens is a seven 5% cash cap rate.
Speaker 6: Okay, and then John , just more broadly, you guys are the person at least to report here and provide some commentary. I'm just curious, you mentioned that you're seeing more opportunities out there, but what are you seeing in terms of pricing and then the competitive buyer pool out there, just given where the cost of capital is trending?
Okay, and then John just more broadly you guys have the person at least REIT to report here and provide some commentary I'm just curious.
John Albright: 14 of the 22 properties sold were occupied by tenants who are not publicly traded or whose debt is not publicly rated. Today, 64% of our portfolios base rent comes from investment grade rated tenants and 93% of our tenants are either publicly traded or have debt that is publicly traded. Our top tenants remain unchanged from the second quarter, which includes notable industry leading operators such as Walgreens, Lowe's, Dick Sporting Goods, Dollar General, Dollar Tree, Family Dollar, Walmart, Best Buy, Hobby Lobby and Home Depot.
You mentioned that you are seeing more opportunities out there, but what are you seeing in terms of pricing and then the competitive buyer pool out there.
Just given where the cost of capital has trended.
Speaker 1: Yeah, I would say there's still the market's very tepid in that the standoff between buyers and sellers.
Yes, I would say there is still.
The market's very tepid and that.
Standoff between buyers and sellers.
Speaker 1: So clearly only looking for situations where people need to sell and so kind of trying to be patient there, but not a lot of transactions are happening for sure. We think that there's gonna be more properties coming on the market.
So clearly only looking for situations where people need to sell.
And so kind of trying to be patient there, but not a lot of transactions are happening for sure.
John Albright: From a portfolio management perspective, we did have seven Valero-branded convenience store properties become vacant during the quarter as a result of bankruptcy and a subsequent liquidation of the operator mountain expressed. These properties are relatively small on size and the rents are modest in the context of our entire portfolio, but nevertheless the lost rent and resulting marginal increase in our borrowing cost due to this bankruptcy, as well as projected timing of the transaction activity.
Thank you.
To be more properties coming on the market.
Speaker 1: that we've heard about people looking to see what kind of liquidity is out there. And so, you know, with the debt market super challenged, you know, that's...
We've heard about people looking to.
See what what kind of liquidity is out there.
And so with the debt markets Super Challenge Dino.
Speaker 1: That is obviously going to be another factor in creating some opportunities, we hope, and we're seeing some of that, but it's not.
That is obviously going to be another factor in and creating some opportunities we hope and we're seeing some of that but it's not.
John Albright: These properties are all contributing factors to our revised guidance. The impact of the bankruptcy should largely be contained to our third quarter and fourth quarter operating results as we anticipate putting this issue behind us by filling the properties in the coming months and reinvesting the proceeds. And finally, we did buy back nearly $5 million per common stock during the third quarter, and we believe to be accreted pricing as our stock is trading near and implied 8% cap rate and well below our book value. We'll continue to be active on our $15 million buy back program as long as our stock trades are what we believe is a meaningful discount to the underlying value of our portfolio and operating platform.
Speaker 1: It's not super interesting right now. We're kind of waiting to see when the wildebeest try to cross the river.
Super.
Interesting right now we're kind of waiting.
Let's see when the welded.
Or will the base charter across the river.
Speaker 1: Are you seeing a meaningful difference in cap rates from investment grade versus non-investment grade? Has that spread widened or tightened? What are you seeing? Yeah, definitely. Everyone wants the investment grade for sure. And so the investment grade is not moving. The non-investment grade is certainly moved. Yes, it's widened quite a bit.
Are you seeing a meaningful.
Difference in cap rates from investment grade versus non investment grade.
Is that spread widened or tightens, what are you seeing and yes definitely everyone wants via the investment grade for sure and so the investment grade is not moving the non investment grade has certainly moved.
Yes has widened quite a bit.
Okay. Thanks, guys I appreciate it.
Thanks.
Matthew Partridge: Now I'll turn the call over to Matt to discuss our quarterly results, balance sheet and revised guidance. Thanks, John. As of the end of the quarter, our portfolio is 99% occupied and consisted of 138 properties totaling 3.9 million square feet with tenants operating in 23 sectors within 35 states. Occupancy ticked down as a result of the mountain expressed bankruptcy, but as John mentioned, our top tenants generally remain unchanged and continue to be made up of well diversified mix of industry leading operators, the majority of which have investment grade credit ratings and are publicly rated or publicly traded.
Speaker 3: Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you and this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
Yes.
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Matthew Partridge: Third quarter, 2023 FFO was 37 cents per share, representing a 7.5% decrease compared to the third quarter of 2022 and third quarter, 2023 AFFO was 38 cents per share, representing a 9.5% decrease over the third quarter of 2022. Our quarterly results were negatively impacted by the non-performing tenant issues, timing of investments in dispositions, and higher interest expense from year-over-year increases in interest rates. These items were partially offset by regular rent increases within the own portfolio, attracting that investment spread from our asset recycling program, increased interest income from cash from restricted cash on balance sheet, and the benefits of an incrementally lower share count resulting from our share repurchase program.
Yes.
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Matthew Partridge: Our general and administrative expenses for the quarter total 1.7 million dollars, which included the 1.1 million dollar management fee to our external manager. Our GNA increased 13% year-over-year, largely driven by increases to the management fee, driven by our net equity capital market activities over the past 12 months. The current annual run rate for the management fee before any assumed new equity issuances or repurchases is $4.3 million, and GNA as a percentage of total revenues in the third quarter was 14.3% down from 14.6% in the second quarter of 2023.
Matthew Partridge: As a result of the Mountain Express bankruptcy, we took a $2.9 million in payment during the quarter and subsequently classified the seven properties as held for sale. The impairment was largely offset by the $2.6 million gain on disposition of assets during the quarter. Both items are adjusted for as part of our FFO and AFFO calculations. Year-to-date, FFO is a $1.10 per share, and AFFO is a $1.11 per share, representing year-over-year per share decreases of approximately 19% when compared to the first nine months of 2022.
Yes.
Okay.
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Okay.
Yes.
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Matthew Partridge: As previously announced, the company paid a third quarter cash dividend of 27.5 cents per share, representing a current annualized yield of approximately 6.6%. Our third quarter, FFO and AFFO payout ratios remained well covered at 74% and 72% respectively. We anticipated announcing our regular quarterly cash common stock dividend for the fourth quarter during the end of November. As John previously referenced, we were active during the quarter on our board of approved $15 million share repurchased program, repurchasing over 280,000 shares of our common stock for a total cost of $4.7 million at an average price of $16.78 per share.
Matthew Partridge: Year-to-date, we have repurchased over 300,000 shares of our common stock for total cost of $5.1 million at an average price of $16.66 per share. We ended the quarter with net debt to total enterprise value of 48%, net debt to perform it even at 6.9 times, and we continue to maintain a strong fixed charge coverage ratio of 3.4 times. Our balance sheet has no floating interest rate exposure, no debt materities until 2026 and total liquidity at quarter end through cash, restricted cash, and undrawn revolver commitments was more than $217 million.
Matthew Partridge: And finally, as we transition into the fourth quarter of 2023, we begin the quarter with portfolio-wide in place, annualized straight line and cash-based rents of approximately $39.2 million. We have updated our full year 2023 guidance to account for our third quarter performance and lost rents from the mountain expressed bankruptcy, projected timing of dispositions and investments, forecasted capital market activities and other various assumptions. We have reduced our full year FFO and AFFO guidance ranges to $1.45 to $1.47 per share and $1.46 and $1.48 per share respectively.
Matthew Partridge: The forecasted weighted average share count for the year was increased by 100,000 shares at the low end and decreased by 400,000 shares at the high end to account for our third quarter and expected fourth quarter net equity capital market activities. And we've maintained our overall dispositions and investment guidance, the latter of which doesn't corporate our loan investment activity. What we do have the tenant credit issue to work through during the fourth quarter, we're confident our portfolio will continue to perform well in any economic environment as the benefits from nearly two-thirds of rents coming from investment-grade rated tenants and strong financial transparency with nearly 93% of rents coming from publicly traded and publicly rated tenants. Combined with our creative asset recycling strategy, ERIS balance sheet and opportunity to share your purchase program, we believe we're strongly positioned for 2024.
Unknown Executive: With that, we'll now open the call up for questions.
Unknown Executive: Operator? Thank you.
Unknown Executive: As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions.
Matthew Erdner: Our first question goes from Matthew Ergner with Jones Trading, you may proceed. Hey, good morning guys. Thanks for taking the question. So it seems like for the remainder of the year that this position activity is going to come from the mountain express, and then maybe an acquisition opportunistically somewhere if you find something that fits. But thinking ahead to 2024, are you guys expecting to be net buyers or net sellers? Well, we hope to be, obviously, net buyers for sure.
Matthew Erdner: It's obviously capital markets dependent and recycling dependent. But clearly, we're starting to see more interesting opportunities. And so we're obviously taking advantage of where we can continue to sell down properties and credits at good prices and be in position to purchase. So we're patiently looking at opportunities. Yeah, so obviously it would love to be net acquired next year. Yeah, and then as a follow-up to that, 93% is currently publicly rated or traded.
Matthew Erdner: Is the goal eventually to get to 100% there? Not necessarily, but we think it's a great indication that obviously a publicly traded company has more access to capital than a private company. And so just a kind of a good data point, I think, for investors. Thank you.
Unknown Executive: One moment for questions.
Rob Stevenson: Our next question comes from Rob Stevenson with Jenny Montgomery Scott. You may proceed. Good morning, guys.
Matthew Partridge: Matt, what's the monthly or quarterly revenue impact from the bankrupt tenant for you guys? It's a little under 150,000 a quarter based rent and then obviously there's carrying costs related to those assets for real estate taxes and maintenance and so on and so forth. So I think what you can expect though is that it will hopefully exit those before the end of the year. Okay.
John Albright: And then John, why calls? I mean, non-investment grade tenant at this point, having or at least had operational issues, stocks a third of what it was 18 months ago. What's the allure there even on a longer term lease from them given the opportunities otherwise that we're out there for you during the quarter? Chandler, Arizona, amazing until location, you know, very appropriately price rent with a rent roll down. So you got just a very strong demographics there and in a market where as you see all these chip manufacturers are going crazy building fabrication plants there. So very until location, you can't build it for this the cost basis and so if something happens to them, I think there'll be plenty of takers for the box or are subdivided by the box.
Unknown Executive: Okay, that's helpful.
John Albright: And then last one for me, how are you guys thinking about capital deployment in the fourth quarter? Buyback more stock, reduce debt, are there more dispositions teed up and acquisitions as well given the where you are relative to the guidance. How likely is that stuff to close in the fourth quarter versus something more out into 24? So a little bit all of above. Obviously we're buying stock. We think opportunistically. We're looking at some interesting investment opportunities and we have assets on the market and in the process of selling to recycle. So we're super active on all fronts.
Unknown Executive: Okay, thanks guys and have a great weekend. Thanks you too.
Unknown Executive: Thank you one moment for questions.
Wesley Golladay: Our next question comes from Wesley Golliday with Bear. You may proceed. Hey, good morning guys. Question on the 118 basis point spread. Maybe looking forward. Do you have a sense of what kind of spread you can get going forward and then maybe can you comment on the growth rate of the assets you're buying versus selling? Yeah, I mean, I would say that there's definitely some interesting spread opportunities of what we can sell versus what we can buy.
Wesley Golladay: I don't know whether they'll come to fruition. There's also maybe a flatter trade of selling some non-investment grade properties in buying investment grade properties where there's not as much, you know, spread there but you're upgrading the portfolio. So it's a little bit of a combination where there is some definitely some spread opportunity and then some that are kind of a little bit neutral. Yeah, and on the growth west, I would say about half of what we bought this year has contractual rent increases.
Wesley Golladay: Obviously the colds has a roll down, but that notwithstanding, it's going to be investment specific because depending on what lease is available on the market at the time that we buy it, it may or may not have rent growth. And if it's a shorter term lease, there might not be contractual increases in the existing term, but if we're buying it right, then there should be growth on the option.
John Albright: Okay. Fantastic. And then can you comment on your watch list now? You definitely heard about some of your smaller tenants. And then maybe could you comment on, you know, what happened with this bankruptcy? It looks like an liquidation in probably wouldn't have been your base case at the start of the year. I'll let Matt kind of discuss some of that, but, you know, in general on the liquidation, the that company mountain express was teed up to the sold.
John Albright: There was a standoff between the private equity and the lenders and, you know, private equity is basically decided to just liquidate the company. So it kind of a startling change, but we've had multiple parties that had followed that process that have come to us interested in these properties. So we're, you know, actively in discussion on getting those sold on the watch list, you know, clearly, as you know, the West, we've been very active on, you know, starting this sale process, you know, over a year ago.
John Albright: And, you know, focusing on a lot of credits that could be an issue, and we're continuing that process. But let, you know, Matt discuss a little bit more granular. Yeah, just to expand on that, if you look at what we sold in the third quarter, a lot of its franchise restaurant operators where, well, we're not trying to get to that 100% publicly traded or publicly rated route that John referenced earlier. We are focused on investing in tenants that have clear transparency when it comes to their, their financials.
John Albright: And so there are other tenants on within our portfolio, small amount that will look at exit opportunistically, if the market gives us appropriate pricing. Okay, and then just one final one for you met on the balance sheet. It was that interest expense did pop for the balance of the year. You expect to be at the lower pricing grid at the start of the next year. Yeah, so we're, we'll see how dispositions materialized through the end of the year, but the goal is to, is to reduce leverage to a point that we, we slide back into a lower spread on our, on all of our debt by year end.
Unknown Executive: Great. Thanks for the time, everyone. Thanks. Well, thank you. Thank you.
Unknown Executive: One moment for questions.
RJ Milligan: Our next question comes from RJ Milligan with Raymond James, he may proceed. Hey, good morning, guys. To quick follow-ups, Matt, I think you said $150,000 a quarter for the tenant bankruptcy. I'm just curious how much you got in the third quarter for modeling purposes.
Matthew Partridge: For modeling purposes, we got most of it in the third quarter. Okay. And then with the goals rolled down, what's what's the effective cap rate on the acquisitions in the quarter? Yeah, the effective cap rate once the rolled on happens is a seven and a half percent cash cap rate.
John Albright: Okay. And then John, just more broadly, you guys are the person at least reach to report here and provide some commentary. I'm just curious. You mentioned that you're seeing more opportunities out there, but what are you seeing in terms of pricing and then the competitive buyer pool out there, just given where the cost of capital is trending. Yeah, I would say there's still the markets very tepid in that the standoff between buyers and sellers.
John Albright: So clearly only looking for situations where people need to sell and so kind of trying to be patient there, but not a lot of transactions are happening for sure. And we think that there's going to be more properties coming on the market that we've heard about people looking to see what kind of liquidity is out there.
John Albright: And so with the debt market super challenge, that is obviously going to be another factor in creating some opportunities we hope and we're seeing some of that, but it's not super interesting right now, we're kind of waiting to see when the will to be tried across the river. Are you seeing a meaningful difference in cap rates from investment grade versus non-investment grade? Has that spread widened or tightened? What do you see? Yeah, definitely everyone wants via the investment grade for sure. And so the investment grade is not moving, the non-investment grade is certainly moved. But yes, it's widened quite a bit.
RJ Milligan: Okay, thanks. I just appreciate it. Yeah, thanks. Thank you.
Unknown Executive: And this concludes today's conference call. Thank you for participating. You may now disconnect. Robert Stevenson, Gaurav Mehta, Jason Robert Stevenson, Gaurav Mehta, Jason