Q3 2025 Alpine Income Property Trust Inc Earnings Call
Speaker #2: Good day and thank you for standing by . Welcome to the Alpine Income Property Trust, Inc. Q3 Earnings Call . At this time , all participants are in a listen only mode .
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Speaker #2: I would now like to turn the conference over to your speaker today , Jen McKinney . Please go ahead .
Jenna McKinney: Thank you. Joining me and participating on the call this morning are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer, and other members of the executive team that will be available to answer questions during the call. As a reminder, many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings. You can find our SEC reports, earnings release, and most recent investor presentation, which contain reconciliations of the non-GAAP financial measures we use, on our website at www.alpinere.com.
Speaker #3: Thank you . Joining me in participating on the call this morning are John Albright , president and Chief Executive officer , Philip Mays .
Speaker #3: Chief Financial Officer and other members of the executive team that will be available to answer questions during the call . As a reminder , many of our comments today are considered forward looking statements under federal securities laws .
Speaker #3: The company's actual results may differ significantly from the matters discussed in these forward looking statements , and we undertake no duty to update these statements .
Speaker #3: 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 #3: 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 w-w-w .
Speaker #3: Dotcom . With that , I will turn the call over to John .
Jenna McKinney: With that, I will turn the call over to John.
John Albright: Thank you, Jenna, and good morning, everyone. We are pleased to report another strong quarter highlighted by AFFO per share growth of 4.5% compared to the same quarter last year and meaningful investment activity both during and shortly after the quarter end. We believe this investment activity has set a foundation for continued earnings growth through the remainder of 2025 and into 2026. Starting with our investment activity, during the quarter, we acquired two properties, ground lease to Lowe's for $21.1 million at a weighted average initial cap rate of 6% and a weighted average lease term, or WALT, of 11.6 years. Investment-grade rated Lowe's is now our largest tenant by AVR, surpassing investment-grade rated Dick's Sporting Goods, which now ranks number two.
Speaker #4: Thank you . Jenna , and good morning , everyone . We're pleased to report another strong quarter highlighted by AFFO per share growth of 4.5% compared to the same quarter last year .
Speaker #4: And meaningful investment activity both during and shortly after the quarter end . We believe this investment activity has set a foundation for continued earnings growth through the remainder of 2025 and into 2026 .
Speaker #4: Starting with our investment activity during the quarter , we acquired two properties ground leased to Loews for $21.1 million at a weighted average initial cap rate of 6% and a weighted average lease term , or Walt of 11.6 years .
Speaker #4: Investment grade rated Loews is now our largest tenant by ABR , surpassing investment grade rated Dick's Sporting Goods , which now ranks number two year to date through the third quarter .
John Albright: Year to date, through the third quarter, property acquisition volume totaled $60.8 million at a weighted average initial cap rate of 7.7% and a WALT of 13.6 years. Regarding the property dispositions during the quarter, we sold three assets for $6.2 million, including an Advance Auto Parts, our vacant theater in Reno, and a vacant property formerly leased to a convenience store. Year-to-date disposition volume through September 30th was $34.3 million, of which $29 million, excluding vacant properties, was sold at a weighted average exit cap rate of 8.4%. As of quarter end, our property portfolio consisted of 128 properties totaling 4.1 million square feet across 34 states, with approximately 99.4% occupied, with 48% of AVR derived from investment-grade rated tenants and a WALT of 8.7 years.
Speaker #4: Property acquisition volume totaled $60.8 million at a weighted average initial cap rate of 7.7% and a Walt of 13.6 years. Regarding the property dispositions during the quarter, we sold three assets for $6.2 million, including an Advance Auto Parts.
Speaker #4: Our vacant theater , in Reno , and a vacant property formerly leased to a convenience store . Year to date disposition . Volumes through September 30th was 34.3 million , of which 29 million excluding vacant properties , was sold at a weighted average exit cap rate of 8.4% .
Speaker #4: As of quarter-end, our property portfolio consisted of 128 properties totaling 4.1 million square feet across 34 states, with approximately 99.4% occupied. Additionally, 48% of Annual Base Rent (ABR) is derived from investment-grade rated tenants, with a Weighted Average Lease Term (WALT) of 8.7 years.
John Albright: Additionally, after the quarter end, we acquired a four-property portfolio for $3.8 million with a weighted average initial cap rate of 8.4% and went non-refundable on a sales contract of one of our eight remaining Walgreens for $5.5 million. Now moving to our loan investments. As a result of our long-term reputation and deep relationships, we continue to see and capitalize on exciting opportunities to originate high-yielding quality loans with strong sponsors at compelling risk-adjusted returns. During the quarter, we originated two loans and one upsized loan totaling $28.6 million at a weighted average initial yield of 10.6%. This included a first mortgage loan for industrial redevelopment and a seller financing note related to the sale of our former theater in Reno. Year to date, through September 30, we originated $74.8 million of commitments for loan investments at a weighted average initial cash yield of 9.9%.
Speaker #4: Additionally , after the quarter end , we acquired a four property portfolio for 3.8 million with a weighted average initial cap rate of 8.4% , and went nonrefundable on a sales contract of one of our eight remaining Walgreens for 5.5 million .
Speaker #4: Now moving to our lone investments as a result of our long term reputation and deep relationships , we continue to see and capitalize on exciting opportunities to originate high yielding , quality loans with strong sponsors at compelling risk adjusted returns .
Speaker #4: During the quarter , we originated two loans and one upsized loan totaling 28.6 million at a weighted average initial yield of 10.6% . This included a first mortgage loan for an industrial redevelopment and a seller financing .
Speaker #4: Note related to the sale of our former theater in Reno . Year to date through September 30th , we originated $74.8 million of commitments for loan investments at a weighted average initial cash yield of 9.9% .
John Albright: Additionally, as disclosed in our earnings release, we have originated three loans since the quarter end, most notably a first mortgage loan secured by a luxury residential development located in the Austin, Texas, metropolitan area. Under this loan agreement, we have funded $14.1 million at closing related to a phase one loan with a total commitment of $29.5 million. The loan agreement also provides for a phase two loan with a commitment of up to $31.8 million. All additional funding is subject to the borrower's satisfaction of certain conditions. Currently, we anticipate funding the balance of the phase one loan by year end and the phase two loan in early 2026. The 36-month loan initially bears interest at 17%, inclusive of a 4% paid-in-kind interest for the full loan term, stepping down to 16% for months 7 to 12 and 14% thereafter.
Speaker #4: Additionally , as disclosed in our earnings release , we have originated three loans since the quarter end , most notably a first mortgage loan secured by a luxury residential development located in Austin , Texas .
Speaker #4: Metropolitan area . Under this loan agreement , we have funded 14.1 million at closing related to a phase one loan with a total commitment of 29.5 million .
Speaker #4: The loan agreement also provides for phase two loan with a commitment of up to 31.8 million , all additional funding is subject to the borrower's tax faction of certain conditions .
Speaker #4: Currently , we anticipate funding the balance of the phase one loan by year end and the phase two loan in early 2026 . The 36 month loan initially bears interest at 17% , inclusive of a 4% paid in kind interest for the full loan term .
Speaker #4: Stepping down to 16% for months 7 to 12 . And 14% thereafter . The loan will be repaid as collateralized home lots are sold with such sales anticipated to begin as early as late 2025 .
John Albright: The loan will be repaid as collateralized home lots are sold, with such sales anticipated to begin as early as late 2025. We believe this loan, as all of our loans, is secured by strong real estate backed by a high-quality sponsor. As is often the case with our larger loans, there is institutional interest in pursuing a purchase of a senior tranche of this loan, and we currently anticipate participating in a portion of it out to reduce our net hold and further enhance our yield. In summary, we believe that our recent investment activity across both property and loan investment positions Pine for continued growth through the remainder of 2025 and into 2026. With that, I'll turn the call over to Phil.
Speaker #4: We believe this loan , as all of our loans is secured by strong , real estate backed by high quality sponsor , as is often the case with our larger loans , there is institutional interest in pursuing a purchase of a senior tranche of this loan , and we currently anticipate participating in a portion of it out to reduce our net hold in further enhance our yield .
Speaker #4: In summary, we believe that our recent investment activity across both property and loan investment positions paves the way for continued growth through the remainder of 2025 and into 2026.
Speaker #4: With that, I'll turn the call over to Phil.
Philip Mays: Thanks, John. Beginning with financial results. For the third quarter, total revenue was $14.6 million, including lease income of $12.1 million and interest income from loan investments of $2.3 million. FFO and AFFO for the quarter were both $0.46 per diluted share, representing 2.2% and 4.5% growth, respectively, over the comparable quarter of the prior year. Year to date, through September 30, total revenue was $43.6 million, including lease income of $36 million and interest income from loan investments of $7.4 million. FFO and AFFO were both $1.34 per share, representing 3.9% and 3.1% growth, respectively, over the comparable period of the prior year. Regarding our common dividend, as previously announced, during the quarter, we declared and paid a quarterly cash dividend of $0.285. Our dividend represents an annualized yield of approximately 8.25% and remains well covered with an approximate AFFO payout ratio of 62% for the third quarter.
Speaker #5: Thanks , John . Beginning with financial results for the third quarter . Total revenue was $14.6 million , including lease income of $12.1 million and interest income from loan investments of $2.3 million .
Speaker #5: FFO and AFFO for the quarter were both $0.46 per diluted share , representing 2.2% and 4.5% growth , respectively . Over the comparable quarter of the prior year .
Speaker #5: Year to date through September 30th . Total revenue was $43.6 million , including lease income of $36 million and interest income from loan investments of $7.4 million .
Speaker #5: FFO and AFFO were both $1.34 per share , representing 3.9% and 3.1% growth , respectively , over the comparable period of the prior year .
Speaker #5: Regarding our common dividend , as previously announced during the quarter , we declared and paid a quarterly cash dividend of 28.5 cents . Our dividend represents an annualized yield of approximately 8.25% , and remains well covered with an approximate payout ratio of 62% for the third quarter .
Philip Mays: Moving to the balance sheet, we ended the quarter with net debt to pro forma adjusted EBITDA at 7.7 times and $61 million of liquidity, consisting of approximately $1.2 million of cash available for use and $60.2 million available under our revolving credit facility. However, with in-place bank commitments, the available capacity on our revolving credit facility can expand an additional $31.3 million as we acquire properties, providing total potential liquidity of more than $90 million. Regarding our property portfolio, we ended the quarter with annualized base rent of $46.3 million on a straight-line basis. As noted before, this amount includes approximately $3.8 million of AVR related to three single tenant restaurant properties acquired in 2024 through a sale leaseback transaction. Under GAAP, we are accounting for these specific sale leaseback transactions as financings.
Speaker #5: Moving to the balance sheet, we ended the quarter with net debt to pro forma adjusted EBITDA at 7.7 times and $61 million of liquidity, consisting of approximately $1.2 million of cash available for use and $60.2 million available under our revolving credit facility.
Speaker #5: However, with in-place bank commitments, the available capacity on our revolving credit facility can expand an additional $31.3 million as we acquire properties, providing total potential liquidity of more than $90 million.
Speaker #5: Regarding our property portfolio , we ended the quarter with annualized base rent of $46.3 million on a straight line basis . As noted before , this amount includes approximately $3.8 million of ABR related to three single tenant restaurant properties acquired in 2024 through a sales leaseback transaction .
Speaker #5: Under GAAP, we are accounting for these specific sales leaseback transactions as financings. Accordingly, their current annual cash payments of approximately $2.9 million are reflected as interest income in our statement of operations.
Philip Mays: Accordingly, their current annual cash payments of approximately $2.9 million are reflected as interest income in our statement of operations as opposed to lease income. Given the level of loan activity after quarter end, let me provide a current update. Our loan portfolio as of today, reflecting the activity John discussed and some other recent activity, is now approximately $94 million at a weighted average interest rate of 11.5%. Notably, of this amount, approximately $21 million at a weighted average rate of 10.4% is scheduled to mature in 2026. We currently expect to utilize proceeds from these 2026 maturities, selling a senior tranche in one or more loan investments, property dispositions, and existing capacity on our revolving credit facility to fund loan commitments. One quick note, the $1.9 million impairment charge recorded this quarter relates to our Walgreens that is currently under contract to be sold. Now turning to guidance.
Speaker #5: As opposed to lease income . Given the level of loan activity after quarter end . Let me provide a current update . Our loan portfolio as of today , reflecting the activity .
Speaker #5: John discussed and some other recent activity is now approximately $94 million at a weighted average interest rate of 11.5% . Notably , of this amount , approximately $21 million at a weighted average rate of 10.4% , is scheduled to mature in 2026 .
Speaker #5: We currently expect utilize proceeds from these 2026 maturities , selling a senior tranche in one or more loan investments . Property dispositions and existing capacity on our revolving credit facility to fund loan commitments .
Speaker #5: One quick note: the $1.9 million impairment charge recorded this quarter relates to Walgreens, which is currently under contract to be sold. Now, turning to guidance.
Philip Mays: As a result of our recent elevated investment activity, we are increasing both our FFO and AFFO outlook for the full year of 2025 to a new range of $1.82 to $1.85 per diluted share from the previous range of $1.74 to $1.77 per diluted share. With that, operator, please open the call to questions.
Speaker #5: As a result of our recent elevated investment activity, we are increasing both our FFO and AFFO outlook for the full year of 2025 to a new range of $1.82 to $1.85 per diluted share, up from the previous range of $1.74 to $1.77 per diluted share.
Speaker #5: With that operator , please open the call to questions .
Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one-one on your telephone. If your question has been answered or you remove yourself from the queue, please press star one-one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Michael Goldsmith with UBS. Your line is open.
Speaker #2: Thank you . Ladies and gentlemen , if you have a question or a comment at this time , please press star one on your telephone .
Speaker #2: If your question has been answered , you wish to move yourself from the queue . Please press star one one again . We'll pause for a moment while we compile our Q&A roster .
Speaker #2: Our first question comes from Michael Goldsmith with UBS . Your line is open .
[Analyst 1]: Good morning. Thanks a lot for taking my questions. A lot of investment activity both during the quarter and subsequent to quarter end. Can you just provide a little color in how you're thinking about funding all of this activity?
Speaker #6: Good morning. Thanks a lot for taking my questions. There is a lot of investment activity, both during the quarter and subsequent to quarter end.
Speaker #6: So can you just provide a little color and how you're thinking about funding all of this activity ?
John Albright: Hey, Michael. John, thanks. You know, look, as you know, we've been very busy on the recycling side. Some of that's going to come from asset sales as we keep on continuing to increase the credit quality of our portfolio. A little bit of this is our loans maturing, and then basically a little bit is going to be net growth in anticipation of additional sales. A little bit of balance on both sides.
Speaker #4: Hey , Michael . John , thanks . Yeah . Look , we as you know , we've been , you very busy on the recycling side .
Speaker #4: So some of that's going to come from from asset sales as we keep on continuing to increase the credit quality of our portfolio .
Speaker #4: And then a little bit of this is our loans maturing and and then , you know , basically a little bit of going to be net growth in , in , in anticipation of additional sales .
Speaker #4: So a little bit of balance on both sides .
[Analyst 1]: Got it. Thanks for that, John. All this loan activity, you're seeing really nice yields on that. I guess the way it cuts the other way is it can generate lumpiness in the quarters as they come due. Can you talk a little bit about how you're thinking about managing that and lease expiration and these loan expirations just to ensure the AFFO doesn't move around too much?
Speaker #6: Got it . Thanks for that John . And then you know all this loan activity . You see you're seeing really nice yields on that .
Speaker #6: I guess the way it cuts the other way is it can generate lumpiness in the quarters as they come due. So, can you talk a little bit about how you're thinking about managing that?
Speaker #6: And lease expiration . And these loan expirations just to ensure the , the AFFO doesn't move around too much .
John Albright: Yeah. Obviously a good question. I mean, when we started this kind of loan program about three years ago, that was a little bit of the pushback was, well, you can't replace these loans at these rates. Here we are, we are doing it with really existing relationships without even trying. Certainly as we see more opportunities, part of that funding mechanism that Phil mentioned is selling off senior pieces of these loans. These loans are very bite-sized, and there's a lot of capital out there. There's a lot of opportunity. I would, I'm not worried about replacing these and having kind of earnings coming down because these are one-time sort of opportunities. We're seeing a strong pipeline of super high-quality kind of assets and sponsorships.
Speaker #4: Yeah . So you know , obviously a good question . I mean , when we started this , you know kind of loan program about three years ago , you know that was , you know , a little bit of the pushback was , you know , well , you can't replace these loans at these rates , but , you know , we here we are .
Speaker #4: We we're doing it with really existing relationships without even trying . And so , you know , certainly as , as we see more opportunities , you know , part of that funding mechanism that , you know , Phil mentioned is selling off a senior pieces of these loans and these loans are very , you know , are very bite sized .
Speaker #4: And there's a lot of capital out there . So there's a lot of opportunity . So I would I would I'm not worried about replacing these and having kind of , you know earnings coming down because these are one time sort of opportunities .
Speaker #4: We're seeing a strong pipeline of of super high quality kind of assets . And sponsorships .
[Analyst 1]: Got it. If you're doing this without really trying, it's exciting to see what you do when you put some effort into it. I'm just kidding. Thank you very much. Good luck in the fourth quarter.
Speaker #6: Got it . Well , if you're doing this without really trying . Exciting to excited to see what you do when you put some effort into it .
Speaker #6: I'm just kidding . Thank you very much . Good luck in the fourth quarter .
John Albright: Thank you.
Speaker #4: Thank you .
Operator: One moment for our next question. Our next question comes from RJ Milligan with Raymond James. Your line is open.
Speaker #2: One moment for our next question. Our next question comes from R.J. Milligan with Raymond James. Your line is open.
[Analyst 2]: Hey, good morning, guys. John, with the recent activity now in residential development, I think you guys have a loan in industrial. Can you tell us how you're thinking about other property types and if you're going to continue to pursue things outside of retail?
Speaker #7: Hey , good morning guys . John , you know , with the recent activity now in residential development , I think you guys have a loan in industrial .
Speaker #7: Just can you tell us how you're thinking about other property types? And if you're going to continue to pursue things outside of retail?
John Albright: Yeah. It's not, it's not, you know, by design going out here, just these unique opportunities with very strong sponsors and very strong assets. You know, the industrial property that we did in Fremont outside of San Francisco, that was actually a retail property that the sponsor is basically converting to industrial to a higher and best use. Part of our underwriting on that is if we ever had to foreclose as roughly 50% of the acquisition, it could still be retail and work on our basis. To answer your question, we're going to stay more focused on the retail side for sure, but if we see unique opportunities and they're short duration, we're not opposed to taking on those opportunities.
Speaker #4: Yeah , it's not it's not , you know , by design , kind of going out here , just these unique opportunities with very strong sponsors and very , you know , strong assets , you know , the the industrial property that we did in Fremont outside of San Francisco , you know , that was actually a retail property that the sponsor is basically converting to industrial to a higher and best use .
Speaker #4: So , you know , part of our underwriting on that is if , if it was if we ever had to foreclose roughly 50% of of the acquisition , it could still be retail and work on our basis .
Speaker #4: So , so to answer your question , we're going to , you know , you know , stay , you know , more focused on the retail side for sure .
Speaker #4: But you know not, but if we see unique opportunities in their short duration, we're not opposed to taking on those opportunities.
[Analyst 2]: Okay. That's helpful. Phil, you talked about some of the sources of capital next year, some of the loan maturities, potential asset sales. Should we expect that to get reinvested, or will those proceeds be used to pay down debt, lower leverage?
Speaker #7: Okay . That's helpful . And then Phil , you talked about some of the sources of capital next year , some of the loan maturities , potential asset sales .
Speaker #7: Should we expect those proceeds to be reinvested, or will they be used to pay down debt and lower leverage?
Philip Mays: You know, a little bit of both, but I think first they're going to get reinvested into a lot of the loans that were recently done, RJ. The maturities coming back from the 26 loans are going to, we're just kind of proactively redeploying that capital a little early with the loans going out first, the new loans going out first. A lot of that's going to just recycle into that. On the margin, you could see leverage take down a little bit.
Speaker #8: You know, a little bit of both. But I think first they're going to get reinvested into a lot of the loans that were recently done.
Speaker #8: RJ so the maturities coming back from the 26 loans are going to we're just kind of proactively redeploying that capital a little early with the loans going out .
Speaker #8: First , the new loans going out first . So a lot of that's going to just recycle into that . But you know , on the margin , if you could see leverage tick down a little bit .
[Analyst 2]: Okay. That's helpful. Thanks, Jason.
Speaker #7: Okay . That's helpful . Thanks guys .
Philip Mays: Thanks.
Speaker #4: Thanks .
Operator: One moment for our next question. Our next question comes from Alex Fagan with Baird. Your line is open.
Speaker #2: One moment for our next question. Our next question comes from Alex Fagan with Baird. Your line is open.
[Analyst 2]: Good morning, and thanks for taking my question. On the luxury residential development in Austin, can you talk about how you got comfortable with the loan and what stage of development it currently is at?
Speaker #9: Hey, good morning, and thanks for taking my question. So, on the luxury residential development in Austin, can you talk about how you got comfortable with the loan and what stage of development it currently is?
Speaker #9: At ?
John Albright: Yeah. We're familiar, you know, if you think back at our origins of CTO and when I got here 14 years ago, we had 14,000 acres of land in Daytona Beach to sell. We are very familiar with residential lot developments through that experience. With regards to kind of where this project is, it's really at the finish line of delivering lots. Actually, there'll be some lot sales starting next week, in fact. It's really kind of coming in at the late stage and not on the early stage.
Speaker #4: Yeah . So , you know , we're familiar . You know , if you think back at our origins of CTO and when I got here , you know , 14 years ago , you know we had , you know , 14,000 acres of , of land and Daytona Beach to , to sell .
Speaker #4: So we are very familiar with residential lot developments through that experience . So with regards to kind of where this , this project is , it's really at the kind of finish line of delivering lots .
Speaker #4: And actually there'll be some lot sales starting next week . In fact . So it's really kind of coming in at the late stage and not on the early stage .
[Analyst 2]: Nice. On that loan, how much of the loan are you looking to sell?
Speaker #9: Nice and and kind of on that loan . How much of the loan are you looking to sell ?
John Albright: We'll probably look to sell potentially 50% of it. It really depends on how fast the proceeds come back, so it could be less, but potentially 50% up to 50%.
Speaker #4: Probably , you know , look to sell potentially 50% of it . And it really depends on how fast the the proceeds come back , you know .
Speaker #4: So it could be could be less . But , you know , potentially up to 50% .
[Analyst 2]: Nice. Switching gears a bit, with the vacant assets that were sold in the quarter, how much do we need to remove from operating expenses that you're carrying?
Speaker #9: Nice . And then switching gears a bit with the vacant assets that were sold in the quarter , how much do we need to remove from operating expenses that you're carrying .
Philip Mays: Yeah. This is Phil. The two largest vacant properties we have are the theater in Reno, which was sold, that had an annual run rate on the expense side of about $400,000. The one that we have left as large is the former Party City that also has a run rate of close to $400,000 on an annual basis. If you were to run rate the current quarter, that'll come down another about $400,000 on an annual basis once Party City is sold.
Speaker #8: Yeah, this is Phil. The two largest vacant properties we have are the theater in Reno, which was sold, and it had an annual run rate on the expense side of about $400,000.
Speaker #8: And the one that we have left , that's large is the former party city that also has a run rate of close to 400,000 on an annual basis .
Speaker #8: So you can if you were to run , rate the current quarter , that'll come down another about 400 grand on an annual basis .
Speaker #8: Once Party City is sold .
[Analyst 2]: Wait, and Party City wasn't sold this quarter?
Speaker #9: And Party City wasn't sold this quarter that .
Philip Mays: It was not. Reno was sold in the quarter. It was sold early in the quarter, so pretty much the full impact of that is reflected. Party City is not sold yet.
Speaker #8: It was not. Reno was sold in the quarter. It was sold early in the quarter, so pretty much the full impact of that is reflected.
Speaker #8: But Party City is not sold yet.
[Analyst 2]: Okay. There were two vacant assets sold in the quarter. Is the other one just minor?
Speaker #9: Okay , there were two vacant assets sold in the quarter . So is the other one just .
Philip Mays: There was a little former. We have, and those are the two largest, Reno and Party City. We have a few. We had former convenience stores that are really small. We sold one during the quarter. There are two left. Altogether, those do not even come up to $100,000 on an annual run rate. They are very small and on the margin.
Speaker #10: Yeah , there was a little warmer .
Speaker #8: We have those are the two largest Reno and Party City . We have a few . We had former convenience stores that are really small .
Speaker #8: There's one sold during the quarter. There are two left altogether. Those don't even come up to $100,000 on an annual run rate.
Speaker #8: So, they're very small. And on the margin...
[Analyst 2]: Got it. Thank you, guys.
Speaker #9: Got it . Thank you guys .
Operator: Thank you. One moment for our next question. Our next question comes from Rob Stevenson with Janney Montgomery Scott. Your line is open.
Speaker #2: One moment , you . One moment . For our next question . Our next question comes from Rob Stevenson with Janney Montgomery Scott , your line is open .
[Analyst 3]: Hi. Good morning, guys. Is the sale of the large loan interest that you may do, is that in the disposition guidance, or are dispositions just properties in terms of the guidance?
Speaker #11: Hey good morning guys . Is the sale of the large loan interest that you may do ? Is that in the disposition guidance or or dispositions ?
Speaker #11: Just properties in terms of the guidance?
Speaker #8: It's if we were it's not it would be on the high end . Rob , if that happened or exceeding the high end , if it happens before the end of the year , you know , the timing on it is a little hard to predict .
Philip Mays: If we were, it's not, it would be on the high end, Rob, if that happened, or exceeding the high end if it happens before the end of the year. The timing on it is a little hard to predict. It could be just before the end of the year, or it could be a little bit after the end of the year. If it were to happen before the end of the year, that would put us on the high end or over the high end of guidance on the dispos side.
Speaker #8: It could be just before the end of the year , or it could be a little bit after the end of the year if it were to happen before the end of the year , that would put us on the high end or over the high end of guidance on the display side .
[Analyst 3]: Okay. You would classify that as a disposition?
Speaker #11: Okay . But you're you would classify that as a disposition . Yeah . Okay .
Philip Mays: Yes. We've historically put dispositions of loans with properties there. If you look at guidance, we kind of added a line for that, a little bucket, when we put year-to-date actuals. There was a line that had loan sales and it showed zero, just to kind of help clarify that we do kind of look at that as a disposition. If the loan one were to happen, we would probably be just over our high end.
Speaker #8: Historically, put dispositions of loans with properties there. And if you look at guidance, we kind of added a line for that.
Speaker #8: A little bucket when we put year to date actuals . And there was a line that had loan spells and it showed zero just to kind of help clarify that , we do kind of look at that as a disposition .
Speaker #8: But if the loan one were to happen, we would probably be just over our high end.
[Analyst 3]: Okay. Because the reason why I ask is if I look at the year-to-date investment and disposition volumes versus the guidance, they're sort of implying between $50 million and $65 million of net investments in the fourth quarter. You've got $27.5 million in terms of rough numbers from the proceeds from the repayment of Publix and Verizon. Just trying to figure out how you're going to finance that, you know, especially given where the stock price is. I don't know, John, if you're comfortable issuing equity here or whether or not you guys just use the line, but was sort of curious as to how you guys are thinking about the sort of incremental there and where does sort of leverage peak out at, you know, here in the fourth quarter, if you do decide to fund any of those net investments on the line?
Speaker #11: Okay, because the reason why I ask is if I look at the year-to-date investment and disposition volumes versus the guidance, they're sort of implying between $50 million and $65 million of net investments in the fourth quarter.
Speaker #11: You've got $27.5 million in terms of rough numbers from the proceeds from the repayment of Publix and Verizon. Just trying to figure out how you're going to finance that.
Speaker #11: You know , especially given where the stock price is . I don't know , John , if you're comfortable issuing equity here or whether or not you guys just use the line .
Speaker #11: But was sort of curious as to like how you guys are thinking about the sort of incremental there . And where does sort of leverage peak out at , you know , here in the fourth quarter , if you do decide to fund any of those net investments on the line ?
Philip Mays: Yeah. Just before, I'll let John answer. On the investments, you know, we always put the full amount for the properties, obviously. For the loans, we put the origination or the initial amount committed. You know, today we're sitting at almost $200 million if you include all the subsequent activity on investment. Of that, $130 million, $135 million is loans, Rob, but only $72 million have funded so far. We also, in the guidance, put in brackets there kind of on the loans just to help clarify because it's a great question, you know, how much of the loans have funded year to date. The full amount of that won't fund because the loans won't fully fund by the end of the year.
Speaker #10: Yes . So .
Speaker #8: Just before and then I can I'll let John answer . But on the investments , you know , we always put the full amount for the properties , obviously , and for the loans we put the origination or the initial amount committed .
Speaker #8: So today we're setting it almost 200 million . If you include all the subsequent activity on investment of of that 130 , 135 is loan , but only 72 have funded so far .
Speaker #8: So we also in the guidance put in brackets there kind of on the loans just to help clarify because it's a great question .
Speaker #8: You know how much of the loans have funded year to date . So the full amount of that won't fund because the loans won't fully fund by the end of the year .
[Analyst 3]: Okay. The net would wind up being lower than that sort of $50 to $65 million that you're implying because that's including the full value.
Speaker #11: Okay . So the net , the net would wind up being lower than that sort of 50 to 65 million that you're implying , because that's including the full value .
Philip Mays: Yeah, there could be $50 million, $60 million of that that's loans that are not funded.
Speaker #8: Yeah, I mean, there could be $50 million, $60 million of that. That's loans that are not funded.
[Analyst 3]: Okay. That's helpful because it was looking like the leverage was going to peak out at something more substantial here if you guys did it all on the line.
Speaker #11: Okay . That's helpful because it was it was looking like that leverage was going to peak out at something more substantial here . If you guys did it all on the line .
Philip Mays: There could be $50 million to $60 million of that number that's loan-related that's unfunded by year-end. On top of that, you could also see like an A note sale prior to the end of the year that would further help lighten that load for the funding.
Speaker #10: Yeah. So, yeah. So there could be.
Speaker #8: 50 to 60 million of that number . That's loan related . That's unfunded by year end . And then on top of that you could also see like an A note sale prior to the end of the year , that would further help lighten that load for the funding .
[Analyst 3]: Okay. I guess, John, what is sort of left within the property portfolio that you want to sell? Is this going through and sort of cleaning up anything remaining? Is it whittling down some of the dollar stuff? How are you thinking about, when you look at dispositions, not only in the fourth quarter, but in 2026, what are you sort of thinking that you're going to wind up selling, and where is the market for those types of assets today?
Speaker #11: Okay . And then I guess , John , what is sort of left within the property portfolio that you want to sell , I mean , is that is this going through and , you know , sort of cleaning up anything remaining , is it , you know , whittling down some of the dollar stuff ?
Speaker #11: How are you thinking about , you know , when you look at dispositions , not only in the fourth quarter , but in 2026 , like , what are you sort of thinking that you're going to wind up selling and , you know , where is the market for those type of assets today ?
John Albright: Yeah. As we discussed previously, we still have some Walgreens that we definitely are moving through. We, you know, dollar stores, as you hit on, certainly will be something we'll trim back on. There's some other, we've sold Advance Auto Parts and that sort of things and Tractor Supplies. Those sort of assets will continue to kind of grind through, if you will, as we see good pricing. It's just really using that as a way to kind of reinvest in some of the high credits that we put on this quarter and Lowe's and so forth. You'll see us be active at the end of the year here with continuingly bringing in some super high-quality type credits. We're looking forward to kind of what this company looks like starting next year.
Speaker #4: Yeah . So , you know , as as we discussed previously , you know , we still have some Walgreens that would definitely are moving through .
Speaker #4: And we , you know , dollar stores as you hit on certainly will be something that we'll trim back on . And then there's some other , you know , we've sold an Advance Auto Parts and that sort of things .
Speaker #4: And tractor supplies and , and so those sort of , you know , assets will , will continue to kind of grind through if you will , as we see , you know , good pricing .
Speaker #4: So it's just really , you know , using , using that as a , as a way to kind of , you know , reinvest in some of the high credits that we , we put on , you know , this , this quarter , Lowe's .
Speaker #4: And so forth . So you'll see us , you know , be active at the end of the year here with continuing to bring in some real super high quality type credits .
Speaker #4: And you know , we're looking forward to kind of what this company looks like . You know , starting next year .
[Analyst 3]: Given the acquisition of the Lowe's, was that opportunistic or, from your standpoint, are the property acquisitions going forward going to be more targeted towards the higher credit quality and basically investment grade and above quality tenants, or are you still looking to acquire stuff across the spectrum on a property-specific basis?
Speaker #11: And then I guess given the acquisition of the Lowe's , was that opportunistic or , you know , just from your standpoint , is the property acquisitions going forward going to be more targeted towards the higher credit quality ?
Speaker #11: Basically , investment grade ? And , you know , above quality tenants , or are you still looking to acquire stuff across the spectrum on a property specific basis ?
John Albright: Yeah. On the Lowe's, that was off-market. It was relationship-driven. We had seen these assets before, a couple of years ago, and they were pulled off the market. We're extremely excited about having those in our portfolio. With regards to, you'll see more of the high-quality, credit, big box sort of assets coming in. You probably won't see us be active in buying a generic tractor supply. Clearly, we don't have any car washes. We like that distinction, that no car washes in the portfolio. We feel like we're set up pretty strong to kind of offer investors something a little bit different. Getting the Lowe's and Dick's in the top five just gives investors an exposure that they can't get other locations.
Speaker #4: Yeah . On on the Lowe's , you know , that was off market . It was a relationship driven . We had seen these assets before a couple years ago .
Speaker #4: And they're pulled off the market . So we're extremely excited about having those in our in our portfolio with regards to you know , so you'll see more of the high quality , you know , credit big box sort of assets coming in .
Speaker #4: You probably won't see us be active in buying , you a generic , you know , Tractor Supply . Clearly we don't have any car washes .
Speaker #4: So we like that distinction that , you know , no car washes in the portfolio . So , you know , it's , you know , we're feel like we're set up pretty , pretty strong to kind of offer investors something a little bit different .
Speaker #4: You know , getting getting a Lowe's and Dick's in the top five . You know just gives investors an exposure that they they can't get other other locations .
[Analyst 3]: Okay. Last one for me, is all of Beachside open and producing at this point, or is there still some of that stuff that's down, and that you're getting insurance payments on?
Speaker #11: Okay. And then last one for me: is all of Beachside open and producing at this point, or is there still some of that stuff that's down and that you're getting insurance payments on?
John Albright: No, it's all been open for a while. I mean, they opened those up less than four months after the hurricane last year. Interestingly enough, they still, when they opened, they weren't obviously as polished looking as they were previous to the hurricane, but they did better sales than they did pre-hurricane. A lot of pent-up demand from customers and, unfortunately, some of their competition did not reopen. It just kind of drove more traffic to those restaurants.
Speaker #4: No , it's all been been open for for a while . I mean , they , they open those up , you know , less than four months after the hurricane last year and , and interestingly enough , I mean , they still when they open , they weren't they weren't obviously as you know , polished looking as they were previous to the hurricane .
Speaker #4: But they did better sales than they did pre hurricane . So a lot of pent up demand from customers and unfortunately some of their competition did not reopen .
Speaker #4: So it just kind of drove more traffic to to those restaurants .
[Analyst 3]: Okay. Rent coverage today is actually higher than where it was pre-hurricane?
Speaker #11: Okay . So rent coverage today is actually higher than where it was Pre-hurricane .
John Albright: Yes.
Speaker #4: Yes .
[Analyst 3]: Okay, thanks, guys. Appreciate the time and have a great weekend.
Speaker #11: Okay. Thanks, guys. I appreciate the time, and have a great weekend.
John Albright: You too.
Speaker #4: You too .
Operator: One moment for our next question. Our next question comes from Gerard Mitzah with Alliance Global Partners. Your line is open.
Speaker #2: One moment for your question . Our next question comes from Gaurav Mehta with Alliance Global Partners . Your line is open .
[Analyst 4]: Thank you. Good morning. I wanted to ask you if you had any update on your properties that are leased to At Home?
Speaker #12: Thank you . Good morning . I wanted to ask you if you had any update on your properties that are leased to at home .
John Albright: Yes. Those properties, as we kind of, the one is in Concord, North Carolina, that could be sold in the not too distant future. The others are the same situation where we're monitoring what At Home's doing. If they come back, we're working on replacement tenants. The idea would be if At Home vacated one of the properties, we would have a replacement tenant in, and then we would sell it at a better cap rate than as At Home. It's a manageable exposure and potential upside.
Speaker #4: Yes . So you know , those those properties as we've kind of one is , in Concord , North Carolina , that , you know , could be sold in the , in the , you know , not too distant future .
Speaker #4: And the others , you know , are the same situation where we're monitoring kind of , you know , what , at home is doing .
Speaker #4: But if they come back , we have we're working on a replacement tenants . So the idea would be if if at home vacated one of the properties , we would have a replacement tenant in and then we would sell it at a better cap rate than as at home .
Speaker #4: So it's a manageable exposure and potential upside .
[Analyst 4]: Okay. Second question, I want to go back to the two loans that you did after September. The interest rates on both of them are higher than the year-to-date loan activity. Can you provide some color on why the rates were higher at 17% and 16%?
Speaker #12: Okay . Second question . I want to go back to the two loans that you that after September , the interest rates on both of them are higher than the year to date loan activity .
Speaker #12: Can you provide some color on on why the rates were higher at 17 and 16% ?
John Albright: Phil, you want to handle it?
Speaker #4: Phil, you wouldn't handle it.
Philip Mays: He was just asking about why the interest rates on the residential and the mixed-use are significantly higher than the blended rate for the portfolio.
Speaker #10: Yeah. So he was just.
Speaker #8: Asking about why the interest rates on the residential and the mixed-use properties are significantly higher than the blended rate for the portfolio.
John Albright: Yeah. On that, basically, because it's such a short-duration loan, to give you more background than maybe you want, the competition for a loan for that sort of product would be mainly from an opportunity fund or a credit fund. Those funds really aren't looking to invest where the duration is less than two years in order to get a multiple. We're able to give a highly flexible loan, but for that, we charge a much higher rate. Just the flexibility of our loan in the short duration gives us that higher interest rate investment.
Speaker #4: Yeah . So that , you know , basically because it's such short duration loan that , you know , so , so kind of give you more , more background than maybe you want .
Speaker #4: Is that, you know, the competition for a loan for that sort of product would be mainly from Opportunity Fund or a credit fund.
Speaker #4: And those funds , you know , really aren't looking to invest where the , the duration is less than two years in order to kind of get a multiple .
Speaker #4: So, we are able to offer highly flexible loans. However, for that flexibility, we charge a much higher rate. The combination of our loan's flexibility and its short duration allows us to maintain that higher interest rate investment.
[Analyst 4]: All right. That's all I had. Thank you.
Speaker #12: All right. That's all I had. Thank you.
Operator: One moment for our next question. Our next question comes from John Massocca with B. Riley Securities. Your line is open.
Speaker #2: One moment for our next question. Our next question comes from John Massocca with B. Riley Securities. Your line is open.
Philip Mays: Good morning.
Speaker #9: Good morning .
John Albright: Morning.
Speaker #10: Good morning .
Philip Mays: Given all of the investment activity on the loan front, particularly subsequent to quarter end, do you view that as maybe kind of the max level you want to be at in terms of a loan balance once this all kind of blends out? Or could you kind of pursue more of that and become, I guess, maybe more of like a mixed loan net lease type REIT? It feels like the amount of loan investments are starting to, certainly in terms of the investment activity, outweigh the net lease transactions.
Speaker #9: So maybe given all of the investment .
Speaker #13: Activity on the loan front in particularly subsequent quarter end , do you view that as maybe kind of the max level you want to be at in terms of a loan balance ?
Speaker #13: If this all kind of blends out , or could you kind of pursue more of that and become , I guess , maybe more of like a mixed loan net lease type REIT ?
Speaker #13: It feels like the amount of loan investments are starting to certainly, in terms of the investment activity, outweigh the net lease transactions.
Speaker #4: You know , I would say that , you know , the the it just kind of really kind of came together here , this last quarter .
John Albright: I would say that it just kind of really came together here this last quarter. The loan activity could tick up from here for sure, as it's a little bit in anticipation of things burning off, paying down, paying off. We are super active on the core net lease side with larger type assets. You'll see this similar balance, but we think we're delivering, and we know we're delivering, really strong free cash flow and high earnings. There are other net lease REITs out there that do the loan program as well. You have REITs like Vichy that have a balance of net lease and loans. It's not like we're in a new frontier here.
Speaker #4: But the loan activity could tick up from here for sure . But as you know , it's a little bit in anticipation of things , you know , burning off , paying down , paying off .
Speaker #4: And then , you know , we are , super active on the core net lease side with , you know , larger type assets .
Speaker #4: So , you know , you'll see this , you'll see this similar balance . But we think we're you delivering , you know , we know we're delivering really strong free cash flow .
Speaker #4: And you know higher earnings and you know and there's other net lease REITs out there that do the loan program as well . And then you have you know rates like VC that have , you know a balance of net lease .
Speaker #4: And loans. So it's not like we're in a new frontier here.
Philip Mays: No, it's true. I just remember thinking, and maybe I'm misremembering, the loans were kind of an opportunistic thing a couple of years ago. Now it feels like they've become a bigger part of the investment strategy. I'm wondering if that's something you view as permanent on a go-forward basis or if it's still something that's temporary where you found this kind of opportunistic way to accretively deploy your capital even in a challenged equity market.
Speaker #13: So I remember thinking and maybe I'm misremembering . The loans are kind of an opportunistic thing . A couple of years ago . And now it feels like they've become a bigger part of of the investment strategy .
Speaker #13: And I'm wondering if that's something you view as like permanent on a go forward basis , or if it's still something that's temporary , where you found this kind of opportunistic way to kind of aggressively deploy your capital , even in a , you know , a challenged equity market .
John Albright: No, it's definitely a good point. When we were opportunistically thinking that it was like a one-time opportunity, it's become repeat. Customers are coming back to us because of the flexibility and the speed that we can transact on. They're willing to pay a higher rate. As you know, we get right of first refusal on acquiring these assets. If the market stalls and cap rates tick up, we have the opportunity to bring these into our portfolio. Like I've said before, we're getting paid a much higher yield than going out and buying some sort of generic net lease property out in the middle of nowhere. We're basically in Austin with very opportunistic type yields on very high-quality sponsor and high-quality asset. The Publix that we had pay off in Charlotte, a Publix in Charlotte, I think that paid off because they sold it at a 5.25% cap.
Speaker #4: No , it's yeah , it's definitely a good point . Yeah . So when when we were opportunistically thinking that it was like a , one time opportunity , it's become it's become repeat customers are coming back to us because of the flexibility and the speed that we can transact on .
Speaker #4: They're willing to pay a higher rate, and then, as you know, we get a right of first refusal on acquiring these assets.
Speaker #4: So if if the market stalls and cap rates tick up , we have the opportunity to bring these in to our portfolio . And so like I've said before , you know , we're getting paid a much higher yield than going out and buying , you know , some sort of generic net lease property out in the middle of nowhere .
Speaker #4: You know , we're , you know , basically in Austin with , you know , very opportunistic type yields on very with very high quality .
Speaker #4: Sponsor and high quality asset . And then , you know , the public's that we had pay off in Charlotte . You know a Publix in Charlotte .
Speaker #4: You know I think that paid off because they sold it at five and a quarter cap . You know . So these are you know we're getting double digit unlevered yields on assets that will sell for , you know , really , really low .
John Albright: These are, we're getting double-digit unlevered yields on assets that we'll sell for really, really low cap rates. It's great to see the opportunities that we're able to kind of, it's become more of a permanent fixture as the sponsors are still very active in the development side on these credit tenants. The banking system just really is slower, less proceeds. This is, we're just basically providing an answer to their capital needs in a much more efficient fashion.
Speaker #4: Cap rates . So it's it's great to see the the opportunities that we're able to kind of it's become more more of a permanent fixture as the you know the sponsors are still very active in in the development side on these credit tenants .
Speaker #4: And and the the banking system just really is slower , less proceeds . And this is we're just basically providing a . Answer to their capital needs on in a much more efficient fashion .
Philip Mays: Okay. Understood. Maybe on a very micro level, with Cornerstone Exchange, pretty significant jump up in the amount you're kind of lending on that project. Why, I guess, maybe why did it increase by so much?
Speaker #14: Okay . Understood .
Speaker #13: And then maybe on a very like micro level with cornerstone Exchange , you know , pretty significant jump up in the amount you're kind of lending on that project .
Speaker #13: Why . I guess maybe why did it increase by so much ?
John Albright: They ended up signing some additional leases. As they've proven out their development with leases, we wouldn't loan on it until they have a signed lease. That's what happened. The development's gotten larger as they've signed leases.
Speaker #4: It's basically they they ended up signing some additional leases . So as they proven out there , the development with with leases , we wouldn't we wouldn't loan on it until they have a signed lease .
Speaker #4: And so that's that's what happened . The development's gotten larger as they've signed leases .
Philip Mays: Okay. Makes sense, and that's it for me. Thank you very much.
Speaker #14: Okay . That makes sense .
Speaker #13: And that's it for me . Thank you very much .
John Albright: Great. Thanks.
Speaker #4: Great . Thanks .
Operator: One moment for our next question. Our next question comes from Craig Coursera with Lucid Capital Markets. Your line is open.
Speaker #2: One moment for our next question . Our next question comes from Craig Kuczera with Lucid Capital Markets . Your line is open .
[Analyst 1]: Yeah. Hey, good morning, guys. John, I want to circle back with a few questions on the Austin loans. It sounds like you're not taking any entitlement or approval risk, at least on phase one. Is that a fair assessment? Does phase two need to be approved?
Speaker #15: Hey , hey good morning guys . John , I want to circle back with a few questions on the Austin loans . It sounds like you're not taking any entitlement or approval risk , at least on phase one .
Speaker #15: Is that a fair assessment ? Does phase two need to be approved ?
John Albright: It's a fair assessment on both. You know, the entitlements are there for both phases and everything needed to basically deliver.
Speaker #4: It's fair assessment on both . You know , the entitlements are there for both phases . And and everything needed to to basically deliver .
[Analyst 1]: Okay. Great. What is the current LTV at those loans?
Speaker #4: .
Speaker #15: Okay. Great. What is the current LTV at those?
Speaker #4: Loans . You know , I would I would put that one in kind of the on a on a discount NPV basis . We're in the 70s .
John Albright: I would put that one in kind of on a discount NTV basis. We're in the 70s.
[Analyst 1]: Okay, if you were to sell the senior tranche or a portion of those loans, and I think Phil mentioned it might be upwards of 50%, what would your yield be if you're holding the junior piece, you know.
Speaker #15: Okay . And if you were to sell the senior tranche or a portion of those loans , and I think Phil mentioned it might be upwards of 50% , what would your yield be if you're holding the junior piece .
John Albright: I don't want to go out there with, I mean, it'll be higher. I don't want to give you specific numbers.
Speaker #4: You know , I don't want to like go out there with . I mean , it'll be higher . I don't want to give you a specific numbers .
[Analyst 1]: Fair enough. All right. Changing gears to Lake Coxswae mixed-use development, is that just raw land now, or has the developer started, or kind of where in the process is that development?
Speaker #15: Fair enough . All right . Changing gears to Lake Toxaway mixed use development . Is that just raw land now , or has the developer started or kind of where in the process is that development ?
John Albright: Yeah. The developer has started. We're coming in like when they really need to really start doing some additional work and delivering pads and that sort of thing.
Speaker #4: Yeah , the developer has started . So kind of we're coming in like when they really need to really start , you know , doing some additional work and delivering pads and that sort of thing .
[Analyst 1]: Okay. That's it for me. Thanks, guys.
Speaker #15: Okay , okay . That's it for me . Thanks , guys .
John Albright: Thank you.
Speaker #4: Thank you .
Operator: One moment for our next question. Our next question comes from Barry Oxford with Colliers International. Your line is open.
Speaker #2: One moment for our next question. Our next question comes from Barry Oxford with Colliers International. Your line is open.
[Analyst 3]: Great. Thanks, guys. John, real quick, a couple of questions on the dividend. Given what I'm hearing on the conference call, you want to retain as much capital as possible. Is it fair to say that, even though you could raise the dividend, for lack of a better word, substantially, any dividend increase will probably be minimal because you want to retain as much capital from an asset allocation?
Speaker #16: Great . Thanks , guys . John , real quick , a couple questions on the dividend . Given what I'm hearing on on the conference call , you want to retain as much capital as possible .
Speaker #16: Is it fair to say that even though you could raise the dividend , for lack of a better word , substantially any dividend increase will probably be minimal because you want to retain as much capital from an asset allocation .
John Albright: That's right. As we progress here and earnings grow, there'll be pressure to raise a dividend just based on what we need to pay out as a REIT.
Speaker #16: .
Speaker #4: That's right . I mean , so , so , you know , as as we progress here and earnings grow , you know , there'll be pressure to raise the dividend just based on on what we need to pay out as a REIT .
[Analyst 3]: Right. You don't run afoul of the REIT rules.
Speaker #16: Right. So, you don't run afoul of the REIT rules.
John Albright: We don't want to pay a check to the IRS. We'd rather give it to our shareholders.
Speaker #4: Well, we don't want to paychecks to the IRS. We'd rather give it to our shareholders.
[Analyst 3]: Right. One thing that I noticed in the press release was the credit-rated tenants. Now, your investment-grade tenants, the % of the portfolio was still roughly the same, but you had a fairly good drop with the credit-rated tenants. What was going on there?
Speaker #16: Right . Right right . And then you know , one thing that I noticed , you know , in the press release was the credit rate tenants .
Speaker #16: Now your investment grade tenants , you know , the the the , the the percent of the portfolio was still roughly the same , but you had a fairly good drop with the credit rated tenants .
Speaker #16: What was going on there ?
Philip Mays: Just the credit-rated as a % of the total portfolio. At the end of the last quarter, it was 51%.
Speaker #10: Just the the credit rated .
Speaker #8: As a percentage of the total portfolio, at the end of...
Speaker #10: The last quarter .
Speaker #8: It was 51% .
[Analyst 3]: Yeah, it went from 81 to 66.
Speaker #16: It went from yeah , it went from 81 to 66 .
Philip Mays: Oh, from credit-rated.
Speaker #10: Credit rated .
[Analyst 3]: Yeah, credit is fine.
Speaker #16: Yeah , yeah .
Speaker #10: The credit is fine. That was more.
Philip Mays: That was more Barry, that's more the Walgreens and the like that used to have a credit rating dropping them that were very, very low and had gone from credit rate to, you know, not or from investment grade to not investment grade, but were still carrying a rating. It's more for, related to a couple of tenants like that, like At Home, Walgreens, and such, dropping the credit rating altogether. That's what caused that decrease.
Speaker #8: Barry. That's more about Walgreens and the like that used to have a credit rating, dropping them that were.
Speaker #10: Very very .
Speaker #8: Low and had gone from credit rated to, you know, not from investment grade to not investment grade. But we're still carrying a rating.
Speaker #8: It's more for related to a couple of tenants like that . They got home Walgreens and such , dropping the credit rating altogether .
Speaker #8: And that's what caused that decrease.
[Analyst 3]: Okay. Makes sense. All right, guys. Thanks. Have a good weekend.
Speaker #16: Okay. Makes sense. All right, guys, thanks. Have a good weekend.
Philip Mays: You're welcome.
Speaker #10: You're welcome .
John Albright: Thanks.
Speaker #17: Okay .
Operator: I'm not showing any further questions at this time. As such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.
Speaker #2: And I'm not showing any further questions at this time. As such, this does conclude today's presentation. We thank you for your participation.