Q2 2026 Alpine Income Property Trust Inc Earnings Call

July 24, 2026

Operator: Good day. Thank you for standing by. Welcome to the Alpine Income Property Trust Q2 2026 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 this session, you will need to press star one one on your telephone. You will hear an automated message advising you your hand is raised. 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, Jenna McKinney, Director of Finance. Ma'am, please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone.

Speaker #1: You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your speaker today, Jenna McKinney, Director of Finance. Ma'am, please go ahead.

Speaker #2: 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, who will be available to answer questions during the call.

Jenna McKinney: Thank you. Joining me in 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, who 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. 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.alpinereit.com.

Speaker #2: 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.

Speaker #2: 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 the non-GAAP financial measures we use—on our website at www.alpinereits.com.

Jenna McKinney: 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.alpinereit.com. With that, I'll turn the call over to John.

Speaker #2: With that, I'll turn the call over to John.

Jenna McKinney: With that, I'll turn the call over to John.

Speaker #3: Thank you, Jenna. And good morning, everyone. We're pleased to report another strong quarter, highlighted by 32% growth in AFFO per diluted share compared to the same quarter last year, approximately $77 million of total investment activity, and a blended initial yield of 8.7%.

John Albright: Thank you, Jenna, and good morning, everyone. We are pleased to report another strong quarter, highlighted by 32% growth in AFFO per diluted share compared to the same quarter last year, and approximately $77 million of total investment activity at a blended initial yield of 8.7%. With this activity, our property portfolio's annualized base rent grew to $50 million at quarter end, with 55% attributable to investment-grade-rated tenants, and our commercial loan portfolio remained at our targeted level of 20% of total undepreciated asset value. Starting with property acquisitions, during the quarter, we acquired three properties for $36.6 million at a weighted average initial cap rate of 7.4% and a weighted average remaining lease term of 9.2 years.

Speaker #3: With this activity, our property portfolio's annualized base rent grew to $50 million a quarter-end. With 55% attributable to investment-grade rated tenants in our commercial loan portfolio remained at our targeted level of 20% of total undepreciated asset value.

Speaker #3: Starting with property acquisitions, during the quarter, we acquired three properties for $36.6 million at a weighted average initial cap rate of 7.4% and a weighted average remaining lease term of 9.2 years.

Speaker #3: These acquisitions included a three-property portfolio leased to Aldi, HomeGoods, and Petco, and two properties ground leased to Lowe's and an Alamo Drafthouse, which is a subsidiary of the A-plus-rated Sony Group Corporation.

John Albright: These acquisitions included a three-property portfolio Lease to Aldi, HomeGoods, and Petco, and two properties ground leased to Lowe's and Alamo Drafthouse, which is a subsidiary of an A+ rated Sony Group Corporation. These acquisitions meaningfully strengthen our portfolio's credit profile. The percentage of ABR derived from investment grade rated tenants increased from 50% to 55%, driven by acquisition activity that was 84% investment grade. At quarter end, four of our top five tenants, Lowe's, Dick's Sporting Goods, Walmart, and Alamo Drafthouse, are now investment grade rated. More broadly, as of quarter end, our property portfolio consisted of 128 properties totaling 4.5 million square feet across 31 states with 99.5% occupancy and a WALT of 9.2 years. Moving to our commercial loan investments. During the quarter, we originated a new $40 million first mortgage loan with $6.2 million funded during the quarter at an initial yield of 10%.

John Albright: These acquisitions included a three-property portfolio lease to ALDI, HomeGoods, and Petco, and two properties ground leased to Lowe's and Alamo Drafthouse, which is a subsidiary of an A+ rated Sony Group Corporation. These acquisitions meaningfully strengthen our portfolio's credit profile. The percentage of ABR derived from investment grade rated tenants increased from 50% to 55%, driven by acquisition activity that was 84% investment grade. At quarter end, four of our top five tenants, Lowe's, Dick's Sporting Goods, Walmart, and Alamo Drafthouse, are now investment grade rated. More broadly, as of quarter end, our property portfolio consisted of 128 properties totaling 4.5 million square feet across 31 states with 99.5% occupancy and a WALT of 9.2 years. Moving to our commercial loan investments.

Speaker #3: These acquisitions meaningfully strengthened our portfolio's credit profile. The percentage of ABR derived from investment-grade rated tenants increased from 50% to 55%, driven by acquisition activity that was 84% investment-grade. At quarter-end, four of our top five tenants—Lowe's, Dick's Sporting Goods, Walmart, and Alamo Drafthouse—are now investment-grade rated.

Speaker #3: More broadly, as of quarter-end, our property portfolio consisted of 128 properties totaling 4.5 million square feet across 31 states, with 99.5% occupancy and a weighted average lease term of 9.2 years.

Speaker #3: Moving to our commercial loan investments, during the quarter, we originated a new $40 million first mortgage loan, with $6.2 million funded during the quarter.

John Albright: During the quarter, we originated a new $40 million first mortgage loan with $6.2 million funded during the quarter at an initial yield of 10%. The loan is secured by a 24 acre, 55,000 square foot Publix anchored retail development and follows the grocery shadow anchored development loan we originated in the Q1. Also, during the quarter, we received full repayment of $8 million of commercial loans that carried weighted average yield of 8%, allowing us to recycle that capital into higher yielding investments. Reflecting this activity, at quarter end, our commercial loan portfolio consisted of 13 loans with an outstanding face amount of $167 million at a weighted average coupon rate, including PIK interest of 13.2%.

Speaker #3: At an initial yield of 10%. The loan is secured by a 24-acre, 55,000-square-foot Publix-anchored retail development and follows the grocery shadow-anchored development loan we originated in the first quarter.

John Albright: The loan is secured by a 24 acre, 55,000 square foot Publix anchored retail development and follows the grocery shadow anchored development loan we originated in the Q1. Also, during the quarter, we received full repayment of $8 million of commercial loans that carried weighted average yield of 8%, allowing us to recycle that capital into higher yielding investments. Reflecting this activity, at quarter end, our commercial loan portfolio consisted of 13 loans with an outstanding face amount of $167 million at a weighted average coupon rate, including PIK interest of 13.2%. Our loan portfolio remains at our targeted level of approximately 20% of the company's total undepreciated asset value, complementing our property portfolio and increasing the overall yield earned on our total assets. However, as noted previously, the timing of fundings and repayments may cause the relative size of loan portfolio to vary quarter by quarter.

Speaker #3: Also, during the quarter, we received full repayment of $8 million of commercial loans that carried weighted average yield of 8%, allowing us to recycle that capital into higher-yielding investments.

Speaker #3: Reflecting this activity, at quarter-end, our commercial loan portfolio consisted of 13 loans with an outstanding face amount of $167 million, and a weighted average coupon rate, including PIK interest, of 13.2%.

Speaker #3: Our loan portfolio remains at our targeted level of approximately 20% of the company's total undepreciated asset value, complementing our property portfolio and increasing the overall yield earned on our total assets.

John Albright: Our loan portfolio remains at our targeted level of approximately 20% of the company's total undepreciated asset value, complementing our property portfolio and increasing the overall yield earned on our total assets. However, as noted previously, the timing of fundings and repayments may cause the relative size of loan portfolio to vary quarter by quarter. With our completed investment activity this quarter and robust investment pipeline, we opportunistically utilize our ATM programs to raise capital. Our investment pipeline continues to have attractive opportunities, including high quality properties net leased to investment grade rated tenants to enhance the credit metrics of our portfolio and attractive loans to replace maturities.

Speaker #3: However, as noted previously, the timing of fundings and repayments may cause the relative size of the loan portfolio to vary quarter by quarter. With our completed investment activity this quarter and a robust investment pipeline, we opportunistically utilize our ATM programs to raise capital.

John Albright: With our completed investment activity this quarter and robust investment pipeline, we opportunistically utilize our ATM programs to raise capital. Our investment pipeline continues to have attractive opportunities, including high quality properties net leased to investment grade rated tenants to enhance the credit metrics of our portfolio and attractive loans to replace maturities. Lastly, reflecting our earnings growth and taxable income outlook for the company, our board has authorized a 6.7% increase in our quarterly common dividend to $0.32 per share beginning in the Q3 2026. This new quarterly common dividend rate represents a relatively low 55% AFFO payout ratio on Q2 2026 AFFO. Further, we're raising the low end of our full year FFO and AFFO guidance, which Phil will detail later. With that, I will turn the call over to Phil.

Speaker #3: Our investment pipeline continues to have attractive opportunities, including high-quality properties net leased to investment-grade rated tenants to enhance the credit metrics of our portfolio.

Speaker #3: In addition, we secured attractive loans to replace maturities. Lastly, reflecting our earnings growth and taxable income outlook for the company, our board has authorized a 6.7% increase in our quarterly common dividend to $0.32 per share beginning in the third quarter of 2026.

John Albright: Lastly, reflecting our earnings growth and taxable income outlook for the company, our board has authorized a 6.7% increase in our quarterly common dividend to $0.32 per share beginning in the Q3 2026. This new quarterly common dividend rate represents a relatively low 55% AFFO payout ratio on Q2 2026 AFFO. Further, we're raising the low end of our full year FFO and AFFO guidance, which Phil will detail later. With that, I will turn the call over to Phil.

Speaker #3: This new quarterly common dividend rate represents a relatively low 55% AFFO payout ratio on second-quarter 2026 AFFO. Further, we are raising the low end of our full-year FFO and AFFO guidance, which we will detail later.

Speaker #3: And with that, I will turn over the call over to Phil.

Speaker #4: Thanks, John. Beginning with financial results, for the quarter, total revenue was $20 million, including lease income of $12.6 million and interest income from commercial loan investments of $7.3 million.

Phil Mays: Thanks, John. Beginning with financial results. For the quarter, total revenue was $20 million, including lease income of $12.6 million and interest income from commercial loan investments of $7.3 million. FFO for the quarter was $0.57 per diluted share, and AFFO was $0.58 per diluted share, representing growth of approximately 30% and 32% respectively over the comparable quarter of the prior year. I would note that the results for the quarter included approximately $300,000 of other income related to a non-refundable deposit we received upon the termination of a contract to sell an At Home to an end user. At Home indicated they were going to renew their lease, and the buyer decided to terminate the contract. For the 6 months ended 30 June, total revenue was $38.4 million, including lease income of $25.2 million and interest income from commercial loans of $13.1 million.

Philip Mays: Thanks, John. Beginning with financial results. For the quarter, total revenue was $20 million, including lease income of $12.6 million and interest income from commercial loan investments of $7.3 million. FFO for the quarter was $0.57 per diluted share, and AFFO was $0.58 per diluted share, representing growth of approximately 30% and 32% respectively over the comparable quarter of the prior year. I would note that the results for the quarter included approximately $300,000 of other income related to a non-refundable deposit we received upon the termination of a contract to sell an At Home to an end user. At Home indicated they were going to renew their lease, and the buyer decided to terminate the contract.

Speaker #4: FFO for the quarter was $0.57 per diluted share, and AFFO was $0.58 per diluted share, representing growth of approximately 30% and 32%, respectively, over the comparable quarter of the prior year.

Speaker #4: I would note that the results for the quarter included approximately $300,000 of other income related to a non-refundable deposit we received upon the termination of a contract to sell an asset to an end user.

Speaker #4: At Home indicated they were going to renew their lease, and the buyer decided to terminate the contract. For the six months ended June 30th, total revenue was $38.4 million, including lease income of $25.2 million and interest income from commercial loans of $13.1 million.

Philip Mays: For the 6 months ended 30 June, total revenue was $38.4 million, including lease income of $25.2 million and interest income from commercial loans of $13.1 million. FFO and AFFO were $1.10 and $1.11 per diluted share respectively, representing growth of 25% and 26% over the comparable period of the prior year. Earnings growth for the quarter and year to date was primarily driven by our investment activity, in particular the growth of our commercial loan portfolio as we grew it to approximately 20% of undepreciated asset value over the last year.

Speaker #4: FFO and AFFO were $1.10 and $1.11 per diluted share respectively, representing growth of 25% and 26% over the comparable period of the prior year.

Phil Mays: FFO and AFFO were $1.10 and $1.11 per diluted share respectively, representing growth of 25% and 26% over the comparable period of the prior year. Earnings growth for the quarter and year to date was primarily driven by our investment activity, in particular the growth of our commercial loan portfolio as we grew it to approximately 20% of undepreciated asset value over the last year. Moving to capital markets activity. During the quarter, we continued to opportunistically utilize both of our ATM programs. Under our common stock ATM program, we issued approximately 1.1 million shares at a weighted average gross price of $19.31 per share for net proceeds of $21.7 million. Under our Series A preferred ATM program, we issued approximately 156,000 shares at a weighted average gross price of $25.18 per share for net proceeds of $3.9 million.

Speaker #4: Earnings growth for the quarter and year-to-date was primarily driven by our investment activity, in particular the growth of our commercial loan portfolio, as we grew it to approximately 20% of undepreciated asset value over the last year.

Speaker #4: Moving to capital markets activity. During the quarter, we continued to opportunistically utilize both of our ATM programs. Under our common stock ATM program, we issued approximately 1.1 million shares at a weighted average gross price of $19.31 per share, for net proceeds of $21.7 million.

Philip Mays: Moving to capital markets activity. During the quarter, we continued to opportunistically utilize both of our ATM programs. Under our common stock ATM program, we issued approximately 1.1 million shares at a weighted average gross price of $19.31 per share for net proceeds of $21.7 million. Under our Series A preferred ATM program, we issued approximately 156,000 shares at a weighted average gross price of $25.18 per share for net proceeds of $3.9 million. Year to date, we have raised a combined $61.7 million of net proceeds under these programs.

Speaker #4: And under our Series A preferred ATM program, we issued approximately $156,000 shares at a weighted average gross price of $25.18 per share, for net proceeds of $3.9 million.

Speaker #4: Year-to-date, we have raised a combined $61.7 million of net proceeds under these programs. At quarter-end, common shares and units outstanding totaled approximately $18,819,00, and preferred shares totaled approximately $2,426,000.

Phil Mays: Year to date, we have raised a combined $61.7 million of net proceeds under these programs. At quarter end, common shares and units outstanding totaled approximately 18,819,000, and preferred shares totaled approximately 2,426,000. Reflecting our investment activity and equity issuance, we ended the quarter with net debt to pro forma adjusted EBITDA of 6.4x, down from 6.6x last quarter and 6.7x at the beginning of the year. As of quarter end, we had $369.5 million of debt outstanding at a weighted average interest rate of 4.38%, including the impact of our in-place swaps. Including cash on hand, available liquidity at quarter end was approximately $83 million. Further, following the recast of our credit facility earlier this year, we have no debt maturing until 2029. One reminder regarding interest expense.

Philip Mays: At quarter end, common shares and units outstanding totaled approximately 18,819,000, and preferred shares totaled approximately 2,426,000. Reflecting our investment activity and equity issuance, we ended the quarter with net debt to pro forma adjusted EBITDA of 6.4x, down from 6.6x last quarter and 6.7x at the beginning of the year. As of quarter end, we had $369.5 million of debt outstanding at a weighted average interest rate of 4.38%, including the impact of our in-place swaps. Including cash on hand, available liquidity at quarter end was approximately $83 million. Further, following the recast of our credit facility earlier this year, we have no debt maturing until 2029. One reminder regarding interest expense.

Speaker #4: Reflecting our investment activity and equity issuance, we ended the quarter with net debt to pro forma adjusted EBITDA of $6.4 times down from $6.6 times the last quarter and $6.7 times at the beginning of the year.

Speaker #4: As of quarter-end, we had $369.5 million of debt outstanding at a weighted average interest rate of 4.38%, including the impact of our in-place swaps.

Speaker #4: Including cash on hand, available liquidity at quarter-end was approximately $83 million. Further, following the recast of our credit facility earlier this year, we have no debt maturing until 2029.

Speaker #4: One reminder regarding interest expense: As previously disclosed, $100 million in SOFR swaps at 2.05% associated with our 2029 term loan matured in May, and were replaced with swaps fixing SOFR at 3.36% for the remaining term.

Phil Mays: As previously disclosed, $100 million of SOFR swaps at 2.05% associated with our 2029 term loan matured in May and were replaced with swaps fixing SOFR at 3.36% for the remaining term. Regarding our property portfolio, we ended the quarter with annualized straight-line base rent of $50 million. As a reminder, our portfolio includes 4 properties acquired through sale leaseback transactions, as well as the Alamo Drafthouse in Denver acquired this quarter, which qualifies as a sales-type lease. Although these 5 properties constitute real estate for both legal and tax purposes, GAAP requires them to be accounted for as financings. Collectively, they represent approximately 12.6% of our straight-line ABR, or $6.3 million, and approximately 10.6% of annualized in-place cash-based rent, or $5.1 million, with these cash payments reflected as interest income rather than lease income.

Philip Mays: As previously disclosed, $100 million of SOFR swaps at 2.05% associated with our 2029 term loan matured in May and were replaced with swaps fixing SOFR at 3.36% for the remaining term. Regarding our property portfolio, we ended the quarter with annualized straight-line base rent of $50 million. As a reminder, our portfolio includes 4 properties acquired through sale leaseback transactions, as well as the Alamo Drafthouse in Denver acquired this quarter, which qualifies as a sales-type lease. Although these 5 properties constitute real estate for both legal and tax purposes, GAAP requires them to be accounted for as financings. Collectively, they represent approximately 12.6% of our straight-line ABR, or $6.3 million, and approximately 10.6% of annualized in-place cash-based rent, or $5.1 million, with these cash payments reflected as interest income rather than lease income.

Speaker #4: Regarding our property portfolio, we ended the quarter with annualized straight-line base rent of $50 million. As a reminder, our portfolio includes four properties acquired through self-lease-backed transactions, as well as the Alamo Drafthouse in Denver acquired this quarter, which qualifies as a sales-type lease.

Speaker #4: Although these five properties constitute real estate, for both legal and tax purposes, GAAP requires them to be accounted for as financings. Collectively, they represent approximately 12.6% of our straight-line ABR, or $6.3 million, and approximately 10.6% of annualized in-place cash base rent, or $5.1 million.

Speaker #4: With these cash payments reflected as interest income rather than lease income, our quarterly earnings press release includes a supplemental table providing details for our commercial loan portfolio and related interest earnings.

Phil Mays: Our quarterly earnings press release includes a supplemental table providing details for our commercial loan portfolio and related interest earnings. With respect to our common dividend, during the quarter, we paid a quarterly cash dividend of $0.30 per share. As John noted, the board has authorized a quarterly common dividend of $0.32 per share for Q3, a 6.7% increase along with the quarterly cash dividend of $0.50 per share on our 8% Series A preferred stock. Now turning to guidance. For the full year 2026, we are increasing the low end of our outlook, resulting in a new FFO range of $2.10 to $2.13 per diluted share, and a new AFFO range of $2.12 to $2.15 per diluted share. Our investment volume assumption remains unchanged at $170 million to $200 million.

Philip Mays: Our quarterly earnings press release includes a supplemental table providing details for our commercial loan portfolio and related interest earnings. With respect to our common dividend, during the quarter, we paid a quarterly cash dividend of $0.30 per share. As John noted, the board has authorized a quarterly common dividend of $0.32 per share for Q3, a 6.7% increase along with the quarterly cash dividend of $0.50 per share on our 8% Series A preferred stock. Now turning to guidance. For the full year 2026, we are increasing the low end of our outlook, resulting in a new FFO range of $2.10 to $2.13 per diluted share, and a new AFFO range of $2.12 to $2.15 per diluted share. Our investment volume assumption remains unchanged at $170 million to $200 million.

Speaker #4: With respect to our common dividend, during the quarter we paid a quarterly cash dividend of $0.30 per share. As John noted, the Board has authorized a quarterly common dividend of $0.32 per share for the third quarter—a 6.7% increase—along with the quarterly cash dividend of $0.50 per share on our 8% Series A preferred stock.

Speaker #4: Now, turning to guidance. For the full year 2026, we are increasing the low end of our outlook, resulting in a new FFO range of $2.10 to $2.13 per diluted share, and a new AFFO range of $2.12 to $2.15 per diluted share.

Speaker #4: Our investment volume assumption remains unchanged at $170 million to $200 million. However, we are lowering our disposition volume expectations to a new range of $20 million to $40 million from the previous range of $30 million to $60 million.

Phil Mays: We are lowering our disposition volume expectations to a new range of $20 million to $40 million from the previous range of $30 million to $60 million. Additionally, based on the equity issued during the quarter, the prospective quarterly run rate for our base management fee is now just over $1.4 million a quarter. I should note here that historically, no incentive management fee has been paid and none is reflected in our guidance. Under Alpine's management agreement, an incentive fee may be earned based on total shareholder return for the full calendar year as calculated by the full year dividend and the last 10-day VWAP for the calendar year. Accordingly, any incentive fee, if earned, is recorded in the last quarter of the year. I refer you to our filings for additional information on our management fees, including the incentive management fee.

Philip Mays: We are lowering our disposition volume expectations to a new range of $20 million to $40 million from the previous range of $30 million to $60 million. Additionally, based on the equity issued during the quarter, the prospective quarterly run rate for our base management fee is now just over $1.4 million a quarter. I should note here that historically, no incentive management fee has been paid and none is reflected in our guidance. Under Alpine's management agreement, an incentive fee may be earned based on total shareholder return for the full calendar year as calculated by the full year dividend and the last 10-day VWAP for the calendar year.

Speaker #4: Additionally, based on the equity issued during the quarter, the prospective quarterly run rate for our base management fee is now just over $1.4 million per quarter.

Speaker #4: I should note here that historically, no incentive management fee has been paid, and none is reflected in our guidance. Under Pines Management Agreement, an incentive fee may be earned based on total shareholder return for the full calendar year as calculated by the full-year dividend and the last 10-day VWAP for the calendar year.

Speaker #4: Accordingly, any incentive fee, if earned, is recorded in the last quarter of the year. I refer you to our filings for additional information on our management fees, including the incentive management fee.

Philip Mays: Accordingly, any incentive fee, if earned, is recorded in the last quarter of the year. I refer you to our filings for additional information on our management fees, including the incentive management fee. With that, operator, please open the call to questions.

Speaker #4: With that, operator, please open the call to questions.

Phil Mays: With that, operator, please open the call to questions.

Speaker #2: Thank you. As a reminder, to ask a question 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.

Operator: Thank you. As a reminder to ask 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. One moment as we compile our Q&A roster. Our first question is going to come from the line of Jay Kornreich with Cantor Fitzgerald. Your line is open. Please go ahead.

Speaker #2: One moment as we compile our Q&A roster. Our first question is going to come from the line of Jay Cornridge with Cantor Fitzgerald. Your line is open.

Speaker #2: Please go ahead.

Speaker #5: Hey, good morning. Thank you. I guess just starting out, you know, you referenced the loan portfolio near that 20% cap for total assets. So, you know, how do you think about your appetite going forward for, you know, I guess, pushing beyond that 20% if you feel like there's really attractive loan opportunities?

Jay Kornreich: Hey, good morning. Thank you.

Jay Kornreich: Hey, good morning. Thank you. I guess just starting out, you referenced the loan portfolio near that 20% cap for total assets. How do you think about your appetite going forward for, I guess, pushing beyond that 20% if you feel like there's really attractive loan opportunities, or if we should expect really the bulk of new investments coming from the net lease real estate? On that side, how would you expect to fund it? Is that more coming from dispositions? Or just how do you think about creating value on the net lease real estate side?

Jay Kornreich: I guess just starting out, you referenced the loan portfolio near that 20% cap for total assets. How do you think about your appetite going forward for, I guess, pushing beyond that 20% if you feel like there's really attractive loan opportunities, or if we should expect really the bulk of new investments coming from the net lease real estate? On that side, how would you expect to fund it? Is that more coming from dispositions? Or just how do you think about creating value on the net lease real estate side?

Speaker #5: Or should we expect, you know, really the bulk of new investments to come from the net lease real estate? And on that side, how would you expect to fund it?

Speaker #5: Is that coming more from dispositions, or how do you think about creating value on the net lease real estate side? Yeah, thanks, Jay.

John Albright: Yeah, thanks, Jay. We do have in front of us in the pipeline a fair amount of net lease investments and hopefully all those come to fruition or a good part of them. On the loan side, there's one that we're looking at, but not anything kind of behind that. You won't see the loan portfolio get above 20%. If it does, it's only a timing issue. It goes above 20%, but then we have some payoffs coming, which we do have some payoffs coming. As we grow, perhaps the loan book goes below 20%. As far as on financing the acquisitions, obviously we have maybe some sales coming up, but really it's through our line. Phil can kind of talk a little bit more about that.

Speaker #5: So, we do have in front of us, in the pipeline, a fair amount of net lease investments. And, you know, hopefully all those come to fruition, or at least a good part of them.

Speaker #5: On the loan side, you know, there's one that we're, you know, looking at, but not a lot, and not anything kind of behind that.

Speaker #5: And so, you know, you won't see the loan portfolio get above 20%. If it does, it's only a timing issue. It goes above 20%, but then we have some payoffs coming—which we do have some payoffs coming.

Speaker #5: So, and as we grow, perhaps a loan book goes below 20%. And so on the as far as on financing, the acquisitions, you know, we have obviously, we have some maybe some sales coming up, but really it's through our line, but Phil can kind of talk a little bit more about that.

Speaker #3: Yeah, Jay, I mean, the financing for acquisitions—you know, it'll be a combination of our line initially, and then, you know, we can also blend in some dispos as well.

Phil Mays: Yeah, Jay, to finance the acquisitions, it'll be a combination of our line initially, and then we can also blend in some dispos, and if appropriate, we can blend in some pref or some common stock on top of it. Initially, it'll be our line of credit that takes them down.

Philip Mays: Yeah, Jay, to finance the acquisitions, it'll be a combination of our line initially, and then we can also blend in some dispos, and if appropriate, we can blend in some pref or some common stock on top of it. Initially, it'll be our line of credit that takes them down.

Speaker #3: And if appropriate, you know, we can blend in some preferred or some common stock on top of it. But initially, it will be our line of credit that takes them down.

Speaker #5: Okay, I appreciate that. And then just one more for me, I guess, on the disposition side. You updated guidance, revising that lower, and it looks like you didn't have any dispositions this quarter.

Jay Kornreich: Okay. I appreciate that. Just one more from me. I guess on the disposition side, you updated guidance revising that lower and looks like you didn't have any dispositions this quarter. Just curious if there's been any, I guess, strategic shift in how you're thinking about specific assets or tenants maybe you initially tended to dispose, or if it's reflective of just overall transaction market maybe not being at the place you want in order to sell for full value. I know you've done a lot of work already just getting the portfolio into a place where you feel like it's really healthy. Just curious what led to the dynamics of expecting less dispositions.

Speaker #5: So, just curious if there's been any, I guess, strategic shift in how you're thinking about specific assets or tenants—maybe you initially intended to dispose of—or if it's reflective of just the overall transaction market maybe not, you know, being at the place you want in order to sell for full value.

Speaker #5: I know you've done a lot of work already just getting the portfolio into a place where you feel like it's really healthy. So just curious what led to the dynamics of expecting less dispositions.

Speaker #5: Yeah, it's a little bit more of a timing issue with regards to tenants that have expressed interest in lengthening their lease term. So we want to kind of get through an extension or a lease renewal that, you know, kind of gets you that better cap rate valuation.

Phil Mays: Yeah, it's a little bit more of a timing issue with regards to tenants that have expressed interest in lengthening their lease term. We want to kind of get through an extension or a lease renewal that kind of gets you that better cap rate valuation. It's really more or less getting the properties in a better place so you can extract more value.

John Albright: Yeah, it's a little bit more of a timing issue with regards to tenants that have expressed interest in lengthening their lease term. We want to kind of get through an extension or a lease renewal that kind of gets you that better cap rate valuation. It's really more or less getting the properties in a better place so you can extract more value.

Speaker #5: So it's really more or less getting the properties in a better place, even to extract more value. Okay, I'll hold it there. Thank you.

Jay Kornreich: Okay, I'll hold it there. Thank you.

Speaker #5: Sure.

Phil Mays: Sure.

John Albright: Sure.

Speaker #2: Thank you. And one moment for our next question. Our next question is going to come from the line of Michael Goldsmith with UBS. Your line is open.

Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Michael Goldsmith with UBS. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #6: Good morning. Thanks a lot for taking my question. It seems like there were some one-timers and some moving pieces in the run rate of the AFFO, kind of from the second quarter to maybe the third quarter.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. Seems like there was some kind of one-timers and some moving pieces in the run rate of the AFFO from the Q2 to maybe the Q3. Phil, do you mind walking through what the equivalent AFFO run rate would be from what you reported, given the non-cash or the one-time payment on the sale and then some of the hedges, like how the run rate AFFO changes going forward?

Speaker #6: So Phil, do you mind walking through kind of like what are the what's kind of like the what the equivalent AFFO run rate would be from what you reported to given the non-cash benefit or the one-time payment on the sale and then the and then some of like the hedges, like how old the web rate AFFO changes going forward?

Speaker #3: Yeah, Michael. So, we reported $0.58 for the quarter. There are some one-time revenue items in there, and there are some expenses that are only partially in there—not fully baked in like they will be for the remainder of the year.

Phil Mays: Yeah, Michael. We reported $0.58 for the quarter. There's some one-time revenue items in there, and there's some expenses that are only partially in there, not fully baked in like they will be for the remainder of the year. On the revenue side, looking at our income statement, you can see investment and other income, and it's elevated about $300,000 for the quarter and year to date. That was a non-refundable deposit that we got to keep. We had an At Home under contract to be sold to an end user who wanted to use the property, but when that At Home emerged from bankruptcy and indicate they were renewing their lease, they dropped the contract because they could not get a hold of the property the way they wanted to, and we got to keep their non-refundable deposit.

Philip Mays: Yeah, Michael. We reported $0.58 for the quarter. There's some one-time revenue items in there, and there's some expenses that are only partially in there, not fully baked in like they will be for the remainder of the year. On the revenue side, looking at our income statement, you can see investment and other income, and it's elevated about $300,000 for the quarter and year to date. That was a non-refundable deposit that we got to keep. We had an At Home under contract to be sold to an end user who wanted to use the property, but when that At Home emerged from bankruptcy and indicate they were renewing their lease, they dropped the contract because they could not get a hold of the property the way they wanted to, and we got to keep their non-refundable deposit.

Speaker #3: On the revenue side, looking at our income statement, you can see investment in other income, and it's elevated about 300,000 for the quarter and year to date.

Speaker #3: And that was a non-refundable deposit that we got to keep. We had an at-home under contract to be sold to an end user who wanted to use the property.

Speaker #3: But when that home emerged from bankruptcy and indicated they were renewing their lease, they dropped the contract because they could not get, you know, a hold of the property the way they wanted to.

Speaker #3: And we got to keep their non-refundable deposit, $300,000—not a large number, not only, but it is about 2 cents of earnings on a per share basis.

Phil Mays: $300,000, not a large number nominally, but it is about $0.02 of earnings on a per share basis. In addition, as you're aware and as I talked about last time on our call, when earlier in the year we refinanced our debt and pushed out our term loans. One was originally scheduled to mature in May of this year, one early next year, and we had swaps that initially lined up with those maturities. When we pushed out the maturities, we did swaps for the remaining balance, and they both switched over from the original swaps to the new forward swaps. One of those happened this quarter on our 2029 term loan, and it moved up about 130 basis points.

Philip Mays: $300,000, not a large number nominally, but it is about $0.02 of earnings on a per share basis. In addition, as you're aware and as I talked about last time on our call, when earlier in the year we refinanced our debt and pushed out our term loans. One was originally scheduled to mature in May of this year, one early next year, and we had swaps that initially lined up with those maturities. When we pushed out the maturities, we did swaps for the remaining balance, and they both switched over from the original swaps to the new forward swaps. One of those happened this quarter on our 2029 term loan, and it moved up about 130 basis points.

Speaker #3: In addition, as you're aware and as I mentioned last time on our call, earlier in the year we refinanced our debt and extended our term loans.

Speaker #3: One was originally scheduled to mature in May of this year, one early next year. And we had swaps that initially lined up with those maturities.

Speaker #3: So when we pushed out the maturities, we did swaps for the remaining balance. And they both, you know, switch over from the original swaps to the new forward swaps.

Speaker #3: So one of those happened this quarter. On our 2029 term loan, it moved up about 130 basis points. And then we have another one that will happen towards the end of January.

Phil Mays: We have another one that will happen towards the end of January on our 2031 term loan, and it'll also move up about 130, 140 basis points. In addition to that, the only other thing really is we did issue equity during the quarter. Obviously that's sitting in the quarter on a weighted average, it'll be in the full weight next quarter, and that also does increase our management fee a little. If you take the current $0.58 and you adjust it for those three items, it comes down to a new kind of initial run rate of $0.52, which we build off of with our investments and capital as we deploy it to build it back up.

Philip Mays: We have another one that will happen towards the end of January on our 2031 term loan, and it'll also move up about 130, 140 basis points. In addition to that, the only other thing really is we did issue equity during the quarter. Obviously that's sitting in the quarter on a weighted average, it'll be in the full weight next quarter, and that also does increase our management fee a little. If you take the current $0.58 and you adjust it for those three items, it comes down to a new kind of initial run rate of $0.52, which we build off of with our investments and capital as we deploy it to build it back up.

Speaker #3: On our 2031 term loan, it'll also move up about 130 to 140 basis points. In addition to that, the only other thing, really, is we did issue equity during the quarter.

Speaker #3: So, obviously, that's you being, you know, at a full weight next quarter. And that also does increase our management fee a little. But if you take the current $0.58 and you adjust it for those three items, you know, it comes down to like a new, kind of initial run rate of $0.52, which we build off of with our investments and capital as we deploy to build it back up.

Michael Goldsmith: Super helpful there. I guess maybe on the management fee, can you kind of reconcile the advantages and disadvantages of when you're issuing equity? Clearly you're in a good place if you're comfortable enough to be issuing equity, but also there is kind of the incentive issue of it increases the management fee and then also if there's some dilution from the nomination.

Speaker #6: Super helpful there. And then I guess, right, like maybe on the management fee, like can you kind of reconcile kind of the advantages and disadvantages of, right, when you're issuing equity, clearly you're in a good place if you're comfortable enough to be issuing equity, but also, right, like there is kind of the incentive issue of, you know, it increases the management fee and then also there's some dilution from the nominee.

Phil Mays: I think we've shown in the past that the management fee is not driving the bus because we've bought back shares in a meaningful way when our stock really got disconnected with NAV, our management fee went down significantly when we did that. It's all about basically making really good investments and driving earnings, and I think you've seen that. Returns have been spectacular. Still we have a higher FFO than APRT and our stock price is $10, 11 bucks below APRT. I think we have some good headway in front of us as far as where we can kind of drive more alpha for our investors.

John Albright: I think we've shown in the past that the management fee is not driving the bus because we've bought back shares in a meaningful way when our stock really got disconnected with NAV, our management fee went down significantly when we did that. It's all about basically making really good investments and driving earnings, and I think you've seen that. Returns have been spectacular. Still we have a higher FFO than APRT and our stock price is $10, 11 bucks below APRT. I think we have some good headway in front of us as far as where we can kind of drive more alpha for our investors.

Speaker #5: I mean, I think we've shown in the past that, you know, the management fee is not driving the bus, because we've bought back shares in a meaningful way when our stock, you know, kind of really got disconnected with NAV.

Speaker #5: And our management fee went down significantly when we did that. So it's all about, you know, basically making really good investments and driving, you know, earnings and I think you've seen that, you know, returns have been spectacular and still, you know, we have higher what we have a higher FFO than EPRT and our stock prices, you know, 10, 11 bucks below EPRT.

Speaker #5: So, I think we have some good headway in front of us as far as, you know, where we can kind of drive more alpha for our investors.

Michael Goldsmith: That's what I wanted to hear. Thank you.

Speaker #6: That's what I wanted to hear. Thanks.

Phil Mays: Yeah. Michael, the only thing I'd add is if you look at companies our size with market caps our size, G&A tends to run 12%, 13% or something of total revenue. Currently, we're running closer to 10% of revenue. I think it's a reasonable load relative to the size of the company.

Philip Mays: Yeah. Michael, the only thing I'd add is if you look at companies our size with market caps our size, G&A tends to run 12%, 13% or something of total revenue. Currently, we're running closer to 10% of revenue. I think it's a reasonable load relative to the size of the company.

Speaker #3: Yeah. And Michael, the only thing I'd add is if you kind of look at companies our size, with market caps our size, G&A tends to run 12%, 13%, or something of total revenue.

Speaker #3: Currently, we're running closer to 10 percent of revenue. So I think, you know, it's a reasonable load relative to the size of the company.

Michael Goldsmith: Thanks for the clarification. Good luck in the back half.

Speaker #6: Thanks for the clarification. Good luck in the back half.

Phil Mays: All right. Thank you.

Philip Mays: All right. Thank you.

Speaker #3: Thank you.

Speaker #2: Thank you. And one moment for our next question. Our next question is going to come from the line of Matthew Erdner with Jones. Your line is open.

Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Matthew Erdner with Jones. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #7: Hey, guys. Good morning. Thanks for taking the question. Could you talk a little bit about the investment guidance and, you know, what would kind of drive it?

Matthew Erdner: Hey, guys. Morning. Thanks for taking the question. Could you talk a little bit about the investment guidance and what would kind of drive it towards that high end versus the low end, along with what you'd be thinking on timing? Would it be kind of late this quarter, early next quarter, in terms of acquisitions?

Speaker #7: Towards that high end versus the low end, along with, you know, what you'd be thinking on timing. Would it be kind of late this quarter, early next quarter in terms of, you know, acquisitions?

Speaker #5: Yeah. I think, you know, our pipeline isn't really good shape. As far as, you know, quality of what we're seeing and we're far enough along on some acquisitions in fact, we thought some acquisitions are going to happen last quarter and it got pushed.

Phil Mays: Yeah, I think our pipeline is in really good shape as far as the quality of what we're seeing, we're far enough along on some acquisitions. In fact, we thought some acquisitions were going to happen last quarter, it got pushed. I suspect we'll be active this quarter and look forward to kind of updating people as we progress. The pipeline is strong, it's not something that you have to wait too long for.

John Albright: Yeah, I think our pipeline is in really good shape as far as the quality of what we're seeing, we're far enough along on some acquisitions. In fact, we thought some acquisitions were going to happen last quarter, it got pushed. I suspect we'll be active this quarter and look forward to kind of updating people as we progress. The pipeline is strong, it's not something that you have to wait too long for.

Speaker #5: So I suspect we'll be active this quarter. And, you know, look forward to kind of updating people as we progress. But the pipeline is strong and it's not something that you have to wait, you know, too long for.

Speaker #7: Got it. And then, you know, could you talk a little bit about, I guess, the type of tenants you're targeting now? You know, the cap rates kind of came down for the properties this quarter.

Alexey Jin: Got it. Then, could you talk a little bit about, I guess, the type of tenants you're targeting now? The cap rates kind of came down for the properties this quarter. It seems like you brought in some nice credits there. How should we think about the cap rate and just what you're targeting going forward?

Matthew Erdner: Got it. Then, could you talk a little bit about, I guess, the type of tenants you're targeting now? The cap rates kind of came down for the properties this quarter. It seems like you brought in some nice credits there. How should we think about the cap rate and just what you're targeting going forward?

Speaker #7: It seems like you brought in some nice credits there. How should we think about the cap rate and what you're targeting going forward?

Speaker #5: Still focusing on high-quality kind of credits. You know, that's, as you know, we're more, you know, real estate-focused than credit-focused, but we happen to find, you know, good locations with good credits.

John Albright: Still focusing on high-quality kind of credits. As you know, we're more real estate-focused than credit-focused, we happen to find good locations with good credits. I would say the cap rates are going to be kind of in the sevens for sure. We don't have to dip below sevens on up, if you will, is kind of where we're seeing some rich sort of targets.

Speaker #5: And so, you know, I would say the cap rates are going to be kind of in the 7s for sure. So we don't have to dip below 7s, but 7s on up, if you will.

Speaker #5: It's kind of where we're seeing, you know, some rich sort of targets.

Speaker #7: Got it. Awesome. That's all from me. Thank you, guys.

Alexey Jin: Got it. Awesome. That's all for me. Thank you, guys.

Matthew Erdner: Got it. Awesome. That's all for me. Thank you, guys.

Speaker #5: Thanks.

John Albright: Thanks.

Philip Mays: Thanks.

Speaker #6: Thanks.

Speaker #2: Thank you. One moment for our next question. And our next question will be coming from the line of Rob Stevenson with Huntington. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will be coming from the line of Rob Stevenson with Janney Montgomery Scott. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #8: Good morning, guys. John, did you say that a couple of these acquisitions this quarter were ground leases?

Rob Stevenson: Good morning, guys. John, did you say that a couple of these acquisitions this quarter were ground leases?

John Albright: On the ground leases, Phil, help me with that one.

Speaker #5: So, on the ground leases—Phil, help me with that one. We have...

John Albright: On the ground leases, Phil, help me with that one.

Phil Mays: Acquired this quarter was on a ground lease.

Philip Mays: Acquired this quarter was on a ground lease.

Speaker #3: Acquired this quarter was on a ground lease.

Speaker #5: Yep.

John Albright: Yep.

Speaker #3: The other ones were not on ground leases, but the Lowe's that we acquired in the quarter was a ground lease.

Phil Mays: The other ones were not on ground leases, but the Lowe's that we acquired in the quarter was a ground lease.

Philip Mays: The other ones were not on ground leases, but the Lowe's that we acquired in the quarter was a ground lease.

Speaker #8: Okay. Is that your only ground lease at this point, or is that, you know, anything substantial in the portfolio as a percentage of ABR?

Rob Stevenson: Okay. Is that your only ground lease at this point, or is that anything substantial in the portfolio as a percentage of ABR?

Speaker #5: No, we have others, for sure. I mean, you know, Lowe's—as Phil mentioned—we have other Lowe's and they're on ground leases.

John Albright: No, we have others, for sure. I mean, Lowe's, as Phil mentioned, we have other Lowe's, and they're on ground leases.

Speaker #8: Okay. And then, were you guys forced by the re-rules to increase the dividend, or was this just a decision that the board made at this point in time?

Rob Stevenson: Okay. Were you guys forced by the REIT rules to increase the dividend, or was this just a decision that the board made at this point in time? What was the background there?

Speaker #8: What was the background there?

Speaker #3: Yeah. So it is really it's just driven by the growth in taxable income as earnings has grown. So we look at taxable income not just for the current year, but we also look out.

Phil Mays: Yeah. It is really, it's just driven by the growth in taxable income as earnings has grown. We look at taxable income not just for the current year, but we also look out and want to make sure that we're fully distributing taxable income. It was driven by the growth in taxable income.

Philip Mays: Yeah. It is really, it's just driven by the growth in taxable income as earnings has grown. We look at taxable income not just for the current year, but we also look out and want to make sure that we're fully distributing taxable income. It was driven by the growth in taxable income.

Speaker #3: And I want to make sure, you know, that we're fully distributing taxable income. And so it was just—it was driven by the growth in taxable income.

Speaker #8: Okay. All right. That's it for me. Thanks. Have a great weekend.

Rob Stevenson: Okay. All right. That's it for me. Thanks. Have a great weekend.

Speaker #5: You too.

John Albright: You, too.

Speaker #2: Thank you. And one moment for our next question. Our next question is going to come from the line of Gaurav Mehta with Alliance Global Partners.

Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Gaurav Mehta with Alliance Global Partners. Your line is open. Please go ahead.

Speaker #2: Your line is open. Please go ahead.

Speaker #6: Thank you, good morning. I wanted to ask you about your investment grade exposure. It seems like it went up to 55% this quarter.

Gaurav Mehta: Thank you. Good morning. I wanted to ask you on your investment grade exposure, it seems like it went up to 55% this quarter. Is there any target number for that exposure that you guys are looking at?

Speaker #6: Is there any target number for that exposure that you guys are looking at?

Speaker #5: No, there's not a hard target. I would say that's probably, you know, kind of close to the high end of where we'll have it.

John Albright: No, there's not a hard target. I would say that's probably kind of close to the high end of where we'll have it. It may even go above that level here in the next quarter, but I wouldn't peg that as a target. Let's say 50% plus is sort of a good target for us.

Speaker #5: It may probably even go above that level here. In the next quarter, but, you know, I went peg that as a target. So it, you know, let's say, you know, 50 percent plus is sort of, you know, a good target for us.

Speaker #6: Okay. The second question on that disposition guidance—does that guidance include property sales, or does it also include any loan portfolio payoffs?

Gaurav Mehta: Okay. The second question on the disposition guidance, does that guidance include property sales, or does that also include any loan portfolio payoffs?

Speaker #3: Yeah. So it includes just really one. I think loan payoff and or sale, so to speak. And it's just the A note that we did earlier in the year for 10 million.

Phil Mays: Yeah. It includes just really one, I think, loan payoff or sale, so to speak, and it's just the A note that we did earlier in the year for $10 million. Other than that, what's included there currently is just related to property dispositions.

Philip Mays: Yeah. It includes just really one, I think, loan payoff or sale, so to speak, and it's just the A note that we did earlier in the year for $10 million. Other than that, what's included there currently is just related to property dispositions.

Speaker #3: Other than that, what's included there currently is just related to property dispositions.

Speaker #6: Okay. And then lastly, on the loan portfolio unfunded commitments of $85 million, what's the timing for that?

Gaurav Mehta: Okay. Lastly, on the loan portfolio unfunded commitment of $85 million, what's the timing for that?

Speaker #3: Yeah. So we—no, so there's, you know, 15 loans. Really, only three of them have any kind of significant unfunded amount, and they'll draw up over time.

John Albright: Yeah. Out of the

Philip Mays: Yeah. Out of the

Phil Mays: Go ahead.

John Albright: Go ahead.

John Albright: No. There's 15 loans. Really only three of them have any kind of significant unfunded amount, they'll draw up over time. You can look at them

Philip Mays: No. There's 15 loans. Really only three of them have any kind of significant unfunded amount, they'll draw up over time. You can look at them

Speaker #3: You know, you can look at them.

Speaker #5: Not significantly in the next six months. They are public sector developments that are getting started now.

Phil Mays: Most significantly in the next 6 months. They are Publix anchor developments that are getting started now.

John Albright: Most significantly in the next 6 months. They are Publix anchor developments that are getting started now.

Speaker #6: Okay. Thank you. That's all I had.

Gaurav Mehta: Okay. Thank you. That's all I had.

Speaker #2: Thank you. And one moment for our next question. Our next question comes from the line of Alex V. Jin with Baird. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Alexey Jin with Baird. Your line is open. Please go ahead.

Operator: Thank you. One moment for our next question. Our next question comes from the line of [Alexey Jin] with Baird. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #9: Hey, good morning, and thank you for taking my question. Maybe just on the loans—can you give some more details about this new loan?

Alexey Jin: Hey, good morning, thank you for taking my question. Maybe just on the loans, can you give some more details about this new loan? Is there maybe any sort of pre-lease rate? What's the loan-to-cost? Anything else that you can provide?

Speaker #9: Is there maybe any sort of pre-lease rate? What's the loan-to-cost? Anything else that you can provide?

Speaker #5: You're talking about a potential one?

John Albright: You're talking about on a potential one?

Speaker #9: Oh, no. The $40 million Kentucky loan this quarter.

Alexey Jin: Oh, no, the $40 million Kentucky loan this quarter.

John Albright: Okay. Yeah. That's basically a Publix anchored development. Traditionally, I think we've mentioned this before, we'll loan sort of 80% plus loan-to-cost and the LTV after they develop these pads and they develop the Publix and where they can sell them in the market tends to be 70%, 75% LTV. That's kind of where we like to target that we'll do more of a higher loan-to-cost than a bank will. We know where these transactions are going to happen as far as where they can sell the tenants on these pad sites and the anchor trends to kind of a 70%, 75% loan-to-value. As mentioned before, we always get sort of a first look if we want to buy these pads.

Speaker #5: Oh, okay. Yeah. So that's basically a public sector development. You know, traditionally, I think we've mentioned this before, we'll loan sort of 80 percent plus loan-to-cost.

Speaker #5: And the LTV after they develop these pads and they develop the publics, and where they can sell them in the market, tends to be 70% to 75% LTV.

Speaker #5: So that's kind of the, you know, you know, where we like to target. That we'll do more of a loan to cost, higher loan to cost than a bank will, but we know where these transactions are going to happen as far as where they can sell the tenants on these pad sites and the anchor and trends to kind of a 70s, 75 percent loan to value.

Speaker #5: And as mentioned before, you know, we always get sort of a first look if we want to buy these pads. And certainly, if for some reason the cap rates go above a certain level where they are attractive to us, we will buy them.

John Albright: Certainly, if for some reason the cap rates go above a certain level where they are attractive to us, we will buy them. Anyway, that kind of gives you a little bit of flavor for that.

Speaker #5: So anyway, that kind of gives you a little bit of flavor for that.

Speaker #9: Yeah. No, thank you for that. And I know you mentioned earlier there's one loan in the pipeline right now that you're potentially working on.

Alexey Jin: Yeah. No, thank you for that. I know you mentioned earlier there's one loan in the pipeline right now that you're potentially working on. Is it a larger loan? Are you mostly going to be sticking with these construction-type loans?

Speaker #9: Is it a larger loan? And are you mostly going to be sticking with these construction-type loans?

John Albright: It's not a larger loan. It's sort of modest size, and it would be a development sort of loan.

Speaker #5: It's not a larger loan. You know, it's, you know, sort of modest-sized, and it would be a development sort of loan.

Speaker #9: Okay, thank you, and have a great day.

Alexey Jin: Okay. Thank you, and have a great day.

Speaker #3: Thanks.

John Albright: Thanks. Great. You too.

Speaker #5: Great. You too.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of John Masaksa with B. Rayleigh Securities. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of John Massocca with B. Riley Securities. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #6: Good morning. Maybe speaking with the loans, of that kind of $85.4 million that's kind of committed but unfunded, is there an amount there that you think is unlikely to be drawn down?

John Massocca: Good morning. Maybe sticking with the loans. Of that $85.4 million that's committed but unfunded, is there an amount there that you think is unlikely to be drawn down? Is there anything today that you have visibility into that you're committed to, but you don't think your partner will actually end up using?

Speaker #6: Like what's kind of is there anything today that you kind of have visibility into that you're committed to, but you don't think your partner will actually end up using?

John Albright: Most likely, at least we look at it, that they'll use it up, there is certainly that opportunity for the borrower that they may have a buyer come in along the process and decide they want to buy it before it delivers. They may come in and they refinance us with a cheaper cost of capital. I would say it's 50/50% chance that it gets fully funded or something happens along the way and they recapitalize and we get an early termination fee, if you will. It's too early to determine right now.

Speaker #5: You know, most likely—at least we look at it that way—they’ll use it up. But there is certainly, you know, that opportunity for the borrower that, you know, they may have a buyer come in along the process and decide they want to buy it before it delivers.

Speaker #5: And, or they may come in and refinance us with cheaper cost of capital. So I would say it's a 50/50 percent chance, sort of, you know, that it gets fully funded, or, you know, something happens along the way and they recapitalize and we get, you know, sort of an early termination fee, if you will.

Speaker #5: So, it's too early to determine right now.

Speaker #6: Okay. And then on the acquisition side, tell you about a theater during the quarter. Understand it is Sony Credit behind it, but anything else about that transaction that kind of got you comfortable with buying theaters?

John Massocca: Okay. On the acquisition side, tell you about a theater during the quarter. Understand there's Sony credit behind it, anything else about that transaction that got you comfortable with buying theaters? That's been a stale market for theater acquisitions over the last, frankly, 6 years. Just curious your thought process, and is there more opportunities to do acquisitions in that tenant industry?

Speaker #6: That's been kind of a stale market for theater acquisitions over the last, frankly, six years. So just kind of curious your thought process, and is there more opportunity to do acquisitions in that tenant industry?

Speaker #5: Yeah, so that one is actually a ground lease as well—the Alamo. And obviously, having the Sony credit and a long-term lease is fantastic.

John Albright: Yeah. That one is actually a ground lease as well. The Alamo, obviously having the Sony credit and a long-term lease was fantastic and the high cap rate. Everything about that we really liked, obviously being in Denver as well. Obviously the trends in theaters have gotten a lot better. We will keep our eye out for additional opportunity where we're looking at kind of the loan-to-value, if you will, of what could be built on a theater parcel, and how they do. Look, the theater industry is getting healthier and healthier. If you think about it, AMC, as leases roll, they're rolling down their rents on properties that aren't really on the high end of performance. Through our exposure at CTO with AMC, we see how well they're doing.

Speaker #5: And the high cap rate. So everything about that, we really liked and obviously being in Denver as well. And obviously the trends in theaters have gotten a lot better.

Speaker #5: So, we will keep our eye out for additional opportunities where we're looking at kind of the, you know, loan-to-value, if you will, of what could be built in on a theater parcel and how they do.

Speaker #5: But, you know, look, the theater industry is getting healthier and healthier. If you think about it, AMC, as leases roll, they're rolling down their rents.

Speaker #5: On, you know, properties that aren't, you know, really on the high end of performance, and so, you know, through our exposure at CTO with AMC, we see how well they're doing.

Speaker #5: We have a property that's in percentage rent. And so, you know, seeing the trends are very, very strong. But if we see good risk-adjusted yields, we'll certainly capture them.

John Albright: We have a property that's in percentage rent, seeing the trends are very strong. If we see good risk-adjusted yields, we'll certainly capture them. That's a little bit more than you wanted, I guess.

Speaker #5: But that's a little bit more than you wanted, I guess.

Speaker #6: No, nope. All helpful. And then, kind of lastly—and apologies if I missed this earlier in the call—any update on the credit watch list?

John Massocca: No, that's all helpful. Kind of lastly, apologies if I missed this earlier in the call, any update on the credit watch list? Anything kind of moving around as you think about kind of tenant credit, particularly outside of your top 10 tenants?

Speaker #6: Is there anything kind of moving around as you think about tenant credit, particularly outside of your top 10 tenants?

Speaker #5: Yeah, not really. I mean, that's why, you know, a little bit of the decision guidance has gone down. We've really addressed things that were a little bit of a worry. You know, actually some of them have become like tailwinds, like the Party City in Long Island.

John Albright: Yeah, not really. That's why a little bit of the disposition guidance has gone down. We've really addressed things that were a little bit of a worry. Actually, some of them have become like tailwinds, like the Party City in Long Island that went bankrupt a while ago. We've been sitting with an empty property there for a while, but we have a lease signed with a new tenant. They just need to go through the permitting, which is taking a long time. Hopefully that property's back and producing income in early 2027, maybe late this year. We'll continue to prune where we see things that we don't like, but it's in pretty good shape right now.

Speaker #5: That went bankrupt a while ago. You know, we've been sitting with, you know, an empty property there for a while, but we've been you know, we have a lease signed with a new tenant.

Speaker #5: They just need to go through the permitting, which has taken a long time. So hopefully that property is back to producing income, you know, in early '27, maybe late this year.

Speaker #5: So, you know, we'll continue to prune where we see, you know, things that we don't like, but it's in pretty good shape right now.

Speaker #6: Hey, can you just remind me, is the party city the only vacancy left or is there something else that's at 0.5?

John Massocca: Can you just remind me, is the Party City the only vacancy left, or is there something else that's at 0.5?

John Albright: Phil, do we have anything?

Speaker #5: Phil, do we have anything?

Phil Mays: It's just the Party City, really. We have two very minimal value, former Mountain Express. Combined, they're probably not $1 million of value. Party City is the only real vacancy we have at this time. As John said, we've recently completed a lease for that property.

Philip Mays: It's just the Party City, really. We have two very minimal value, former Mountain Express. Combined, they're probably not $1 million of value. Party City is the only real vacancy we have at this time. As John said, we've recently completed a lease for that property.

Speaker #3: It's just the Party City, really. We have two very, very minimal value former Mountain Express properties, but you know, combined they're probably not a million dollars of value.

Speaker #3: So Party City is the only real vacancy we have at this time, and as John said, we've recently completed a lease for that property.

John Massocca: Okay. I appreciate all that. That's it for me. Thank you very much.

Speaker #6: Okay. I appreciate all that. And that's it for me. Thank you very much.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Craig Coucera with Lucid Capital Markets. Your line is open.

John Albright: Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Craig Kucera with Lucid Capital Markets. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #7: Yeah, thank you. You know, John, there seems to be an increasing bifurcation in the economy between high-end and low-end consumers. You know, maybe some pullback in spending at some grocers.

Craig Kucera: Yeah. Thank you. John, there seems to be an increasing bifurcation in the economy between high-end and low-end consumers, maybe some pullback in spending at some grocers. I'd be curious to get your thoughts on, is that influencing how you're thinking about lending or acquisitions in this environment?

Speaker #7: I'd be curious to get your thoughts—is that influencing how you're thinking about lending or acquisitions in this environment?

Speaker #5: Not really. I mean, we're seeing the grocers have been, you know, doing very, very well. We own, as you know, at CTO, Sprouts, and they are doing really strong.

John Albright: Not really. We're seeing the grocers have been doing very well. We own, as you know, at CTO Sprouts, and they are doing really strong. I remember one too long ago where people worried about that sort of credit, but that's no longer the case. The expansion of the high-quality grocers, Whole Foods, Publix, has been pretty strong. We're not seeing any sort of weakness with their revenues and sales. No, we don't have that concern.

Speaker #5: I remember, you know, one too long ago where people worried about that sort of credit, but that's no longer the case. So and you know, the expansion of the high-quality grocers, you know, Whole Foods, Publix, has been pretty strong.

Speaker #5: So, we're not seeing any sort of weakness with their revenues and sales, so no, we don't have that concern.

Speaker #7: Okay, that's helpful. I just want to talk about your investment guidance. We're hearing from some of your peers that this is one of the best acquisition environments, certainly at the property level, in some time.

Craig Kucera: Okay. That's helpful. I just want to talk about your investment guidance. We're hearing from some of your peers that this is one of the best acquisition environments, certainly at the property level, in some time. You've obviously been pretty aggressive on the lending side. Sounds like there's a lot in the pipeline you're working on. You've done $150 million year to date. You're talking about $170 to 200 million. Is that just conservatism, or is that just what you're seeing in the pipeline?

Speaker #7: And you've obviously been pretty aggressive on the lending side. Sounds like there's a lot in the pipeline you're working on. You know, you've done $150 million year to date.

Speaker #7: You're talking about 170 to 200. Is that just conservatism or is that just what you're seeing in the pipeline?

Speaker #5: Well, I mean, we're being a little conservative because we had some property acquisitions that we were hoping to happen last quarter that, you know, through due diligence, we didn't like what we saw.

John Albright: Well, we're being a little conservative because we had some property acquisitions that were hoping to happen last quarter that, through due diligence, we didn't like what we saw, so we passed on them, when we internally thought that we were definitely going to acquire them. It's really being a little bit conservative that we have a really good pipeline, but we know that some of them won't shake out. Anyway, just being a little bit conservative there.

Speaker #5: So we passed on them when we internally thought that, you know, we were definitely going to acquire them. And so it's really, you know, being a little bit conservative, that we have a really, you know, good pipeline, but we know that some of them won't shake out.

Speaker #5: So, anyway, just being a little bit conservative there.

Speaker #7: Okay, that's helpful. That's it for me. Thank you.

Craig Kucera: Okay. That's helpful. That's it for me. Thank you.

Speaker #5: Thanks.

John Albright: Thanks.

Speaker #2: Thank you. And I'm showing no further questions at this time. Ladies and gentlemen, this will conclude today's question-and-answer session, as well as today's conference call.

Operator: Thank you. I'm showing no further questions at this time. Ladies and gentlemen, this will conclude today's question and answer session, as well as today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Q2 2026 Alpine Income Property Trust Inc Earnings Call

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