Good morning, and welcome to the Alpine Income Property Trust Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Albright, President and CEO. Please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining us today for the Alpine Income Property Trust third quarter 2020 operating results conference call. I am pleased to have Matt Partridge, our new Chief Financial Officer joining me this morning. Before we began, I’ll turn it over to Matt to provide a customary disclosures regarding today’s call. Matt?

Thanks, John. I’d like to remind everyone that many of our comments today are considered forward-looking statements under Federal Securities Law. The Company’s actual future results may differ significantly from the matters discussed in these forward-looking statements. And we undertake no duty to update these statements. 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 in our earnings release, which contain reconciliations of non-GAAP financial measures we use on our website at alpinereit.com. With that, I will now turn the call back over to John.

Thanks, Matt. It is an excellent third quarter for Alpine as we work to achieve 100% contractual base rent collection rate for each of the three months within the quarter. With the Q2 negotiations largely behind us, we were able to refocus on actively growing the company in the third quarter by executing our targeted acquisition strategy of investing in income producing properties, exhibiting strong real estate fundamentals leads to high quality tenants. In the third quarter, we invested in 15 properties in five states for $23.9 million at an average weighted going-in cap rate of approximately 6.8%. Notably 100% of the acquired annualized base rent is from Dollar General and Advance Auto Parts, both investment grade rated tenants and the weighted average lease term of the third quarter investment with 13 years at the time of acquisition. In addition to our third quarter acquisition activity, we also sold our Outback Steakhouse in Charlottesville, Virginia for a price of $5.1 million. This represented a 5.75% cap rate on in-place net operating income, which we believe when coupled with going-in cap rate of our acquisitions and their associated investment grade credit is highly accretive to our portfolio on a risk adjusted basis. Year-to-date, we’ve acquired 26 properties for approximately $99.3 million at a weighted average going-in cap rate of 6.9%. We’re particularly excited that our acquisitions this year were comprised primarily of new credits and high performing sectors. Specifically through the first nine months of 2020, we selectively invested in five new retail sectors and notably increased our concentration in grocery, convenience store, dollar store and auto parts sectors, which all provide excellent incremental diversification. These investments have also provided an opportunity to partner with 10 new retail tenants, including sector leading operators, such as Walmart, 7-Eleven and Dollar General, the…

Thanks, John. As John referenced, the company experienced excellent rent collection results during the third quarter, collecting 100% of contractual base rents in each of the three months. Thanks to proactive portfolio management and the resulting strong rent collection trends, we reported total revenues of $5.1 million during the quarter. I’ll remind everyone that the 100% collection rate represents rents that were contractually due in each respective month and include the effect of rent deferrals or abatements agreed to prior to the rent payment date. Comparatively rent collected during the third quarter was on average approximately 5% less per month than what would’ve been due prior to entering into COVID-19 related amendments. We anticipate 100% repayment of deferred rent by the end of 2021. For the third quarter of 2020, funds from operations were $3 million or $0.35 per share and adjusted funds from operations were $2.9 million or $0.34 per share. As announced during the second quarter AFFO was previously impacted by $625,000 from the previously mentioned rent referral agreements. As those rent deferrals are repaid in subsequent periods, we will experience a positive impact to our AFFO in the periods of repayment. For the third quarter of 2020, we received just over $86,000 of scheduled rent deferral repayments, which positively impacted our third quarter AFFO. General and administrative expenses in the third quarter, inclusive of the company’s management fee totaled $1.1 million, which was down 271 basis points as a percentage of revenue from the second quarter of 2020. We believe this trend will continue as we realize more economies of scale to the execution of our investment strategy. As previously announced, the company paid a $0.20 third quarter cash dividend on September 30 to stockholders of record on September 15. This represented a quarterly payout ratio of…

Thanks, Matt. In advance of the Q&A, I’d like to summarize some of the highlights, particularly since we’ve made some meaningful strides operationally in our growth as an organization. As previously noted, we have achieved 100% rent collection rate for the past four months, including this first month of the fourth quarter. We continue to build on the momentum and the transaction market acquiring only investment grade tenants during the third quarter, which is going to further strengthen our growing portfolio and create tangible economies of scale. Consistent execution has allowed us to increase our full year guidance and increase the cash dividend for the fourth quarter by 10% quarter-over-quarter to a yield of approximately 6.1%. And with the expansion of our credit facility, we have ample liquidity to execute on our disciplined investment strategy and drive outside per share earnings growth. In summary, I want to thank our shareholders for their continued support and congratulate our team on their successes within the quarter. At this time, we’ll open it up for questions. Operator?

[Operator Instructions] And our first question comes from Barry Oxford of D.A. Davidson. Please go ahead.

Great. Thanks guys. If you could give me and us on the phone a little more color on your acquisition pipeline, maybe as far as dollar amount of how much you’ve looked at and where you are as far as maybe getting close to letter of intent to the extent that you can?

Sure. Thanks, Barry. Look, the acquisition pipeline is pretty strong. We have – we’re in some sort of negotiation for a mouth that’s more than our guidance. Thinking that some may not fully come into negotiation or something might happen within due diligence. So we’re very comfortable with what we’re seeing in front of us as far as high quality credits and good locations.

Would you expect to be able to do roughly somewhat close in 2021 in acquisitions that you did in 2020, considering that 2Q was a little light?

Of course, that – given that our track record and what we’ve been able to accomplish so far this year, we’re highly confident that the success this year and obviously given the pandemic can be replicated or even more.

Right, perfect. Appreciate that. Turning to the balance sheet. You guys are in stellar position by any metrics. But at what point would be the outside range of which you would want to lift debt to, and you can speak to it from any metrics that you want, the fixed income, debt to EBITDA or debt to market cap ever – whatever kind of metric you want to look at.

Yes. I’ll let Matt kind of discuss that point.

Great. Thanks, Matt.

I don’t want to put a ceiling on it, but during the road show, the company told investors that they wanted to run a long-term average somewhere around 6 times net debt to EBITDA. We’re approaching that level, but obviously we may be comfortable going above and certainly operating below that that’s intended to be a longer-term average. So I think for us, it’s going to depend on the opportunities in front of us.

Great, great. Thanks, guys. That’s all for me.

Thank you.

Thanks.

Our next question will come from Rob Stevenson of Janney. Please go ahead.

Good morning, guys. John, beyond the Outback, what is the level of assets in the portfolio today that you may want to sell over the next few years, and some of those you think more attractive to 1031 buyers who might be even more motivated to pay more and close deals by year end to provide you with better pricing?

Yes. I mean – thanks for the question. I mean, look we intentionally took that property out to market, because I think there’s a disconnect between – and there still is a disconnect on our stock price relative to implied cap rate and the asset base we have. So I think shareholders probably didn’t appreciate that. You look at casual dining and certainly, we’ve been challenged during this pandemic, but we knew on the ground that, there’s still a very strong investor appetite for those type of assets. So we almost hit that asset out and to demonstrate the strength of the portfolio and the strength of the investor universe. And so that was highly accretive to sell a casual dining sector credit and basically be able to redeploy that into a higher credit, longer lease, sort of investment. So in a roundabout way, we could certainly do a lot more of that if we wanted to, we don’t have plans to at this point.

Okay. And then sort of feeding into that and piggybacking off of Barry’s question. So the guidance implies about $10 million of acquisitions in the fourth quarter. You guys just increase the capacity on the line to give you additional room there. But when you think about the leverage levels that Matt was talking about, how are you thinking about financing the next $50 million of acquisitions, especially with the stock at $14 and change, do you look at preferred? Do you target more assets sales? Can you give us a glimpse into the conversations you and the board are having with regarding funding the company’s growth over the next few quarters?

Yes. Certainly, there’s, different opportunities if you will, but we’re certainly not going to lever this thing up or don’t have plans to lever this thing up with the capacity we have. It’s just nice to have the capacity. If we did see a unique investment opportunity, we certainly could take it down, and then do what we just did with casual dining sales some very low cap rate investments and keep working the portfolio, if the stock was not performing. So there are different opportunities for us or different flexible options. But we don’t have the intention of just doing all the leverage and just sitting back. So we’ll look at kind of the different opportunities as that time comes about.

Okay. Thanks guys. Appreciate it.

Thank you.

Our next question comes from Craig Kucera of B. Riley Securities. Please go ahead.

Good morning, guys. And Matt, welcome aboard.

Thanks, Craig.

First of all, I want to talk about the Dollar General’s you acquired this quarter. Can you tell us what was so compelling about going so significantly that kind of you’re in the third quarter?

I mean look, that credit is very strong credit, very successful operator. That’s a growing business, done very well during the pandemic and it turns into – it’s a very necessity driven credit that we like a lot. So if we see more good opportunities with a good lease length, we don’t mind having more of that credit into the company. I wouldn’t expect a whole lot more of them, but certainly, a great company and we’re very excited to have it onboard.

Okay, great. And can you give us some color on the leases with Dollar General that you were executed this quarter? Is there any sort of guarantee or support at the corporate level?

Well, certainly it’s a corporate credit. So we’re getting into the mother ship. So we certainly wouldn’t be buying it if we didn’t get the full credit.

Okay, great. And John, I feel like earlier in the pandemic given the performance of the office assets versus retail, you had mentioned that you might even look to add to office because it had performed so well. But kind of – what are your current thoughts today? Are you still thinking that way? Are you more tilted in your pipeline and thoughts towards retail?

Yes. The pipeline is 100% retail at the moment. We do keep looking or open to office acquisitions, have something really made sense the high-quality single-tenant office that we’ve looked at are still being priced below our acquisition kind of guidance. So it’s – we’re still open to it and it’s got to be a special situation for us. But right now the pipeline is retail.

Got it. I want to circle back to the dividend, I’m sure investors appreciated the 10% increase which I think based on this quarters, the FFO was about a 65% payout of AFFO. How was the board thinking about payout ratios going forward? Was this sort of an initial step in the direction of raising the dividend to maybe a higher level of recurring cash flow? Or is 65% sort of how investors should think about the dividend going forward?

Craig, it’s Matt. In conversations with the board, I think the long-term targets somewhere between 75% and 85% of AFFO. Obviously, we have intentions to grow the portfolio. And so retaining cash flow for that is certainly top of mind, but the increase for Q4 with a step towards that longer term payout ratio. And as we continue to grow, we’ll continue to evaluate where the dividend is.

Okay, great. I want to circle up on Hilton Grand Vacations, I think last week, they announced that they’d been laying a healthy amount of people off. Had there been any discussions with them regarding downsizing space from you? Or are they – any color that’d be great?

Yes. Thanks for the question. So Hilton Grand Vacations obviously has announced corporate layoffs and half their properties are timeshare properties. We feel like we’re in very good position with regards to the two buildings that we have with them in that they had expanded outside of our buildings next door in more expensive office space and shorter lease duration. So we’ve already been – we’ve had discussions and heard that the plan is that they’ll consolidate some of those operations into our buildings. So out of their office space, in Orlando, where the cheapest cost to them and probably the most efficient, we’re single storey office buildings where they’re the only tenant. And so if you think about this kind of COVID world, they don’t have to get an elevator with other tenants and that sort of thing. And there are other spaces that they have in other buildings or multi-storey buildings with other tenants. So this gives them the security of – and the efficiency of being in our building. So we’re very confident kind of where we are with them. And also the rent that they’re paying us is less than their other occupancies.

Got it. And just one more for me. As we stand here in October, you got about 2% of rent that’s being abated or deferred. Can you give us any color on the categories that are still – you still having a little bit of trouble getting rent worked out here and sort of your outlook and heading into 2021?

Yes, Craig. So we’re collecting a 100% of existing obligations, but obviously that’s post deferral agreements. The areas where we’ve received deferral agreements are entered into them is the entertainment space, specifically with the theaters and Alpine with those deferrals though we’ve been able to enhance the length of the lease, and also gotten some income participation rights as part of those agreements. So we feel like at this point, we’re in a pretty good place, especially with all October rents being paid.

Okay. Thanks. Appreciate it.

Our next question comes from RJ Milligan of Raymond James. Please go ahead.

Good morning. So Matt, I just wanted to touch back on the 5% that sort of – from pre-COVID levels that’s either in deferrals or abatements? Just curious as we look into 2021, what’s the expectation to recover? Or how much do you expect to recover as we move into 2021 of that bucket?

Yes. So the way the deferral agreements were laid out, there was some slight repayment in Q3, which I talked about on the prepared remarks of $86,000. It’s generally in that same range for Q4, and then it really ramps up in Q1 and Q2 of 2021. And so we expect all the deferrals to be repaid through the balance of 2021.

Okay. And what’s the mix between deferral and abatement in that 500 basis point bucket?

Yes. So the abatement piece is depending on the months it’s between 2% and 1%. The abatement was only through the end of this year. And then that lease is through with the abatements, but otherwise everything else is deferrals.

Okay. That makes sense. And then, obviously, a 100% of the rent’s billed and collected for third quarter. We’re just curious, John, if you have any thoughts on the longer term risk of potential fallout for those that are already paid rent. But might be concerned going forward or what categories might be concerning going forward?

Yes. So, I mean, look the ones that really watch I think is really the theaters and we feel like we’re in a good spot with them because obviously if a – for instance, if they can see which we always say only on one, the small deal, but let’s say AMC. It goes bankrupt. Obviously, they’re going to go through a process and look at rejecting and accepting certain leases. We feel like we’re in a good spot with them because we just had come out of COVID negotiations with them and they extended the lease and we got part percentage rent and so forth on in addition to our base rent. And so you look at the AMC and either paying us a very cheap rent and their operations pre-COVID were very strong and it’s in a market with very little competition. So we feel very strong that those type of properties are going to be base and be accepted through a bankruptcy if that happens. And so we feel like our exposure is not concerning versus if we had some sort of more urban theater, let’s say with high labor costs, very expensive rent and very expensive pass-throughs I think that’s where you’re going to see some real pain. So we feel very comfortable. With that we stay on top of it, but that’s kind of how we look at it right now.

Okay. Thanks guys. That’s all I have.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to John Albright for any closing remarks.

Thank you for joining the call. And I look forward to talking to you throughout the quarter.

The conference is now concluded. Thank you for attending today’s presentation and you may now disconnect.