Good day and thank you for standing by. Welcome to the Alpine Income Property Trust First Quarter 2022 Earnings Call. Please be advised today’s conference maybe recorded. I'd now like to hand the conference over to your host today, Matt Partridge, Senior Vice President, Chief Financial Officer and Treasurer. Please go ahead.

Good morning, everyone. And thank you for joining us today for the Alpine Income Property Trust first quarter 2022 operating results conference call. With me today is our CEO and President, John Thanks, John Albright. Before we begin, I'd like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements and we undertake no duty to update these statements. 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. And good morning, everyone. We have had an eventful start to the year acquiring 16 properties during the first quarter of 2022 for just over $65 million, and weighted average cap rate of 6.9%. And most recently selling our last remaining office property in Hillsboro, Oregon. The office sell completes our strategic shift to 100% retail portfolio, and now positions Walgreens as our largest tenant. The bulk of our acquisition volume was concentrated in a nine property, Walgreens and CVS occupied pharmacy portfolio, which we purchased via a reverse 1031 exchange in anticipation of the office property sale. This portfolio allowed us to maintain the investment grade credit exposure, we were losing with the Wells Fargo sale, while also improving the geographic diversity and more than doubling the remaining lease term of the sole property. In total, our 16 newly acquired properties are located in 12 states had a weighted average lease term of nine years and included seven different tenants operate in the pharmacy, grocery, auto parts, dollar stores, especially retail and convenience store sectors. With a 6.9% initial cap rate, the first quarter saw our acquisition yields returned to a more normalized level, which is more consistent with where we expect to acquire throughout the year. Although with year-to-date acceleration interest rates, we're hopeful we'll start to see incremental cap rate expansion, as we prudently look for opportunities to add to our pipeline. In terms of markets, we continue to favor infill locations that benefit from population density and higher barriers to entry. With more than two thirds of our Q1 acquired rents coming from larger MSAs with more than 1 million people. Along these lines, we're able to add exposure to the New York, Philadelphia, Baltimore, and Washington DC markets at attractive per square foot…

Thanks John. Jumping right into Q1 results. First quarter 2022 FFO was $0.49 per share, a $0.07 per share, or 16.7% increase compared to the first quarter of 2021. First quarter 2022, AFFO was $0.48 per share, a $0.04 per share, or 9.1% increase over the first quarter of 2021. The most notable variance between our FFO and AFFO year-over-year performance is the $248,000 of net non-recurring COVID rent deferral repayments that totaled $271,000 in the first quarter of 2021 and just $23,000 in the first quarter of 2022. I'm very pleased to say next quarter will be the last quarter of scheduled COVID rent deferral repayments, marking the completion and full recovery of all of our previously deferred rents. On the operating side of things, our portfolio remains 100% occupied. And as we have monitored the corporate performance of our tenants through the first quarter of the year, we've largely seen continued improvement in corporate level operating trends, or a demonstrated ability to maintain strong consistent performance across nearly all of our tenant sectors. Our general and administrative expenses for the quarter, which includes $936,000 in management fees to our external manager totaled $1.4 million. This was a year-over-year increase of 39%, largely driven by increases to our management fee from our 2021 equity capital markets activities, and was positively offset by revenue growth more than 83%. G&A as a percentage of revenues in the first quarter was 13.3%, a year over decrease of nearly 425 basis points, which is as highlighted in the past quarters continues to reflect our improving organizational scale and efficiency. For the first quarter of 2022. The company paid a cash dividend of $0.27 per share, representing a 12.5% year-over-year increase over the company's Q1 2021 cash dividend. And its current annualized yield of…

Thanks Matt. We're pleased with our solid start to the year driven by our strong investment activity and the completion of our portfolio strategic shift to becoming 100% retail. While there has been a lot of volatility in the market this year, we intend to keep selectively pruning our portfolio to demonstrate the attractive and resilient value of our investments while driving towards a higher quality earnings. We have a strong operational roadmap in place to help us outperform over the long run, and we appreciate the continued support of our shareholders as we execute on our plan. I want to thank our team for all of their accomplishments. At this time, we'll open it up for questions. Operator?

Our first question comes from Rob Stevenson with Janney.

Good morning. John, the Walgreens leases, are those the standard flat no bumps leases? And if so, what does that do to your bumps for the portfolio as a whole now that's your largest tenant? And then what also made that portfolio attractive to you guys at this point in time, given the sort of hyper growth phase that Pine is still in at this point.

Yes. Thanks Rob. So kind of on your -- on the latter question on the attractiveness. It was a portfolio deal. It was -- the sellers are motivated, not tax driven or what have you. And we just wanted to kind of get it done. It was kind of a smaller portfolio. And so they weren't too price sensitive. So we feel like we got a really good price for the quality portfolio. But to answer question on the Walgreens lease, yes, it's a standard lease situation that Walgreens has across the board. And with regards to rent bumps on what that does to the portfolio, let Matt kind of look opine on that.

Yes. Hey, Rob. Post acquisition of the Walgreens and post-sale of the Wells Fargo, about half the portfolio has either annual or periodic rent bumps in the existing terms.

And what is that average now?

In terms of annual growth?

Yes.

It depends on the year, but it's somewhere between 75 and 125 basis points per year on average.

Okay, perfect. And then Matt, well, I've got you here you guys expanded your debt capacity here. But in talking with your bank group, if you had to go out there and access new debt today, or replace parts of your stack, where would that price versus the beginning of the year, it seems like over the last five, seven years, every time rates have gone up, the spread has gone down in the REIT space. I assume that some of that's happened. But some of that big jump in rates over the last three, four months would be transmitted into your cost of borrowing. How significant is that for you guys these days if you had to access new debt rather than expanding existing?

Yes, I would say spreads have largely hung in there on the unsecured side, and I think they've moved out a little bit on the secured front which we don't do a lot of, really where it's widened out is on the forward swaps, the five year forward swaps. Last week, check about a couple of weeks ago, they had moved out to over 2.5%. So from a spreads perspective, we're all in between 135 and 195, which has been attractive for us, but obviously, with where new swaps are, you're in the 4% plus range to do new fixed rate five year debt

Okay. And then last one for me, John, any sense in looking out there at your own pipeline, or the conversations that you're having in the early stages on deals that anything is happening yet in terms of either pricing for assets, or the size of the amount of properties being brought to market these days, any changes of note that you would say, between now and three or six months ago?

Yes, so as I mentioned on our last earnings call, we're certainly have expanded out our acquisition interest as far as cap rates and have been wider than the market. So I can give you some, obviously real data point color that as you've seen, we've expanded our disposition guidance because we're still seeing very strong low cap rates on smaller type assets. And so we're feeding more of our properties into the sell market, because we can reinvest those at higher spreads higher yields. So we're going to do that. So right now we're seeing the pricing very strong for smaller assets. And I think that's really, because what you're seeing is people want to get out of the way of the bond market. So if you're a fixed income investor, and the bonds are going to be a bad deal, you'd rather basically swap into strong real estate asset with a long lease at a higher yield, and you have the inflation protection of the real estate. So I think you're seeing that sort of movement, where capital is moving out of bonds and into real estate for better yield and asset protection. And so we're basically going to take our time on the acquisition side, and we're not seeing anything right now. We're not seeing any good deals right now that may come later in the year. So we're kind of being patient about it. On the multi tenanted side, since we're active on that as CTO, you are seeing buyer hesitancy so maybe that will come on the net lease side, but we haven't seen it yet. So I have a long winded answer.

Our next question comes from Wes Golladay with Baird.

Hey, good morning, guys. I'd like to dig in more on this asset recycling you're going to do in the second half of the year. What type of spread are you looking between what you're buying and what you're selling? And will it be a big part of the strategy going forward?

It'll be a big part of the strategy. If we still see great opportunity to sell properties at lower cap rates, then we would be a buyer and the ability to reinvest that at higher spreads. So we'll do that all day. But in general, I would say it's about 100 basis point spread between what we're selling and what we're buying, could be a little higher.

And I guess what type of friction would you have from transaction costs? And how much would that eat into that?

It's not, I mean it's not material given, I mean material maybe in the eyes of the beholder. It's not bad. I wouldn't want to think that would be a gating issue.

Okay. And then when we look through the leverage, maybe towards the end of the year, once you're done with the asset recycling, what do you think that can get to?

Based on current guidance, we're projecting it to be at or below 7x net debt to EBITDA.

Okay, and then last one for me. With the office sales now complete would you have any more assets for reimbursements in the income statement?

No, we don't have any operating expenses beyond what existed in the first quarter. So there is a little bit of leakage in there. Not much that'll continue on some assets that we own, but with specifically the Hilton property from Q4, the higher leakage asset is now out of the portfolio.

Our next question comes from Anthony Hau with Truist Securities.

Good morning, guys. Thanks for taking my question. John, how would you describe the assets that you're planning to sell this year and where do they rank in terms of quality within the portfolio?

Well, I think my view is that investors and maybe research analysts don't view some of the assets that we're looking to sell as being high quality, but we know that the locations are such high quality, that they will get a premium pricing. So we're looking to just impress our investors and with the fact that Pine has a very strong portfolio, and people may wake up one day and be surprised at the valuations we get on the distribution side. So not to dodge your questions with names and so forth, but it'll probably be not core type names as far as credits. And just really it just more pruning the portfolio with locations that are not getting properly, appropriately valued in the public markets.

Got you. Is there a certain sector that you're planning to reduce your exposure given the hyperinflation environment?

Look, we were early on in selling casual dining, we sold out banks over the last couple of years, we didn't have a lot of and we had two, but we -- it was one-- that was kind of before inflation started going crazy, but labor costs were going up. So we felt like casual dining would be really in the bullseye of labor costs. And if inflation took off, and so we're kind of there on both of those issues. So that's one that we've kind of went away from and then we only own one carwash. And so that could be disposition kind of candidate. That's kind of a discretionary spend item in our view, and certainly not ESG friendly type of asset, but only have one of those.

Got you. And last one for me, Matt, given where rates are headed, what's the plan for the variable debt exposure? Should we assume that 90% of the balance sheet will be fixed by year end?

Yes, we're going to be opportunistic on fixing the existing variable rate debt. We want to have some balance on the revolver because as we sell assets, or in the event that we raise additional equity, we want the ability to pay down that floating rate debt versus having it locked in and having the equity drag. But I would tell you my strong preference is to have fixed rate debt versus variable rate debt over the long term, and there's a lot of volatility with the forward curve, and where forward swaps are pricing. So depending on market headlines and what's happening in the world, if we see a point where we can lock in at a reasonable forward rate on the existing variable rate debt, we'll look to do that.

Our next question comes from Michael Gorman with BTIG.

Yes, thanks. Good morning. John, I know you mentioned that you're not seeing much change in terms of the buyer behavior on the net lease side of things, but obviously a solid first quarter in terms of deal volume. And in terms of yields, and I'm just curious, kind of what you're seeing out there on the volume side, that's allowing you to source I guess, the source the strong first quarter, and then to give you the confidence as you go through the year in a relatively volatile environment, that you'll have kind of the offset acquisitions for the dispositions that you're planning?

Yes, I would say, look, with the volatility, that's going to be in our favor, that's going to kick out the marginal buyer. And so I have no issues, no problems with being able to find acquisitions are, so I think we have a great deal team, small deal team with great relationships and whether we get kind of hit with a special situation where somebody needs to close by a certain time and they really need a group that can focus on it. So we're very confident that we can kind of dial up the volume when we need it. Right now as we've gotten a lot done early on, we're in a good position to kind of sit back and take our shot so when we see good value.

Okay, and then I guess maybe just on the supply side, have you seen any pickup in supply in the marketplace, whether it's rate volatility, having sellers concerned about future valuations or sellers that maybe have debt maturity coming up, have you seen an increased amount of product out there?

What we've seen is, we haven't seen a great deal of product, more product come on the market because of what you just said. But I just got back from ULI in San Diego, early flight last night. And brokers are definitely telling their clients that if you want to sell something, you need to get it to market as soon as possible. Because who knows what could happen? So I do expect more supply to come on. If you're a seller this year, why wait? That sort of thing, so I would expect more, but we're not seeing that yet.

Okay, that's helpful. And then last one for me, it was a little bit away from the transactions, obviously, a lot of talk about inflation on the call generally in the economy, labor shortages, cost of employees, all those things, you've kind of put a framework about around how you think about internalizing management for Pine on a go forward, just the current environment and the rising costs on a G&A side change that kind of framework in terms of where you think the appropriate size is to look at internalizing the structure.

Not really, we recently looked at the cost structure, and it was marginally higher than maybe we thought about at IPO someone like Matt doesn't come any cheaper these days, for sure. So maybe we'll have to cheaper CEO or something like that. But, yes, so I would say it's marginally gone up for sure. But it don’t really change the dynamics of the size that we need to be for that. And clearly, we understand the value proposition and the market of internalized structure. So that isn't lost upon us. So I think the timing is just really kind of the size we just need to get there. So it's not a burdensome cost structure.

Our next question comes from Jason Stewart with Jonestrading.

Thanks. Good morning, most of the questions had been answered, I wanted to pull up a little bit and get your thoughts on sort of a medium term outlook for cap rates, and then at least sector given the move we've had in rates year-to-date.

Yes, I mean, so as I mentioned we're still seeing very strong cap rates on things that we're looking to sell. And surprisingly so we have talked with, as I mentioned, on a call at ULI, and people are really seeing the pricing gap out or expand out on more assets that had gotten really tight and had more of a financing component. So if you think about it like multifamily that's the leverage there it is has been part of bringing down cap rates, and because leverage is so important to the multifamily side. That's where the market seen a lot of disruption right now I think. So on the single tenant net lease, since it's driven a lot by the 1031 with no leverage, it really hasn't, we really haven't seen any kind of volatility that you might expect. We hope to see that volatility as a greedy investor and buyer of assets. So we hope to see some disruption and opportunity and so that's why we'll be patient to see if we get some of those shots.

Okay. I guess we'll wait to see what happens there. And then on the CTO ownership side, can you remind us of the plan whether there are any limitations to how much CTO can own upon?

Yes. Hey, Jason, CTO currently owns about 15% of Pine. The limitation is really dictated by the REIT structure and some of the tax rules around that from an ownership perspective. So CTO currently can own up to 11% of Pine’s REIT share shares, which would be in addition to the OP units that it currently holds.

Our next question comes from Craig Kucera with B. Riley Securities.

Hey, good morning, guys. John, you had mentioned last quarter that you had some reverse inquiries on potential asset sales. Have those inbound calls continue to accelerate in the last few months?

We certainly get a regular stream of those calls. But we really have with the market kind of like in disruption and our stock really not acting very favorably, we decided to be more proactive and hiring brokers and testing the waters, if you will, on assets. And we have been very pleasantly surprised on the pricing and the amount of interest. And so, we'll continue to keep on taking advantage of have that sort of market environment, and then that will help us set up to be ready to redeploy at higher spreads after properties closed. So that's kind of a three month process at least and we're taking our time, we're not trying to sell a super-fast or what have you, but it's just a regular kind of methodical movement here. And when we talked about before, when we had reverse inquiries, that kind of started us off on this, where we do have some properties in the sale process that started with reverse inquiries. And so that got us saying, hey, let's see if the market really prices such and such property at extreme valuation. So that's kind of a little bit of context behind it.

No, that's helpful. I appreciate it. And just stepping back, you guys have pretty much been on a tear from an acquisitions perspective for the last four quarters. But it sounds like maybe we should expect at least from an acquisition perspective for things to maybe slow down here in the second quarter, as you kind of wait for things to settle down and then maybe reaccelerate the back half of the year. Is that fair?

Yes, that's fair. I mean, we are now told the acquisition team, we're in no rush to try to impress the market with acquisition volume. We know we can do it when we want to, but we want to really see what kind of pain is out there if possible. And so we'll take our time.

Got it. And just one more for me. Are you making any update on the grocery development site in Jacksonville?

Yes. Good question. I do have an update, but we haven't discussed it. Let's just say it's basically back on track. In really the timing, the reason why it's been delayed is negotiating with old time pottery and the new grocer. And in getting all that done, just really took some time. And everyone's been busy, I guess, in this environment. So to get two groups together to figure out how it logistics and how it all works out. So that's all been done. So why don't you look, we'll give an update on next quarter on timing and so forth.

Our next question comes from Andrew Lavery, an Individual Investor.

Hi, everybody, how are you doing? I just have question with regards to ESG. What does the board and senior leadership think about ESG and stakeholder capitalism as a whole?

So we're very mindful of ESG, obviously, we have a slide on our investor deck that you should take a look at. One thing we're very proud of is as CTO, the manager of Pine, we've planted 170,000 pine trees in Florida, over the last couple of years, and we have brought on diversity on our boards. And so we're as a small company, we're basically very mindful of it, and we're very proud of what the progress we've made. But we also know that it's a big issue and keep on thinking of what we can do to keep moving that forward.

Okay, with and follow up question, if I may. You say you mentioned how you in that portfolio is one carwash property, and how that's not very ESG friendly, I'm assuming it's not ESG friendly based because of the amount of water it uses, the wastewater it produces and such. Now if you offloaded that property due to just kind of ESG kind of off our guidance, I guess is the way to put it, I suppose. Would you -- do you feel you'd be now assuming too if that property is paying rent on time consistently it provides good guide to overall portfolio and you decide to sell it because of ESG. Do you feel you're fulfilling your fiduciary responsibility to the shareholder?

So what we won’t sell it if we don't get a really good price, so we're not letting the tail wag the dog. So we're very sure. Very, basically shareholder friendly as far as value. But we think that we can basically do hit two birds with one rock, if you will, that we can get a very good price for that because the ground lease and it's a very strong market. And let – we will let shareholders and investors, research analysts decide whether carwashes are ESG friendly or not. We won’t have, that was just a commentary that uses a lot of water and people are concerned about water.

Well, and I would say to that, if you did sell it, and it was purely for environmental reasons, and you say you got a good price.

So, yes, I just answered the question, Andrew. So we're not selling it because we wouldn't sell it at a high cap rate because of use of water.

Well, I'm just saying that you would, someone else is going to buy it, and it's still going to use a lot of water. So I'm not saying, that's why I wanted to point out and just one final comment. I noticed on the investor relations page, I believe we own 129 properties now, is that correct?

It was 129 at quarter end, but with the Wells Fargo sale after quarter, and it's dropped back down to 128.

Okay, all right. Perfect. Yes, I saw in the quarterly earnings report it’s at 129. And then on the investor relations page, it's at 128. So I just wanted to make sure there wasn't a discrepancy there. That's all. Thank you. That concludes today's question and answer session. I'd like to turn the call back to John Albright for closing remarks.

I just wanted to say thank you for attending the call and look forward to follow up questions. Thank you.

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