Prepared remarks
Good day, and 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 speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press 11 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.
Thank you. Joining me and participating on the call this morning are John Albright, President and Chief Executive Officer, Philip R. 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, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings. You can find our SEC reports, earnings release and most recent investor presentation, which contain reconciliations of the non-GAAP financial measures we use, on our website at www.alpinereit.com. With that, I will turn the call over to John.
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. These acquisitions included a three-property portfolio leased 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%. 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. Also during the quarter, we received full repayment of $8 million of commercial loans that carried a 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 the loan portfolio to vary quarter-by-quarter. With our completed investment activity this quarter and a robust investment pipeline, we opportunistically utilized 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 third quarter of 2026. 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 Philip will detail later. And with that, I will turn the call over to Philip.
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 3% and 3,000%, respectively, over the comparable quarter of the prior year. I would note that the results for the quarter included approximately $300 thousand of other income related to a non-refundable deposit we received upon the termination of a contract to sell an At Home property to an end user. At Home indicated that they were going to renew their lease, and the buyer decided to terminate the contract. For the six months ended June 30, 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 2.5% and 3,000% 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 at-the-market (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 and under our Series A preferred ATM program, we issued approximately 156 thousand 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. At quarter-end, common shares and units outstanding totaled approximately 18.8 million and preferred shares totaled approximately 2.43 million. 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 last quarter and 6.7x at the beginning of the year. As of quarter-end, we had $370 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: as previously disclosed, a $100 million SOFR swap at 2.05% associated with our 2029 term loan matured in May and was replaced with a swap 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 four 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 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, $6.3 million, and approximately 10.6% of annualized in-place cash base rent or $5.1 million, 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. 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. 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. 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. 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. I should note here that historically, incentive management fee has been paid, and none is reflected in our guidance. Under PINE'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. With that, operator, please open the call to questions.
Questions and answers
Thank you. As a reminder, to ask a question, please press 11 on your telephone. First question is going to come from the line of Jay Kornreich with Cantor Fitzgerald. Your line is open. Please go ahead.
I guess just starting out, you referenced the loan portfolio nearly at that 20% cap for total assets. So how do you think about your appetite going forward for pushing beyond that 20% if you feel like there are really attractive loan opportunities? Or should we expect the bulk of new investments coming from the net-lease real estate? And on that side, how would you expect to fund it? Is that more coming from dispositions, or how do you think about creating value on the net-lease real estate side?
Yeah. Thanks, Jay. We do have in front of us in the pipeline a fair amount of net-lease investments, and hopefully all of those come to fruition or a good part of them. On the loan side, there is one that we are looking at, but not a lot and not anything behind that. So you will not see the loan portfolio get above 20%. If it does, it is 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 financing acquisitions, we have, obviously, some maybe some sales coming up, but really it is through our line. Philip can talk a little bit more about that.
Yeah, Jay, to finance the acquisitions, it will be a combination of our line initially, and then we can also blend in some dispositions, and if appropriate, 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.
Okay. I appreciate that. And then just one more for me. On the disposition side, you updated guidance revising that lower and it looks like you did not have any dispositions this quarter. So curious if there has been any strategic shift in how you are thinking about specific assets or tenants you initially intended to dispose of, or if it is reflective of just the overall transaction market maybe not being at the place you want in order to sell for full value. I know you have done a lot of work already getting the portfolio to where you feel like it is really healthy. So I am just curious what led to the dynamics of expecting fewer dispositions?
Yeah. It is a little bit more of a timing issue with regards to tenants that have expressed interest in lengthening their lease term. We want to get through an extension or a lease renewal that gets you that better cap rate valuation. So it is really more about getting the properties in a better place to extract more value.
Okay. I will hold it there. Thank you.
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.
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 from the second quarter to maybe the third quarter. Phil, do you mind walking through what the equivalent AFFO run rate would be from what you reported given the real non-cash benefit or the one-time payment on the sale and then some of the hedges, how the run-rate AFFO changes going forward?
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 and are not fully baked in for the remainder of the year. On the revenue side, looking at our income statement, you can see investment and other income is elevated about $300 thousand for the quarter and year-to-date. That was a non-refundable deposit that we kept. We had an At Home under contract to be sold to an end user who wanted to use the property, but when At Home emerged from bankruptcy and indicated they were renewing their lease, the buyer dropped the contract and we got to keep the non-refundable deposit. $300 thousand is not a large number nominally, but it is about $0.02 of earnings on a per-share basis. In addition, as you are aware and as I talked about last time on our call, 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 and 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. One of those happened this quarter on our 2029 term loan and it moved up about 130 basis points. Then we have another one that will happen towards the end of January on our 2031 term loan and it will also move up 130 to 140 basis points. Then, in addition, we did issue equity during the quarter, so that will be in at a 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 initial run rate of approximately $0.52, which we will build off as we deploy capital and bring investments online to build it back up.
Super helpful there. And then on the management fee, can you reconcile the advantages and disadvantages of issuing equity? Clearly you are comfortable issuing equity, but there is the incentive issue of an increase with the management fee and also some dilution. I think we have shown in the past that the management fee is not driving the bus.
We have bought back shares in a meaningful way when our stock really got disconnected with the NAV, and our management fee went down significantly when we did that. So it is all about making really good investments and driving earnings, and I think we have seen returns have been spectacular. We still have a higher FFO than EPR, and our stock price is about $10.11 below EPR. I think we have some good headway in front of us as far as where we can drive more alpha for our investors.
That is what I like to hear. Thank you. Good luck in the back half.
Alright. Thank you.
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.
Hey, guys, good morning. Thanks for taking the question. Could you talk a little bit about the investment guidance and what would drive it towards that high end versus the low end, along with what you would be thinking on timing?
It would be kind of late this quarter or early next quarter in terms of acquisitions. Our pipeline is in really good shape as far as the quality of what we are seeing, and we are far enough along on some acquisitions. In fact, we thought some acquisitions were going to happen last quarter and they got pushed. So I suspect we will be active this quarter, and I look forward to updating people as we progress. The pipeline is strong and it is not something you have to wait too long for.
Got it. And then could you talk a little bit about the type of tenants you are targeting now? The cap rates kind of came down for the properties this quarter, but it seems like you brought in some nice credits. How should we think about cap rates and what you are targeting going forward?
Still focusing on high-quality credits. We are more real estate-focused and credit-focused, and we happen to find good locations with good credits. I would say cap rates are going to be kind of in the 7% range for sure; we do not have to dip below 7%, but 7% and up is where we are seeing attractive opportunities.
Got it. Awesome. That is all for me. Thank you, guys.
Thank you. One moment for our next question. Our next question will be coming from the line of Robert Stevenson with Huntington. Your line is open. Please go ahead.
John, did you say that a couple of these acquisitions this quarter were ground leases?
On the ground leases, Philip helped me with that one. We have acquired one this quarter that is a ground lease.
This quarter, one was a ground lease—the Lowe's that we acquired was a ground lease. The others were not ground leases.
Okay. Is that your only ground lease at this point, or is there anything substantial in the portfolio as a percentage of ABR?
No, we have others for sure. We have other Lowe's and some of them are on ground leases.
Okay. And then were you guys forced by the REIT rules to increase the dividend, or was this just a decision the Board made at this point in time? What was the background there?
It was really driven by the growth in taxable income as earnings has grown. We look at taxable income not just for the current year but also look out and want to make sure that we are fully distributing taxable income. So it was driven by growth in taxable income.
Okay. Alright. That is it for me. Thanks.
Have a great weekend.
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.
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?
No, there is not a hard target. I would say that is probably close to the high end of where we will have it. It may even go above that level in the next quarter, but I would not peg that as a target. So let's say 50% plus is a good target for us.
Okay. The second question on the disposition guidance: does that guidance include property sales, or does that also include any loan portfolio payoffs?
It includes really just one loan payoff and/or sale, and it is just a note that we did earlier in the year for $10 million. Other than that, what is included currently is just related to property dispositions.
Okay. And then lastly, on the loan portfolio, unfunded commitment of $85 million—what is the timing for that?
There are 15 loans, and really only three of them have any kind of significant unfunded amount. They will draw up over time and could be significantly drawn in the next six months.
They are Publix-anchored developments that are getting started now.
Okay. Thank you. That is all I had.
Thank you. One moment for our next question. Our next question comes from the line of Alec Feygin with Barry. Your line is open. Please go ahead.
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? Is there maybe any sort of prelease rate, what is the loan-to-cost? Anything else that you can provide?
You are talking about the $40 million Kentucky one this quarter. That is basically a Publix-anchored development. Traditionally, we will loan sort of 80% plus loan-to-cost. The LTV after they develop these pads and they develop the Publix and can sell them in the market tends to be 70% to 75% LTV. So that is where we like to target—we will do a 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. The anchor tends to be in the 70s to 75% loan-to-value. As mentioned before, we always get a first look if we want to buy these pads, and certainly if for some reason the cap rates go to a level where they are attractive to us, we will buy them. That gives you a little bit of flavor for that.
Thank you for that. You mentioned earlier there is one loan in the pipeline you are potentially working on. Is it a larger loan? Are you mostly going to be sticking with these construction-type loans?
It is not a larger loan; it is sort of a modest size and it would be a development sort of one.
Okay. Thank you, and have a great day.
Thanks. You too.
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.
Good morning. Maybe sticking with the loans: of that $85.4 million that is 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 are committed to but you do not think your partner will actually end up using?
We look at it as most likely they will use it up, but there is certainly an opportunity that a borrower may have a buyer come in along the process and decide to buy it before it delivers, or they may refinance us with a cheaper cost of capital. I would say it is a 50/50 chance that it gets fully funded or something happens along the way and they recapitalize and we get an early termination fee. It is too early to determine right now.
Okay. And then on the acquisition side, you bought a theater during the quarter. I understand there is a Sony credit behind it, but anything else about that transaction that got you comfortable with buying theaters? It has been a stale market for theater acquisitions over the last six years.
So that one is actually a ground lease as well, the Alamo. Having the Sony credit and a long-term lease is fantastic and the cap rate was attractive. Being in Denver was a positive, and trends in theaters have gotten a lot better. We will keep our eye out for additional opportunities where we look at risk-adjusted yields and loan-to-value for what can be built on a theater parcel. The theater industry is getting healthier: AMC, as leases roll, is rolling down rents on properties that are not on the high end of performance, and through our exposure we see how well they are doing. We have a property that is on percentage rent and seeing those trends are very strong. If we see good risk-adjusted yields, we will certainly capture them.
No, that is helpful. And any update on the credit watch list—anything moving around as you think about tenant credit, particularly outside of your top 10 tenants?
Not really. That is part of why our disposition guidance has gone down a bit: we have addressed things that were a little bit of a worry and some have become tailwinds. For example, the Party City in Long Island went bankrupt a while ago and we have been sitting with an empty property, but we have a lease signed with a new tenant; they just need to go through permitting, which is taking a long time. Hopefully that property is back producing income in early 2027 or maybe late this year. We will continue to prune where we see things we do not like, but the portfolio is in pretty good shape right now.
And can you just remind me, is that Party City the only vacancy left, or is there something else that is at 0.5?
It is really just the Party City. We have two very minimal former Mountain Express locations that combined are probably not a million dollars of value, so Party City is the only real vacancy at this time, and as John said, we have recently completed a lease for that property.
Okay. I appreciate all that. That is it for me. Thank you very much.
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.
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 would be curious to get your thoughts on whether that is influencing how you are thinking about lending or acquisitions in this environment?
Not really. We are seeing grocers doing very well. We own Sprouts through our exposure and they are doing really strong. The expansion of high-quality grocers like Whole Foods and Publix has been pretty strong. We are not seeing any weakness with their revenues and sales, so we do not have that concern.
Okay. That is helpful. And just on your investment guidance: we are hearing from some of your peers that this is one of the best acquisition environments at the property level in some time, and you've been aggressive on the lending side. You have done $150 million year-to-date and you are talking about $170 to $200 million. Is that conservatism or just what you are seeing in the pipeline?
We are being a little conservative because we had some property acquisitions we thought were going to happen last quarter that we passed on after due diligence. So although the pipeline is really good, we know some of them will not shake out, hence the conservative guidance.
Okay. That is helpful. That is it for me. Thank you.
Thanks.
Thank you. I am 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.