Participants

Lisa Vorakoun; Interim Chief Financial Officer, Treasurer; Alpine Income Property Trust Inc

John Albright; President, Chief Executive Officer, Director; Alpine Income Property Trust Inc

Gaurav Mehta; Analyst; AGP / Alliance Global Partners

Jason Weaver; Analyst; JonesTrading

Rob Stevenson; Analyst; Janney Montgomery Scott LLC

Wes Golladay; Analyst; Baird

John Massocca; Analyst; B. Riley Securities

Michael Gorman; Analyst; BTIG LLC

Presentation

Operator

Good day and thank you for standing by, and welcome to the ALPINE Q1 2024 earnings call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker speaker, Mr. Moura Kohn, Chief Accounting Officer. Please go ahead.

Lisa Vorakoun

Good morning, everyone, and thank you for joining us today for the Alpine Income Property Trust First Quarter 2024 operating results conference call. With me today is our CEO and President, 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, earnings release and most recent investor presentation, which contain reconciliations of the non-GAAP financial measures we use on our website at Alpine ri.com. Now I would like to turn the call over to John for his prepared remarks.

John Albright

Thanks, Lisa, and good morning, everyone. I'd like to start off by thanking our former CFO, Matt Partridge, for his many contributions to our company. We wish him well with his new opportunity. We have engaged a national firm to search for a new CFO and have started interviewing candidates reviewing our first quarter investment activity. Although the traditional acquisition market was quiet for us during the quarter, we did originate a $7.2 million first mortgage loan investment, of which $3.6 billion was funded during the quarter. We also acquired the land under our CBS. in Baton Rouge for $1 million. The initial yield on our loan investment was 11.3%. Cash cap rate for our land acquisition was 7.3%. The loan investment made during the quarter was to provide a CAD7.2 million of funding with a two year term towards a six pad retail development anchored by Chick-fil-A in a growing submarket of Atlanta, Georgia.
On the property acquisition front, we saw fewer attractive core investment opportunities due to the selected sellers. However, we anticipate that as the market further adjusts to higher for longer rates, the transaction market may become more productive for us. We are seeing additional high yielding and better risk-adjusted loan opportunities, which we expect to pursue in the second quarter as of the end of the quarter, our portfolio was 99% occupied and consisted of 138 properties totaling 3.8 million square feet with tenants operating in 23 sectors within 35 states. Our top tenants remain unchanged from our year end earnings call in mid February with Walgreens, Lowe's, Dick's Sporting Goods, family, dollar Dollar Tree and Dollar General has our top-five tenants, all of them carry investment grade credit. We ended the quarter with 65% of our total annualized base rents coming from tenants with an investment grade credit rating, which is an increase of 700 basis points from this time last year. We have a strong balance sheet and no debt maturities until 2026 and this stability complements the strength of our high-quality portfolio.
I also want to highlight the valuation discount with our current stock price trading at approximately $15 a share, which is an implied cap rate of over 8.5% and a current dividend yield of over 7%, considering our book value is over $18 per share in the past year, we have repurchased almost 1 million shares or 6% of our company's capitalization at an average price of approximately $16.25 per share. We believe Alpine stock provides an attractive value and yield investment, which we will work on better communicating with the investment community in the near future.
On the disposition side, we're starting to see more activity on some of the assets we would like to sell and recycle into higher-yielding opportunities. This recycling of capital to organically grow earnings should be an active area for us this year with that, I'll now turn it over to Lisa to talk about our first quarter performance, balance sheet, capital markets and guidance.

Lisa Vorakoun

Based on Beginning with our financial results, first quarter 2024 FFO was $0.41 per share, or $0.05 per share or 13.9% increase over the first quarter of 2023. First Quarter 2024 AFFO was $0.42 per share, a $0.06 per share increase or 16.7% increase over the first quarter of 2023. Our results benefited from an 11.7% increase in total revenues, which was primarily driven by the interest income generated by our loan portfolio. While our seven former Mountain Express properties still created a negative impact on our lease income revenues as compared to the first quarter of 2023. Rent on three leases with new operators commenced during the quarter, and we anticipate a fourth lease will commence during the second half of 2024. We are in active discussions for the potential lease or sale of the remaining three properties. G&a as a percentage of revenues in the first quarter was 12.4%, a year-over-year decrease of nearly 121 basis points. Our G&A benefited from our reduced external management fee as a result of our recent share repurchases.
For the first quarter of 2024, the Company paid a cash dividend of $0.275 per share, representing a current annualized yield of over 7.25%. Ffo and AFFO first quarter payout ratios were 67% and 65% respectively, down from 76% in the first quarter of last year, we anticipate announcing our regular quarterly cash dividend for the second quarter. Towards the end of May, we repurchased over 45,000 shares of common stock on the open market for a total cost of $800,000 at an average price of $16.90 per share, which completed the previously authorized 15 million share repurchase program. As we previously discussed, our balance sheet is well stabilized, with no debt maturities until 2026 and total liquidity at quarter end was 185 million. We ended the quarter with net debt to total enterprise value of 54%, net debt to pro forma EBITDA of 7.4 times, and our fixed charge coverage ratio remained very healthy at 3.4 times.
As we look forward to the balance of 2024, we begin the second quarter with portfolio-wide in-place annualized straight-line base rents of 38.9 million or 38.5 million of in-place annualized cash base rents as well as annualized interest income from loan investments of $3.6 million. We maintained our full year FFO and FFO guidance of $1.51 to $1.56 per share and $1.53 to $1.58 per share, respectively.
Our investment guidance remains unchanged at a range of 50 to 80 million of investments, contingent on reasonable market conditions and includes the potential for additional low investments. Our dispositions guidance also remains unchanged at a range of between 50,000,080 million.
With that, I'll now turn the call back over to John for his closing remarks for exclusive.

John Albright

Overall, we're confident our unique asset recycling strategy, ample liquidity, derisked balance sheet and high-quality portfolio has us well positioned to drive value over the long run. And we look forward to executing on our 2024 guidance and positioning us for future earnings growth in 2025. I want to thank the team for their hard work and our shareholders and business partners for their continued support.
And with that, operator, please open the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Gaurav Mehta, Alliance Global Partners.

Gaurav Mehta

Good morning. I wanted to ask you on your acquisition guidance and your comments on the on the critical activities and opportunities that you're seeing in the market. I was wondering how much are you willing to grow your loan portfolio in the event you don't see attractive traditional acquisition opportunities?

John Albright

Yes. So it's a good question. We are seeing a little bit more movement in the market. So we are optimistic that we'll be able to definitely hit our acquisition targets. We're seeing a little bit more movement as well on some of the properties that we'd like to sell on. So we're optimistic that we'll be able to sell some some non IG credits and recycle an IG credit. And so we're pretty comfortable what we're seeing in the market as now that rates are sticking with kind of a higher trajectory. I think the folks that have business plans that maybe they are hoping on a little bit better rate environment or just can't go and start Are you moving with their business plans?

Gaurav Mehta

Okay. Second question I have is on the guidance maybe on the on the one Q. $0.41, the FFO that you reported and I was just wondering what are some of the assumptions for the remaining year that takes you from $0.41 sort of run rate to a dollar $51.56 guidance.

John Albright

Yes. So look, we got a lot of questions on that appropriately. So a little bit of the earnings model is that we expect to sell assets and have a lag on the acquisitions to come this year, we'll be missing some revenue as we as we sell assets and there in escrow as we're waiting to acquire assets on and a little bit of it is really kind of on the on the loan side on the MicroMaxx loan. That loan is set up more of the short term loan as the the borrower like to sell the assets and as they sell the assets at hyper amortizes our loan. And so if they become more active in selling assets, we'll lose the income from that from that loan investment if we don't replace it and a little bit from on the G&A side, with some of the higher audit and tax fees later in the year. But in general, we are being a little bit conservative. Obviously, Matt left at the the end of March, and we were not looking to kind of do a lot of remodeling and so forth. So we're early in the year. And if it's appropriate, obviously next quarter we'll we'll revisit it.

Gaurav Mehta

Okay. Thank you.

John Albright

Thank you.

Operator

Jason Weaver, JonesTrading.

Jason Weaver

Can you give us any color about your upcoming rental rate increases over the balance of the year and if you expect any lease turnovers during the same?

John Albright

Yes. I mean, we have very little lease turnover this year. We have a theater in Reno at the end of November. So it will be only one month of lag there. But everything else has pretty much not a lot of lease turnover if you will, for this year on on on basically the risk at the rent increase, obviously we're roughly about a point a year as far as the rent escalations over the balance of the whole portfolio as you kind of think about it. And a lot of our we do have some flat leases and we have some leases that escalate every five years and on on kind of on an aggregate basis, it's usually a percent.

Jason Weaver

Got it. Thank you for that color. And then the next one's a hypothetical. If we remain in this depressed sort of transaction environment for much longer. How do you look at the priority for capital deployment between acquiring new new retail loans versus share repurchase?

John Albright

Yes. So obviously, we were very active on the share repurchases last year and a little bit in the quarter on. We'll basically a board, obviously discusses that on a quarterly basis, and we'll see how how we start out this quarter and see how things go. But we are seeing some very, I would say, opportunistic loan opportunities that we'd like to execute, where we're getting very high risk-adjusted yields. And so that's a good way to kind of deploy capital, have some strong free cash flow as we see wait and see if there's some opportunities on the core acquisition side. So we're trying to balance that don't want to go incredibly into the share buyback side. But if if the stock kind of presents more opportunity kind of like where it is now, we may revisit that for sure.

Jason Weaver

Or I thank you for taking my questions and one on the story question.

Operator

Rob Stevenson, Janney Montgomery Scott.

Rob Stevenson

They've been a good morning, John, I guess with respect to the loans, is there any sort of upper boundary that you and the Board have at this point or is it case by case, how are you guys thinking about how big of a loan exposure you would want to have, you know, sitting here over the next year or two?

John Albright

Yes. So we're almost there given our credit facilities and kind of limit us on how much of the loan activity we can do. So the the upward bounds of that exposure is roughly $10 million from where we are now. Now we weak maybe recycling some of the loans as we see opportunities. So but the aggregate amount of call it, you know, in the mid 50s.

Rob Stevenson

Okay, that's helpful. And then at this point, given your comments about the reluctance of sellers, how are you feeling about the ability for buyers of your disposition assets to be able to fund that given where rates have moved to and sort of tighter purse strings by the banks, et cetera, how robust is that market? And is that going to be a delaying factor for you guys and selling some of the assets this year?

John Albright

Yes. I mean, we're seeing people with some actually a fair amount of capital starting to become more productive on the acquisition side is I think the view is they're sitting on capital. They're not seeing a lot of movement in the market and they're basically would rather deploy now rather than see see if another quarter goes by and if things change. So I think you're starting to see people step out of the sidelines and be more active on the 1031 side to my surprise, if you're if you have something below 5 million, you're still seeing a very on a per doc, the 1031 market, I was talking to a developer yesterday that if you're under 3 million, they have some restaurant pad sites and they're selling sub five caps with the non IG. So if you have your properties below 3 million, you're really seeing a very efficient 10, 31 market still. And then I know you're basically dealing with the wall laws are a little bit larger. Those are still kind of five cap plus or minus. So it's amazing how sticky that sector's been.

Rob Stevenson

All right. And then last one for me where is still 1% vacancy. We're still baking asset for you guys and Sure.

Lisa Vorakoun

And so what that is really is a couple of our Mountain Express properties when we re-lease lease, then they came back in. And then we talked about I think on the last call, we evicted our Boston Market tenants.

John Albright

So that really makes up the delta there that would be good or pretty good pretty far along in getting the maintenance pricing relief. Okay. So you'll see more kind of activity in the next this quarter with regards to some of that revenue starting to come online. And then as Lisa talked about on the Boston market, we have a nice backfill opportunity that's better credit and higher rents.

Rob Stevenson

And it was going to be my next question. Thank you, guys. Appreciate the time and have a great weekend.

John Albright

Sure. Thank you, Tahira.

Operator

Wes Golladay, Baird.

Wes Golladay

Yes, good morning, everyone. A quick question on the income statement. There's a new line called other revenue that I think that's tied to the revenue sharing agreement. Is that something that amortizes or is that just a one-time thing in the first quarter and.

Lisa Vorakoun

Yes, so really what that is, you're going to see a consistent stream of revenue in that bucket from the revenue share. Our $24 million portfolio that we're managing assets on included in that number this quarter, though is about $21,000 worth of one-time fees related to dispositions on sales under that loan. And so you can you'll see that number be consistent, but probably call it between 60 and 75,000 a quarter of essentially both of them go through sort of what the acquisition versus disposition spread.

Wes Golladay

Is that pretty consistent to how you were thinking at the beginning of the year?

John Albright

Yes. Well, I would say that some of the situations might be closer to flat because what we're looking to do is sell some non IG and be able to buy IG at at similar cap rates are higher. So there will be a little bit of positive spread, but not as much as you think as we're basically high-grading the portfolio at the same time. But if we were simply going to non non IG, there would be some some nice pickup in spreads.

Wes Golladay

Got it. And then regarding the Boston market tenant, do you have a sense of what the mark-to-market is on that lease?

John Albright

Now It's I would say that on that is, I would say, 20% on a on a mark to market for where the next tenants going.

Wes Golladay

Got it. Thanks. Thanks for the time, sir.

Operator

John Massocca, B. Riley Securities.

John Massocca

John morning from filling and digging in on the acquisition side of things a little bit more, how much of this a more attractive acquisition environment is reflected in kind of the pipeline today? Or is it mostly just kind of initial stage deals you're kind of seeing come across your desk? I'm trying to think in terms of timing as to where we should kind of think about your acquisition volumes as earlier?

John Albright

I would be conservative on that because we're bidding on a lot, but we're bidding wide to see who has kind of loose hands, if you will. So one that really has a stress of some debt coming due or just cash flow issues, though other places in the portfolio. So we're not we don't feel like we need to be in a mad rush of. So I would push it to the third and fourth quarter for sure.

John Massocca

And then with your Walgreens assets, I'm just kind of broad strokes. What's kind of the remaining lease duration on those properties or that portfolio? I just know a lot of that came from that one big portfolio deal. So just trying to think about and how much term is still left on those assets?

John Albright

Yes, it's roughly eight years Okay.

John Massocca

Very helpful. And then just one quick modeling question. Was there anything maybe one-time-ish to call out in the revenue line item number? Is that kind of a pretty steady run rate number.

Lisa Vorakoun

And yes, apart from just a very small comment, 20,000 or so that was in that other revenue line item, there's not very many one-time gains and that's it for me.

John Massocca

Thank you very much.

Operator

Michael Gorman, BTIG.

Michael Gorman

Yes, thanks. Good morning. John, if I could just follow up on your comments just previously here. Can you give us some more color on what's going on in the acquisitions market you mentioned bidding wide. So is this a function where the market pricing hasn't adjusted is the flow of deals down as well? Or and for those deals where you are bidding why are those deals ultimately closing or are they just staying on the market? If any color you could give there would be great. (tecnical difficulty)