Alpine Income Property Trust, Inc. (NYSE: PINE) — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the filing text does not provide standalone fourth-quarter results.
Business context
PINE is an externally managed U.S. net-lease REIT focused primarily on retail properties, generally under triple-net leases. At year-end it owned 113 properties across 32 states and 76 markets, totaling approximately 3.3 million square feet. The portfolio was 100% leased, with a 7.9-year weighted-average remaining lease term and $36.9 million of annualized base rent.
Financial performance and position
| Metric | FY 2021 / Dec. 31, 2021 | FY 2020 / Dec. 31, 2020 |
|---|---|---|
| Revenue | $30.1 million | $19.2 million |
| Net income | $11.5 million | $1.1 million |
| Net income attributable to PINE | $10.0 million; $1.02 basic and $0.89 diluted per share | $1.0 million; $0.13 basic and $0.11 diluted per share |
| FFO / AFFO | $17.7 million / $17.9 million; $1.58 / $1.59 per diluted share | $10.8 million / $9.2 million; $1.23 / $1.04 per diluted share |
| Cash from operating activities | $17.2 million | $9.4 million |
| Cash and restricted cash | $9.5 million, including $0.6 million restricted | $1.9 million |
| Total assets / total equity | $505.5 million / $227.9 million | $262.2 million / $149.1 million |
| Debt | $269.0 million face value; $267.7 million carrying value | $106.8 million carrying value |
| Dividends declared and paid per share | $1.015 | $0.820 |
Operating cash flow was $17.2 million; investing activities used $196.0 million, principally reflecting property acquisitions, while financing activities provided $186.4 million. FFO and AFFO are non-GAAP measures and are not substitutes for operating cash flow or net income.
Changes versus the prior year
- Revenue rose 56.5%, primarily from portfolio acquisitions; operating expenses increased 45.6%, including higher depreciation, property costs and management fees.
- Net income increased substantially, with a material contribution from $9.7 million of gains on property dispositions, versus $0.3 million in 2020. PINE sold three properties for $28.3 million in aggregate.
- PINE acquired 68 properties for $260.3 million, compared with 29 properties for $116.6 million in 2020. Year-end property count was 113.
- Interest expense increased to $3.7 million from $1.5 million as average debt outstanding grew. Year-end debt rose to $269.0 million face value.
- The company raised $54.3 million net in a June follow-on offering and $13.8 million net through its ATM program, and issued OP units as partial acquisition consideration.
Liquidity, debt and outlook
Debt comprised a $99 million revolving credit facility, $60 million 2026 term loan, $80 million 2027 term loan and $30 million mortgage. The reported weighted-average interest rate was 2.10%; interest-rate swaps fixed the reference-rate component on both term loans. No principal payments were due within one year; the $99 million revolver matures in November 2023. PINE reported $51 million of available revolver capacity, compliance with debt covenants, and management’s expectation of sufficient liquidity for operations, capital needs and debt service over the next twelve months and foreseeable future.
Management said 2021 operating results were in line with expectations and described continued investment in net-lease properties as its strategy. No quantified earnings, acquisition or distribution guidance is provided in the supplied filing text. The board retains discretion over future dividends; PINE intends to distribute at least 90% of REIT taxable income to maintain REIT status.
Risks, contingencies and notable disclosures
- Tenant and sector exposure: Wells Fargo contributed 12% of 2021 revenue; 55% of annualized base rent was from tenants or parent companies that were unrated or below investment grade. Retail demand, tenant credit, lease expirations and consumer spending are key risks.
- Geographic concentration: Texas represented 20% of portfolio square footage at year-end. Real estate values, tenant performance and leasing conditions may be affected by regional downturns, competition, inflation, interest rates and natural disasters.
- COVID-19: management identified possible tenant disruption, rent collection pressure and capital-market constraints as risks. No COVID-related rent-deferral agreements were entered into during 2021.
- Related-party structure: PINE has no employees and is managed by a CTO subsidiary. The manager’s base fee is based on total equity; the company disclosed potential conflicts involving staffing, acquisitions and capital raising. No incentive fee was due for 2021 or 2020.
- Other risks include environmental liabilities, uninsured property losses, cybersecurity, LIBOR transition, REIT qualification and dependence on external capital. No pending or threatened legal proceeding was identified as likely to have a material adverse effect.
- Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2021. The auditor issued an unqualified opinion on the financial statements but did not audit internal control effectiveness.
Important facts for investors to verify
- How much of reported earnings and year-over-year improvement is repeatable after excluding the $9.7 million disposition gain; compare GAAP results with FFO, AFFO and operating cash flow.
- Tenant-level credit, rent coverage and lease rollover exposure, particularly Wells Fargo concentration and the 55% of rent attributable to unrated or non-investment-grade tenants.
- Debt maturity and refinancing plans, revolver availability, covenant headroom, and the effect of variable-rate borrowing and benchmark-rate transition.
- Acquisition pricing and returns on the 68 properties added in 2021, including related-party transactions with CTO and the impact of equity issuance on per-share results.
- Dividend sustainability relative to AFFO, operating cash flow, debt service and REIT distribution requirements.