Alpine Income Property Trust, Inc. — Q1 2023 10-Q
Reporting period: Three months ended March 31, 2023. Alpine owns and operates U.S. commercial net-lease properties, primarily under long-term triple-net leases, and is externally managed by a subsidiary of CTO Realty Growth. At quarter-end, its portfolio comprised 138 properties across 34 states, was 99% leased, and had a 7.3-year weighted-average remaining lease term.
Key financial metrics
Amounts below are in millions, except per-share data; comparisons are with Q1 2022.
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Lease revenue | $11.17 | $10.80 | Up 3.4% |
| Net income | $3.75 | $0.92 | Up $2.82; includes $4.45 gain on property sales |
| Net income attributable to Alpine | $3.34 | $0.81 | Basic EPS $0.24 vs. $0.07; diluted EPS $0.21 vs. $0.06 |
| FFO / AFFO | $5.63 / $5.64 | $6.60 / $6.45 | Diluted FFO and AFFO per share were each $0.36, versus $0.49 and $0.48 |
| Operating cash flow | $5.38 | $6.12 | Down $0.75 |
| Interest expense | $2.61 | $1.68 | Up 55.5%, reflecting higher rates, partly offset by lower average debt |
| Cash and restricted cash | $63.56 | — | Includes $59.27 restricted, largely sale proceeds held for reinvestment through like-kind exchanges |
| Long-term debt | $248.96 carrying value | $267.12 at Dec. 31, 2022 | $250.00 face value; no principal due before 2026 |
Material changes and capital activity
- Revenue increased modestly, reflecting prior-year acquisitions partly offset by property dispositions. Real estate expenses rose 31.3% and depreciation and amortization rose 11.7%.
- The company sold 10 properties for $56.2 million, recognizing $4.5 million in gains; it made no acquisitions in the quarter. The sales proceeds drove investing cash inflow of $55.35 million.
- Net income rose sharply due to the property-sale gains, while FFO and AFFO declined year over year. The gain is excluded from FFO, so GAAP earnings growth does not indicate comparable growth in those operating measures.
- Alpine issued 665,929 shares through its ATM program, raising $12.4 million net at a weighted-average price of $18.96. The company reported $109.5 million remaining under the program.
- Cash dividends were $0.275 per share for the quarter, versus $0.270 a year earlier.
Liquidity, outlook, risks, and unusual items
- Debt consisted of $50 million drawn on a $250 million revolving facility and $200 million in term loans. Alpine reported $200 million of undrawn revolver capacity and compliance with all debt covenants at March 31, 2023.
- Interest-rate swaps hedge the term loans and $50 million of the revolver balance. Management cited higher underlying interest rates as a reason for increased interest expense.
- Management said it expects sufficient liquidity for operations, capital needs, maintenance, and debt service over the next 12 months and into the foreseeable future, citing cash, operating cash flow, sale proceeds, ATM availability, and revolver capacity. It plans to continue investing in net-leased properties. The filing provides no specific earnings or acquisition guidance.
- Walgreens represented 12% of Q1 revenue, creating tenant concentration exposure. Management identified real estate market conditions, recession, inflation and rising rates, tenant losses, access to capital, and execution of acquisition plans among forward-looking risks.
- Restricted cash is largely escrowed for reinvestment under like-kind exchange arrangements. No material litigation was reported, and the filing reported no material change in risk factors from the 2022 Form 10-K.
- The company is externally managed by CTO’s wholly owned subsidiary; the filing discusses potential conflicts of interest with CTO and the manager. Disclosure controls were deemed effective, with no material change in internal control over financial reporting.
Important facts for investors to verify
- How much of the $59.3 million in restricted sale proceeds was reinvested, and on what terms, within the like-kind exchange timelines?
- Whether lease income, occupancy, tenant credit quality, and rent collections remain resilient, particularly given Walgreens’ 12% revenue share.
- Whether higher interest costs persist and how effectively the swaps protect cash flows as debt maturities approach in 2026 and 2027.
- How future property sales, acquisitions, and ATM share issuance affect recurring FFO/AFFO per share and dividend coverage.
- Whether the company maintains covenant compliance and adequate liquidity after considering restricted cash and planned capital deployment.