Alpine Income Property Trust, Inc. — Q2 2021 Form 10-Q
Business context and period. This quarterly report covers the three and six months ended June 30, 2021, with comparisons to 2020. Alpine Income Property Trust (NYSE: PINE) owns a U.S. portfolio of long-term net-leased retail and office properties and is externally managed by a CTO Realty Growth subsidiary. At quarter-end, the portfolio comprised 71 properties in 22 states, was 100% occupied, and had an 8.0-year weighted-average remaining lease term.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Lease revenue | $6.60 million | $4.59 million | $12.49 million | $8.76 million |
| Operating income | $1.02 million | $0.62 million | $2.09 million | $0.89 million |
| Net income | $0.35 million | $0.28 million | $0.86 million | $0.29 million |
| Net income attributable to PINE | $0.30 million | $0.24 million | $0.74 million | $0.25 million |
| Diluted EPS | $0.03 | $0.03 | $0.08 | $0.03 |
| FFO per diluted share | $0.38 | $0.29 | $0.79 | $0.51 |
| AFFO per diluted share | $0.39 | $0.16 | $0.82 | $0.35 |
Q2 operating margin, calculated as operating income divided by revenue, was approximately 15.5%, versus 13.6% a year earlier. Q2 net income attributable to PINE was approximately 4.6% of revenue, versus 5.2% in Q2 2020.
- Cash flow: First-half operating cash flow was $8.9 million, compared with $3.5 million in 2020. Investing activities used $65.9 million, principally for real estate acquisitions. Financing activities provided $63.7 million. Cash and cash equivalents were $6.3 million at June 30; restricted cash was $2.2 million.
- Debt and liquidity: Debt had a $141.6 million face value and $140.8 million carrying value at quarter-end. The company had $50.0 million drawn on its $150.0 million credit facility, leaving $100.0 million available. The stated weighted-average debt rate was 2.50%. Interest-rate swaps fixed the benchmark component on the $50 million credit-facility balance and $60 million term loan; the company reported compliance with debt covenants.
- Balance sheet: Total assets were $367.5 million and total equity was $218.4 million at June 30, 2021. Long-term debt increased from $106.8 million at December 31, 2020.
- Dividends: PINE declared and paid $0.25 per share for Q2 and $0.49 per share for the first half, versus $0.20 and $0.40, respectively, in 2020.
Material changes versus the prior period
- Revenue rose 43.7% in Q2 and 42.5% in the first half, primarily reflecting portfolio growth. The company acquired 23 properties for a combined purchase price of $103.2 million during the first half, compared with 11 properties costing $75.4 million in the first half of 2020.
- First-half net income attributable to PINE increased 194.1% to $0.74 million. However, diluted EPS was $0.08 versus $0.03, reflecting the higher share count following equity issuance as well as earnings growth.
- Operating expenses increased 40.4% in Q2, including higher depreciation and real estate expenses associated with the expanded portfolio. Interest expense nearly doubled to $0.68 million in Q2, reflecting higher average debt balances.
- The company completed a June follow-on offering of 3.22 million shares, receiving $54.3 million net, and raised $10.9 million net under its at-the-market program in the first half. It also entered a $60 million term loan and assumed a $30 million mortgage in connection with the June portfolio acquisition from CTO.
- One property, with $3.1 million of net assets, was classified as held for sale at June 30. No properties were disposed of during the first half.
Outlook, commentary, risks and unusual items
- Management stated that available cash, operating cash flow, and $100 million of credit-facility capacity were expected to provide sufficient liquidity for operations, capital needs, maintenance, and debt service over the next 12 months and the foreseeable future. The filing provides no quantitative earnings or acquisition guidance.
- Management intends to continue investing in net-leased properties, with a stated objective of generating stable and growing cash flows and attractive risk-adjusted returns. COVID-19-related deferred rent repayments were continuing for some tenants, in certain cases through mid-2022; the filing does not quantify the remaining deferred-rent balance in the provided text.
- Tenant concentration is notable: Wells Fargo properties represented 15% of first-half 2021 revenue. PINE identifies tenant credit, economic conditions, real estate market changes, acquisition execution, capital availability, and the duration and effects of COVID-19 as risks.
- Related-party considerations include external management by CTO and acquisitions from CTO under a right-of-first-offer arrangement. The filing describes potential conflicts of interest, including in related-party transactions and capital-raising recommendations.
- The company reported no material pending or threatened legal proceedings, no off-balance-sheet arrangements, and no material change in risk factors from its 2020 Form 10-K. Disclosure controls were reported effective as of June 30, 2021.
Most important facts for investors to verify
- Review acquisition underwriting, lease terms, tenant credit quality, and the performance of the 23 properties acquired in the first half—especially the June portfolio transactions with CTO.
- Assess tenant and property concentration, including Wells Fargo’s 15% share of first-half revenue, and monitor lease expirations and renewal exposure.
- Confirm liquidity and covenant headroom after acquisitions, debt refinancing, and any further investment; distinguish unrestricted cash from restricted cash.
- Compare dividends with AFFO and cash generation, and account for the share-count increase from the follow-on offering and ATM issuance.
- Track remaining COVID-19 rent deferrals and repayments, and the disposition status of the property classified as held for sale.