Alpine me Property Trust(PINE) - 2024 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Presents unaudited consolidated financial statements and detailed notes for Alpine Income Property Trust, Inc. for Q3 2024 Item 1. Financial Statements Presents unaudited consolidated financial statements for Q3 2024, including balance sheets, income, equity, cash flows, and explanatory notes Consolidated Balance Sheets | Metric | September 30, 2024 (Unaudited, in thousands) | December 31, 2023 (in thousands) | | :----- | :------------------------------------------- | :------------------------------- | | Total Assets | $578,986 | $564,560 | | Total Liabilities | $307,032 | $288,947 | | Total Equity | $271,954 | $275,613 | Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenues | $13,480 | $11,559 | $38,436 | $34,063 | | Total Operating Expenses | $10,446 | $12,766 | $30,740 | $31,704 | | Net Income (Loss) | $3,354 | $(939) | $3,293 | $2,896 | | Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | $3,080 | $(837) | $3,024 | $2,582 | | Basic EPS | $0.22 | $(0.06) | $0.22 | $0.18 | | Diluted EPS | $0.21 | $(0.05) | $0.20 | $0.16 | Consolidated Statements of Comprehensive Income | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income (Loss) | $3,354 | $(939) | $3,293 | $2,896 | | Total Other Comprehensive Income (Loss) | $(6,686) | $1,492 | $(5,046) | $3,105 | | Total Comprehensive Income (Loss) | $(3,332) | $553 | $(1,753) | $6,001 | | Comprehensive Income (Loss) Attributable to Alpine Income Property Trust, Inc. | $(3,059) | $655 | $(1,610) | $5,687 | Consolidated Statements of Stockholders' Equity | Metric (in thousands) | September 30, 2024 | December 31, 2023 | | :-------------------- | :----------------- | :---------------- | | Common Stock at Par | $143 | $137 | | Additional Paid-in Capital | $254,110 | $243,690 | | Dividends in Excess of Net Income | $(10,652) | $(2,359) | | Accumulated Other Comprehensive Income | $4,641 | $9,275 | | Stockholders' Equity | $248,242 | $250,743 | | Noncontrolling Interest | $23,712 | $24,870 | | Total Equity | $271,954 | $275,613 | - For the nine months ended September 30, 2024, Net Income was $3,024 thousand, Stock Issuance, Net of Equity Issuance Costs was $10,963 thousand, and Cash Dividends were $(11,317) thousand[16] Consolidated Statements of Cash Flows | Metric (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided By Operating Activities | $21,005 | $18,744 | | Net Cash Provided By (Used In) Investing Activities | $(7,522) | $9,654 | | Net Cash Provided By (Used In) Financing Activities | $841 | $(24,011) | | Net Increase in Cash and Cash Equivalents | $14,324 | $4,387 | | Cash and Cash Equivalents and Restricted Cash, End of Period | $28,055 | $17,431 | - Cash Paid for Interest increased from $6,924 thousand in 2023 to $8,996 thousand in 2024 for the nine months ended September 30[20] - Unrealized Gain (Loss) on Cash Flow Hedge shifted from a gain of $3,105 thousand in 2023 to a loss of $(5,046) thousand in 2024 for the nine months ended September 30[20] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. BUSINESS AND ORGANIZATION - Alpine Income Property Trust, Inc. (PINE) is a REIT that owns and operates a portfolio of 133 net leased commercial properties across 34 states, primarily subject to long-term net leases. The Company also acquires or originates commercial loans and investments[22][23] - PINE operates in two primary business segments: income properties and commercial loans and investments[24] - The Company is externally managed by Alpine Income Property Manager, LLC, a wholly owned subsidiary of CTO Realty Growth, Inc. (CTO). As of September 30, 2024, PINE has a 92.1% ownership interest in its Operating Partnership, with CTO holding a 7.9% interest[24][25] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Company's consolidated financial statements include its wholly owned subsidiaries and other controlled entities, with all significant inter-company balances eliminated[29] - PINE operates in two primary business segments: income properties and commercial loans and investments, with financial information reviewed on a disaggregated basis by the chief executive officer[30] - Real estate assets are stated at cost less accumulated depreciation and amortization, with depreciation recognized on a straight-line basis over estimated useful lives. Depreciation of real estate (exclusive of intangible assets) was $12.7 million for the nine months ended September 30, 2024, compared to $12.6 million in 2023[32] - Investments in commercial loans and investments are recorded at historical cost, net of unaccreted origination costs and current expected credit losses (CECL) reserve. The CECL allowance is estimated using a loss-rate method and macroeconomic factors, as no historical losses have been incurred[41] - Restricted cash totaled $25.5 million as of September 30, 2024, with $22.4 million held for like-kind exchange reinvestment and $3.1 million for interest, real estate tax, insurance, and capital expenditure reserve accounts related to commercial loans and investments[46] NOTE 3. PROPERTY PORTFOLIO - As of September 30, 2024, the Company's property portfolio consisted of 133 properties, including three classified as commercial loans and investments, with a total square footage of 3.6 million[55] | Lease Income (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Lease Payments | $10,051 | $10,049 | $29,815 | $30,187 | | Variable Lease Payments | $1,667 | $1,398 | $4,697 | $3,764 | | Total Lease Income | $11,718 | $11,447 | $34,512 | $33,951 | - During the nine months ended September 30, 2024, the Company acquired six properties for $53.1 million and sold 10 properties for $55.2 million, generating $4.3 million in gains on sale[57][58] - The three Tampa Properties, acquired for $31.4 million through a sale-leaseback with a tenant repurchase option, are accounted for as a financing arrangement for GAAP purposes but are included in the property portfolio for legal and tax purposes[57] NOTE 4. COMMERCIAL LOANS AND INVESTMENTS - During the nine months ended September 30, 2024, the Company originated several construction loans, including a $7.2 million loan in Lawrenceville, GA, a $6.1 million loan in Mount Carmel, OH, and a $17.8 million loan in Charlotte, NC, with fixed interest rates ranging from 10.25% to 11.50%[60][62][64] - On August 1, 2024, the Company acquired three single-tenant income properties (Tampa Properties) for $31.4 million through a sale-leaseback transaction. Due to a tenant repurchase option, this is accounted for as a financing arrangement, with imputed interest recognized as interest income[63] | Description | Maturity Date | Original Face Amount (in thousands) | Current Face Amount (in thousands) | Carrying Value (in thousands) | Coupon Rate | | :---------- | :------------ | :---------------------------------- | :--------------------------------- | :---------------------------- | :---------- | | Construction Loan – Wawa Land Development – Greenwood, IN | July 2025 | $7,800 | $7,149 | $7,133 | 9.25% | | Construction Loan – Wawa Land Development – Antioch, TN | October 2025 | $6,825 | $4,683 | $4,655 | 11.00% | | Mortgage Note – Portfolio | November 2026 | $24,000 | $22,915 | $22,830 | 8.75% | | Construction Loan – Retail Outparcels – Lawrenceville, GA | January 2026 | $7,200 | $6,618 | $6,558 | 11.25% | | Construction Loan – Wawa Land Development – Mount Carmel, OH | September 2025 | $6,127 | $5,023 | $4,976 | 11.50% | | Sale-Leaseback - Bradenton Beach, FL | August 2029 | $9,608 | $9,599 | $9,599 | 8.30% | | Sale-Leaseback - Anna Maria, FL | August 2029 | $16,408 | $16,392 | $16,392 | 8.30% | | Sale-Leaseback - Long Boat Key, FL | August 2029 | $5,408 | $5,402 | $5,402 | 8.30% | | Construction Loan – Publix Land Development – Charlotte, NC | September 2025 | $17,760 | $9,967 | $9,881 | 10.25% | | CECL Reserve | - | - | - | $(877) | - | | Total Commercial Loans and Investments | | $101,136 | $87,748 | $86,549 | | NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS | Financial Instrument (in thousands) | Carrying Value (Sep 30, 2024) | Estimated Fair Value (Sep 30, 2024) | Carrying Value (Dec 31, 2023) | Estimated Fair Value (Dec 31, 2023) | | :-------------------------------- | :---------------------------- | :---------------------------------- | :---------------------------- | :---------------------------------- | | Cash and Cash Equivalents - Level 1 | $2,560 | $2,560 | $4,019 | $4,019 | | Restricted Cash - Level 1 | $25,495 | $25,495 | $9,712 | $9,712 | | Commercial Loans and Investments - Level 2 | $86,549 | $94,302 | $35,080 | $36,288 | | Obligation Under Participation Agreement - Level 2 | $13,178 | $13,510 | $— | $— | | Long-Term Debt - Level 2 | $278,898 | $267,786 | $275,677 | $258,613 | | Interest Rate Swap (in thousands) | Fair Value (Sep 30, 2024) | Fair Value (Dec 31, 2023) | | :-------------------------------- | :------------------------ | :------------------------ | | 2026 Term Loan Interest Rate Swap | $2,404 | $4,314 | | 2027 Term Loan Interest Rate Swap | $3,231 | $5,793 | | Credit Facility Interest Rate Swap | $141 | $716 | NOTE 6. INTANGIBLE ASSETS AND LIABILITIES | Intangible Assets and Liabilities (in thousands) | September 30, 2024 | December 31, 2023 | | :----------------------------------------------- | :----------------- | :---------------- | | Sub-total Intangible Lease Assets—Net | $40,574 | $49,292 | | Sub-total Intangible Lease Liabilities—Net | $(4,358) | $(4,907) | | Total Intangible Assets and Liabilities—Net | $36,216 | $44,385 | | Net Amortization (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Amortization of Intangible Assets and Liabilities | $1,941 | $2,108 | $6,000 | $6,422 | - As of September 30, 2024, the weighted average amortization period for both total intangible assets and liabilities was 8.7 years[76] NOTE 7. PROVISION FOR IMPAIRMENT - During the nine months ended September 30, 2024, the Company recorded a $0.6 million impairment charge for three income properties classified as held for sale, based on estimated sales prices less book value and costs to sell[78] - During the nine months ended September 30, 2024, a $0.5 million charge was recorded for the provision for credit losses related to commercial loans and investments, driven by the initial estimated CECL allowance based on investment activity[81] - In the prior year, for the three and nine months ended September 30, 2023, the Company recorded a $2.9 million impairment charge for seven income properties due to a tenant bankruptcy and lease rejections[79] NOTE 8. OTHER ASSETS | Other Assets (in thousands) | September 30, 2024 | December 31, 2023 | | :-------------------------- | :----------------- | :---------------- | | Tenant Receivables—Net of Allowance for Doubtful Accounts | $950 | $809 | | Prepaid Insurance | $34 | $838 | | Deferred Financing Costs—Net | $887 | $1,190 | | Interest Rate Swaps | $6,277 | $10,957 | | Operating Leases - Right-of-Use Asset | $1,249 | $1,434 | | Total Other Assets | $10,951 | $17,045 | NOTE 9. OPERATING LAND LEASES - As of September 30, 2024, the Company's right-of-use assets for operating land leases totaled $1.2 million, with corresponding lease liabilities of $1.3 million[86] - Amortization of right-of-use assets was less than $0.1 million for the three months ended September 30, 2024 and 2023, and $0.1 million and $0.2 million for the nine months ended September 30, 2024 and 2023, respectively[87] | Metric | September 30, 2024 | September 30, 2023 | | :----- | :----------------- | :----------------- | | Weighted Average Remaining Lease Term | 6.7 years | 7.2 years | | Weighted Average Discount Rate | 2.0% | 2.0% | | Total Lease Payments (in thousands) | $1,334 | - | | Operating Leases – Liability (in thousands) | $1,278 | - | NOTE 10. ASSETS HELD FOR SALE | Assets Held for Sale (in thousands) | September 30, 2024 | December 31, 2023 | | :---------------------------------- | :----------------- | :---------------- | | Assets Prior to Provision for Impairment | $7,553 | $7,274 | | Less Provision for Impairment | $(3,453) | $(2,864) | | Total Assets Held for Sale | $4,100 | $4,410 | NOTE 11. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER LIABILITIES | Liabilities (in thousands) | September 30, 2024 | December 31, 2023 | | :------------------------- | :----------------- | :---------------- | | Accounts Payable | $19 | $30 | | Accrued Expenses | $3,822 | $2,449 | | Due to CTO | $921 | $1,052 | | Interest Rate Swaps | $501 | $134 | | Operating Leases - Liability | $1,278 | $1,454 | | Total Accounts Payable, Accrued Expenses, and Other Liabilities | $7,279 | $5,736 | NOTE 12. OBLIGATION UNDER PARTICIPATION AGREEMENT - As of September 30, 2024, the Company's obligation under a participation agreement had a carrying value of $13.2 million, with an associated loan carrying value of $13.1 million (net of a $0.1 million CECL reserve). The interest rate on this obligation was 8.0%[93] - This obligation arose from a participation sale that did not achieve sale accounting under ASC 860, thus treated as a secured borrowing[93] NOTE 13. LONG-TERM DEBT | Debt Type (in thousands) | Face Value (Sep 30, 2024) | Wtd. Avg. Rate (Sep 30, 2024) | Maturity Date | | :----------------------- | :------------------------ | :---------------------------- | :------------ | | Credit Facility | $79,500 | 5.31% | January 2027 | | 2026 Term Loan | $100,000 | 3.50% | May 2026 | | 2027 Term Loan | $100,000 | 2.58% | January 2027 | | Total Debt | $279,500 | 3.68% | | - The Credit Facility has a commitment level of $250.0 million, with an outstanding balance of $79.5 million and $53.5 million available borrowing capacity as of September 30, 2024[100] | Interest Expense (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Interest Expense | $3,167 | $2,443 | $8,933 | $7,494 | | Total Interest Paid | $3,493 | $2,243 | $8,996 | $6,924 | NOTE 14. INTEREST RATE SWAPS - The Company uses interest rate swap agreements to hedge against fluctuating interest rates, which were 100% effective during the three and nine months ended September 30, 2024 and 2023[110] | Hedged Item | Effective Date | Maturity Date | Fixed Rate | Amount (in thousands) | Fair Value (Sep 30, 2024, in thousands) | | :---------- | :------------- | :------------ | :--------- | :-------------------- | :-------------------------------------- | | 2026 Term Loan | 5/21/2021 | 5/21/2026 | 2.05% + 0.10% + applicable spread | $100,000 | $2,404 | | 2027 Term Loan | 9/30/2021 | 11/29/2024 | 0.51% + 0.10% + applicable spread | $80,000 | $573 | | 2027 Term Loan | 9/30/2022 | 1/31/2027 | 3.84% + 0.10% + applicable spread | $20,000 | $(226) | | 2027 Term Loan (forward starting) | 11/29/2024 | 1/31/2027 | 1.61% + 0.10% + applicable spread | $80,000 | $2,884 | | Credit Facility | 3/1/2023 | 3/1/2028 | 3.21% + 0.10% + applicable spread | $50,000 | $141 | NOTE 15. EQUITY - The Company filed a shelf registration statement on Form S-3 on September 27, 2023, for the potential issuance of up to $350.0 million in various securities, replacing the 2020 registration statement[113] - Under the 2022 ATM Program, the Company sold 623,526 shares for gross proceeds of $11.3 million (net proceeds $11.1 million) during the nine months ended September 30, 2024, at a weighted average price of $18.08 per share[116] - As of September 30, 2024, CTO holds a 7.9% noncontrolling ownership interest in the Operating Partnership, representing 1,223,854 OP Units[118] - The Company declared and paid cash dividends of $0.830 per share for the nine months ended September 30, 2024, and $0.825 per share for the same period in 2023, to maintain its REIT status[119] NOTE 16. COMMON STOCK AND EARNINGS PER SHARE | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. (in thousands) | $3,080 | $(837) | $3,024 | $2,582 | | Basic EPS | $0.22 | $(0.06) | $0.22 | $0.18 | | Diluted EPS | $0.21 | $(0.05) | $0.20 | $0.16 | | Weighted Average Number of Common Shares: Basic | 13,744,232 | 13,946,194 | 13,663,752 | 14,001,774 | | Weighted Average Number of Common Shares: Diluted | 14,968,086 | 15,649,688 | 14,887,606 | 15,705,268 | NOTE 17. SHARE REPURCHASES - Under the 2023 $15.0 Million Repurchase Program, the Company repurchased 45,768 shares of common stock for $0.8 million (average price $16.90 per share) during the three months ended March 31, 2024, completing the program[124] - No repurchases of common stock occurred during the three months ended September 30, 2024[124] NOTE 18. STOCK-BASED COMPENSATION - Non-employee directors can receive annual retainer fees in Company common stock. For the nine months ended September 30, 2024, $0.2 million (14,603 shares) was recognized as expense for stock issued to directors[125] | Stock Compensation Expense (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Director Retainers Paid in Stock | $79 | $79 | $238 | $238 | NOTE 19. RELATED PARTY MANAGEMENT COMPANY - As of September 30, 2024, CTO owns 1,223,854 OP Units and 1,138,621 shares of PINE common stock, representing a total investment of $43.0 million or 15.3% of PINE's outstanding equity[129] - The Management Agreement with CTO's subsidiary, Alpine Income Property Manager, LLC, was extended to January 31, 2025, and automatically renews annually thereafter[131] - The Company incurred management fee expenses of $1.1 million and $3.1 million for the three and nine months ended September 30, 2024, respectively[135] - PINE entered into a Revenue Sharing Agreement with CTO, expecting to receive a share of asset management, disposition management, leasing commissions, and other fees related to CTO's management of a portfolio of assets secured by the Mortgage Note. PINE recognized $0.1 million and $0.4 million in revenue from this agreement for the three and nine months ended September 30, 2024, respectively[149] NOTE 20. COMMITMENTS AND CONTINGENCIES - The Company is committed to fund five construction loans, with an unfunded portion totaling $12.3 million as of September 30, 2024[151] - PINE is committed to funding $5.0 million in tenant improvements for a property, expected to be funded within one year[151] NOTE 21. BUSINESS SEGMENT DATA - The Company operates in two primary business segments: income properties and commercial loans and investments[152] - Income property operations accounted for 79% of identifiable assets as of September 30, 2024, and 90% of consolidated revenues for the nine months ended September 30, 2024[152] | Segment Revenues (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Lease Income | $11,718 | $11,447 | $34,512 | $33,951 | | Interest Income from Commercial Loans and Investments | $1,663 | $112 | $3,552 | $112 | | Other Revenue | $99 | $— | $372 | $— | | Total Revenues | $13,480 | $11,559 | $38,436 | $34,063 | | Identifiable Assets (in thousands) | September 30, 2024 | December 31, 2023 | | :--------------------------------- | :----------------- | :---------------- | | Income Properties | $456,650 | $503,151 | | Commercial Loans and Investments | $89,965 | $37,384 | | Corporate and Other | $32,371 | $24,025 | | Total Assets | $578,986 | $564,560 | NOTE 22. SUBSEQUENT EVENTS - Subsequent events and transactions were evaluated through October 17, 2024, the date the consolidated financial statements were issued[155] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operating results, liquidity, and non-GAAP measures for the three and nine months ended September 30, 2024 Special Note Regarding Forward-Looking Statements - The report contains forward-looking statements subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially from expectations[159] - Key risks include real estate market strength, economic downturns, acquisition/development strategy execution, credit risk from commercial loans, loss of key management, and macroeconomic conditions (geopolitical conflicts, inflation, interest rates)[159] OVERVIEW - Alpine Income Property Trust, Inc. (PINE) is a REIT focused on acquiring, owning, and operating freestanding, commercial retail properties in the U.S., primarily under long-term net leases[161][162] - The Company targets tenants in industries resilient to e-commerce and properties with attractive credit characteristics, stable operating histories, and favorable market locations[162][163] - As of September 30, 2024, PINE owned 133 properties (including three classified as commercial loans and investments) with 3.6 million square feet, 99% occupied, and a weighted average remaining lease term of 8.8 years[165] - The commercial loan investments portfolio had a total carrying value of $86.5 million, comprising five construction loans, one mortgage note, and three sale-leaseback properties[165] COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 | Metric (in thousands) | Sep 30, 2024 | Sep 30, 2023 | $ Variance | % Variance | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Total Revenues | $13,480 | $11,559 | $1,921 | 16.6% | | Total Operating Expenses | $10,446 | $12,766 | $(2,320) | (18.2%) | | Net Income from Operations | $6,460 | $1,379 | $5,081 | 368.5% | | Net Income (Loss) Attributable to Alpine Income Property Trust, Inc. | $3,080 | $(837) | $3,917 | 468.0% | - Lease income increased by $0.3 million, primarily due to higher reimbursable revenue, while real estate expenses rose by $0.1 million due to increased reimbursable expenses[168] - Interest income from commercial loans and investments surged from $0.1 million to $1.7 million, driven by the expanded portfolio of construction loans, a mortgage note, and sale-leaseback properties[169] - Other revenue of $0.1 million in 2024 was attributable to fees from a revenue sharing agreement with CTO, with no comparable income in 2023[170][171] - Provision for impairment decreased significantly from $2.9 million in 2023 (income properties) to $0.4 million in 2024 (CECL reserve for commercial loans)[173] - Gain on disposition of assets increased by $0.8 million, from $2.6 million in 2023 to $3.4 million in 2024, despite selling fewer properties (8 vs. 8) but for a higher aggregate sales price ($48.6 million vs. $20.6 million)[175] - Interest expense increased by $0.8 million, primarily due to a higher average outstanding debt balance ($0.4 million) and $0.3 million from the sale of participation interest in the Mortgage Note[177] COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 | Metric (in thousands) | Sep 30, 2024 | Sep 30, 2023 | $ Variance | % Variance | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Total Revenues | $38,436 | $34,063 | $4,373 | 12.8% | | Total Operating Expenses | $30,740 | $31,704 | $(964) | (3.0%) | | Net Income from Operations | $12,040 | $10,164 | $1,876 | 18.5% | | Net Income Attributable to Alpine Income Property Trust, Inc. | $3,024 | $2,582 | $442 | 17.1% | - Lease income increased by $0.6 million, reflecting property acquisitions in 2024 and 2023, partially offset by property sales. Real estate expenses increased by $0.8 million due to higher reimbursable expenses and non-recoverable portfolio expenses[180] - Interest income from commercial loans and investments significantly increased from $0.1 million to $3.5 million, driven by the expanded portfolio including construction loans, a mortgage note, and the Tampa Properties[182] - Other revenue of $0.4 million in 2024 was from the revenue sharing agreement with CTO[183] - Provision for impairment decreased from $2.9 million in 2023 (income properties) to $1.0 million in 2024 (split between CECL reserve for commercial loans and income properties)[185] - Gain on disposition of assets decreased by $3.4 million, from $7.8 million in 2023 to $4.3 million in 2024, reflecting fewer properties sold (10 vs. 22) and lower aggregate sales price ($55.2 million vs. $99.6 million)[189] - Interest expense increased by $1.4 million, primarily due to a $1.0 million increase from higher average outstanding debt and $0.4 million from the sale of participation interest in the Mortgage Note[191] LIQUIDITY AND CAPITAL RESOURCES - Cash totaled $28.1 million as of September 30, 2024, including $25.5 million in restricted cash[193] - The Company had an outstanding balance of $79.5 million on its $250 million revolving Credit Facility and $200.0 million in term loans as of September 30, 2024[193] - During the nine months ended September 30, 2024, the Company acquired six properties for $53.1 million and sold 10 properties for $55.2 million[194] - The Company expects sufficient liquidity for the next twelve months from cash on hand, operating cash flow, proceeds from asset sales (like-kind exchange), $98.3 million remaining under the 2022 ATM Program, and $53.5 million available on the Credit Facility[196] - Capital commitments include $5.0 million for tenant improvements within one year and $12.3 million for unfunded construction loans[195] Non-GAAP Financial Measures - The Company discloses FFO (Funds From Operations) and AFFO (Adjusted Funds From Operations) as non-GAAP financial measures, which are widely used in the REIT industry to compare operating performance[199] - FFO is GAAP net income adjusted for real estate depreciation/amortization and gains/losses from sales of depreciable real estate assets and impairment write-downs. AFFO further adjusts FFO for other non-cash revenues and expenses[200] | Metric (in thousands, except per share data) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Funds From Operations (FFO) | $6,690 | $5,867 | $19,133 | $17,264 | | FFO per Diluted Share | $0.45 | $0.37 | $1.29 | $1.10 | | Adjusted Funds From Operations (AFFO) | $6,649 | $5,932 | $19,291 | $17,410 | | AFFO per Diluted Share | $0.44 | $0.38 | $1.30 | $1.11 | OFF-BALANCE SHEET ARRANGEMENTS - The Company has no off-balance sheet arrangements[205] CRITICAL ACCOUNTING ESTIMATES - A critical accounting estimate is the purchase accounting for acquisitions of real estate subject to a lease, where the fair value of acquired real estate is allocated to tangible and intangible assets/liabilities[206] - This allocation relies on market information and estimates (replacement cost, land values, future cash flows), and changes in underlying assumptions could materially impact financial condition and results of operations due to changes in depreciation and amortization[206][207] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company, as a smaller reporting entity, is exempt from detailed market risk disclosures under Regulation S-K - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[209] Item 4. Controls and Procedures Management confirmed effective disclosure controls and procedures as of September 30, 2024, with no material changes to internal financial reporting controls - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2024[210] - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2024[210] PART II—OTHER INFORMATION Item 1. Legal Proceedings The Company is not involved in any material pending or threatened legal proceedings - The Company is not a party to any pending or threatened legal proceedings that are believed to have a material adverse effect on its business or financial condition[211] Item 1A. Risk Factors No material changes to risk factors from the 2023 Annual Report on Form 10-K as of September 30, 2024 - No material changes in risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as of September 30, 2024[212] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - This item is not applicable[212] Item 3. Defaults Upon Senior Securities This item is not applicable for the current reporting period - This item is not applicable[213] Item 4. Mine Safety Disclosures This item is not applicable for the current reporting period - This item is not applicable[213] Item 5. Other Information This item is not applicable for the current reporting period - This item is not applicable[213] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including organizational documents, agreements, and certifications - Exhibits include Articles of Amendment and Restatement, Amended and Restated Bylaws, Specimen Common Stock Certificate, Amendment No. 1 to Management Agreement, Section 302 and 906 Certifications, and Inline XBRL documents[215] SIGNATURES The report is signed by the President and CEO, CFO and Treasurer, and Chief Accounting Officer, dated October 17, 2024 - The report was signed by John P. Albright (President and CEO), Philip R. Mays (SVP, CFO, and Treasurer), and Lisa M. Vorakoun (SVP and Chief Accounting Officer) on October 17, 2024[217]