Alpine me Property Trust(PINE) - 2023 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Alpine Income Property Trust, Inc., highlighting decreased net income due to lower asset disposition gains, stable operating cash flows, and active portfolio management Consolidated Balance Sheets Total assets slightly decreased due to property dispositions, while reduced long-term debt led to an increase in total equity as of June 30, 2023 Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $566,685 | $573,431 | | Real Estate—Net | $455,336 | $477,054 | | Cash and Cash Equivalents | $7,755 | $9,018 | | Total Liabilities | $262,405 | $278,056 | | Long-Term Debt | $249,020 | $267,116 | | Total Equity | $304,280 | $295,375 | Consolidated Statements of Operations Net income significantly declined in Q2 and H1 2023, primarily due to substantially lower gains on asset dispositions compared to the prior year Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $11,439 | $11,280 | $22,605 | $22,079 | | Gain on Disposition of Assets | $743 | $15,637 | $5,196 | $15,637 | | Interest Expense | $2,438 | $2,123 | $5,051 | $3,803 | | Net Income Attributable to PINE | $80 | $14,282 | $3,419 | $15,088 | | Diluted EPS | $0.01 | $1.05 | $0.22 | $1.12 | Consolidated Statements of Cash Flows Operating cash flow remained stable, while investing activities generated a net inflow due to asset sales, and financing activities primarily used cash for debt repayment and dividends Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $13,676 | $13,252 | | Net Cash Provided By (Used In) Investing Activities | $16,103 | $(38,616) | | Net Cash Provided By (Used In) Financing Activities | $(14,968) | $33,425 | Note 1: Business and Organization PINE is a REIT owning 143 net lease properties across 34 states, externally managed by a CTO subsidiary, holding an 89.2% interest in its Operating Partnership - The company's portfolio consists of 143 net leased properties located in 107 markets across 34 states[23] - PINE is externally managed by Alpine Income Property Manager, LLC, a wholly owned subsidiary of CTO Realty Growth, Inc. (CTO)[24] - As of June 30, 2023, PINE holds an 89.2% ownership interest in its Operating Partnership, with CTO holding a 7.8% interest[25] Note 3: Property Portfolio The portfolio consists of 143 properties, with active management in H1 2023 through acquisitions and dispositions, resulting in a $5.2 million gain and substantial future rental receipts Acquisition & Disposition Activity (Six Months Ended June 30) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Properties Acquired | 9 | 35 | | Acquisition Cost | $61.6 million | $110.0 million | | Properties Sold | 14 | 5 | | Aggregate Sales Price | $79.1 million | $72.8 million | | Gain on Sale | $5.2 million | $15.6 million | Minimum Future Rental Receipts (in thousands) | Year Ending December 31, | Amount | | :--- | :--- | | Remainder of 2023 | $19,720 | | 2024 | $38,648 | | 2025 | $36,917 | | 2026 | $35,994 | | 2027 | $32,617 | | 2028 and Thereafter | $130,072 | | Total | $293,968 | Note 9: Long-Term Debt As of June 30, 2023, the company had $250.0 million in total debt with a 3.36% weighted-average interest rate, no principal payments due until 2026, and was in compliance with all covenants Outstanding Indebtedness as of June 30, 2023 (in thousands) | Debt Instrument | Face Value | Stated Interest Rate | Maturity Date | | :--- | :--- | :--- | :--- | | Credit Facility | $50,000 | SOFR + 0.10% + [1.25% - 2.20%] | Jan 2027 | | 2026 Term Loan | $100,000 | SOFR + 0.10% + [1.35% - 1.95%] | May 2026 | | 2027 Term Loan | $100,000 | SOFR + 0.10% + [1.25% - 1.90%] | Jan 2027 | | Total Debt | $250,000 | 3.36% (Weighted-Avg) | | - The company was in compliance with all of its debt covenants as of June 30, 2023[82] Note 11: Equity The company raised $12.4 million from its ATM program in H1 2023 and increased dividends to $0.550 per share for the six months ended June 30, 2023 - During the six months ended June 30, 2023, the Company sold 665,929 shares under its 2022 ATM Program for net proceeds of $12.4 million[90] Dividends Declared and Paid (per share) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | $0.275 | $0.270 | | Six Months Ended June 30 | $0.550 | $0.540 | Note 15: Related Party Transactions PINE is externally managed by a CTO subsidiary, which holds a 14.8% equity stake, incurring $2.2 million in management fees for H1 2023, with potential conflicts of interest - The company is externally managed by a subsidiary of CTO, which owned 14.8% of PINE's outstanding equity as of June 30, 2023[105][106] Management Fees Incurred (in millions) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | $1.1 | $0.9 | | Six Months Ended June 30 | $2.2 | $1.9 | - Potential conflicts of interest exist regarding executive time allocation, enforcement of agreements, and transactions between PINE and CTO[123][124][125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant decrease in net income primarily from lower asset sale gains, highlighting active portfolio management, sufficient liquidity, and non-GAAP FFO/AFFO metrics Overview and Recent Activity The company's strategy focuses on acquiring and operating single-tenant commercial retail properties, with 143 properties, 99.5% leased, and active acquisition and disposition activity in H1 2023 - As of June 30, 2023, the portfolio included 143 properties with 3.9 million square feet, 99.5% leased, and a weighted average remaining lease term of 7.3 years[143] - In H1 2023, the company acquired nine properties for $60.5 million and sold 14 properties for $79.1 million, generating gains of $5.2 million[142] Results of Operations Net income significantly decreased in Q2 and H1 2023 due to lower gains on asset dispositions, while operating expenses and interest expense increased - The $16.2 million decrease in Q2 2023 net income was most notably due to a $14.9 million decrease in the gain on disposition of assets compared to Q2 2022[152] - For H1 2023, interest expense increased by $1.2 million year-over-year, attributed to higher interest rates on the company's debt[160] Liquidity and Capital Resources The company maintains sufficient liquidity through cash, operating cash flow, asset sales, its credit facility, and remaining ATM program capacity - As of June 30, 2023, the company had an outstanding balance of $50.0 million on its $250 million revolving Credit Facility, leaving $200.0 million available[163] - The company believes it has sufficient liquidity from cash on hand, operating cash flow, asset sale proceeds, its ATM program ($109.5M remaining), and its Credit Facility ($200.0M available)[166] Non-GAAP Financial Measures (FFO & AFFO) The company reports Q2 2023 AFFO of $5.8 million ($0.37/share) and H1 2023 AFFO of $11.5 million ($0.73/share), both lower year-over-year FFO and AFFO per Diluted Share | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | FFO per Diluted Share | $0.37 | $0.47 | $0.72 | $0.97 | | AFFO per Diluted Share | $0.37 | $0.47 | $0.73 | $0.95 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, PINE is not required to provide disclosures about market risk for this item - As a smaller reporting company, PINE is not required to provide quantitative and qualitative disclosures about market risk[184] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[185] - No material changes were made to the company's internal control over financial reporting during the three months ended June 30, 2023[185] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings expected to adversely affect its business or financial condition - The company is not currently a party to any material legal proceedings[186] Item 1A. Risk Factors No material changes to the company's risk factors have been reported since its 2022 Annual Report on Form 10-K - No material changes to risk factors were reported since the company's 2022 Form 10-K[187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities but repurchased 23,889 shares for approximately $0.4 million during Q2 2023 Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 2023 | 19,134 | $15.22 | | June 2023 | 4,755 | $15.22 | | Total | 23,889 | $15.22 | Other Items (3, 4, 5, 6) Items 3, 4, and 5 of Part II are not applicable, while Item 6 lists the exhibits filed with the report - Items 3, 4, and 5 of Part II are not applicable[190]