Alpine Income Property Trust, Inc. (PINE) is a real estate investment trust (REIT) that owns and operates a high-quality portfolio of commercial net lease properties. The company has a track record of delivering consistent growth and shareholder value since its initial public offering in 2019.
Business Overview and History Alpine Income Property Trust was formed as a Maryland corporation on August 19, 2019, and went public through an initial public offering (IPO) on November 26, 2019. The company is externally managed by Alpine Income Property Manager, LLC, a wholly owned subsidiary of CTO Realty Growth, Inc. (CTO), a publicly traded diversified REIT. All of PINE's executive officers also serve as executive officers of CTO, and one executive officer and director of PINE, John P. Albright, also serves as an executive officer and director of CTO.
The company's primary focus is on acquiring and managing commercial net lease properties, which are generally leased to tenants under long-term agreements that require the tenant to pay for property operating expenses such as taxes, insurance, and maintenance. The company's portfolio consists of 133 properties across 34 states, totaling 3.6 million square feet of gross leasable area as of September 30, 2024.
PINE's investment strategy is centered on targeting tenants in industries that are favorably impacted by macroeconomic trends, such as consumer spending, stable employment, and positive consumer sentiment. The company also seeks to invest in properties that are net leased to tenants with attractive credit profiles, stable operating histories, and rents at or below market rates.
In addition to its property portfolio, PINE also invests in commercial loans and investments, which accounted for 15% of its total assets as of September 30, 2024. These investments are generally secured by real estate or the borrower's pledge of ownership in an entity that owns real estate. As of September 30, 2024, the company's commercial loans and investments portfolio had a total carrying value of $86.5 million and was comprised of five construction loans, one mortgage note, and three properties acquired pursuant to a sale-leaseback transaction whereby the tenant has a future repurchase right.
Financial Performance and Ratios Alpine Income Property Trust has demonstrated strong financial performance in recent years. For the most recent fiscal year, the company reported total revenue of $52.2 million, with a net income of $3.29 million. Operating cash flow (OCF) for the year was $21 million, while free cash flow (FCF) stood at $4.3 million.
In the most recent quarter, PINE reported revenue of $13.8 million, representing a year-over-year growth of 16.6%. The increase in revenue was primarily attributable to an increase in reimbursable revenue. However, the company reported a net loss of $958,000 for the quarter, primarily due to a provision for impairment related to the company's commercial loans and investments. Operating cash flow and free cash flow for the quarter both stood at $4.6 million.
For the nine months ended September 30, 2024, the company reported total revenue of $38.4 million, including $34.5 million in lease income and $3.6 million in interest income from commercial loans and investments. The company's net income for this period was $3.3 million.
PINE's financial ratios as of September 30, 2024, include a debt-to-equity ratio of 1.12, a current ratio of 0.23, and a quick ratio of 0.23. The company's interest coverage ratio was 1.24, indicating its ability to cover its interest expenses.
Liquidity In terms of liquidity, PINE had $28.1 million in cash and cash equivalents, including $25.5 million in restricted cash, as of September 30, 2024. The company also had $95 million in total liquidity, consisting of $5 million in available cash and $90 million in available capacity under its revolving credit facility. As of the most recent report, PINE had $2.6 million in cash and $53.5 million available under its $250 million revolving credit facility.
Investment Activity and Portfolio Composition During the nine months ended September 30, 2024, PINE acquired six properties for a combined purchase price of $53.1 million, at a weighted average cash capitalization rate of 7.6%. The company also sold 10 properties for an aggregate sales price of $55.2 million, generating $4.3 million in gains on disposition.
As of September 30, 2024, PINE's property portfolio was 99% occupied, with a weighted average remaining lease term of 8.8 years. The portfolio is diversified across 34 states, with the top three states by square footage being New Jersey (12%), Michigan (12%), and Ohio (11%).
The company's tenant base is also well-diversified, with its top two tenants being Dick's Sporting Goods (10% of annual base rent) and Lowe's Home Improvement (10% of annual base rent), both of which have investment-grade credit ratings.
Business Segments Alpine Income Property Trust operates in two primary business segments: income properties and commercial loans and investments.
The income properties segment consists of lease income from PINE's portfolio of income-producing real estate properties. This segment accounted for 79% of the company's identifiable assets as of September 30, 2024, and 90% of its consolidated revenues for the nine months ended September 30, 2024. The rental arrangements for PINE's income property portfolio are classified as operating leases, with PINE recognizing lease income on a straight-line basis over the lease terms.
The commercial loans and investments segment consists of interest income generated from a portfolio of commercial loans and investments. During the nine months ended September 30, 2024, PINE originated several new commercial loans, including a $7.2 million construction loan, a $6.1 million construction loan, and a $17.8 million construction loan, as well as acquiring three properties through a sale-leaseback transaction for a total of $31.4 million. The interest income from this expanded commercial loans and investments portfolio totaled $3.5 million for the nine months ended September 30, 2024, compared to $0.1 million for the same period in 2023. This segment accounted for 15% of PINE's identifiable assets as of September 30, 2024.
Guidance and Outlook For the full year 2025, PINE provided initial earnings guidance of $1.70 to $1.73 per diluted share for both funds from operations (FFO) and adjusted funds from operations (AFFO). This guidance assumes investment volume of $50 million to $80 million, dispositions of $20 million to $30 million, and weighted average shares outstanding of 16 million to 16.5 million.
The company's guidance also factors in the potential impact of the Party City bankruptcy and the vacant theater in Reno, which are expected to reduce 2025 FFO and AFFO per share by approximately $0.08. However, PINE noted that if the Party City lease is assumed, and the company successfully executes on planned property acquisitions and loan originations, it could be on the high end of its guidance range or potentially exceed it.
In 2024, PINE achieved AFFO of $0.74 per diluted share, representing growth of 17% from the prior year. The company also raised its common dividend to a new quarterly rate of $0.285 per share, effective the first quarter of 2025. This new annualized dividend of $1.14 continues PINE's achievement of increasing its annual dividend each year since its IPO in November 2019.
Risks and Challenges Like any REIT, PINE faces risks such as changes in economic conditions, tenant bankruptcies, and volatility in the real estate and financial markets. The company's reliance on debt financing and sensitivity to interest rate movements could also pose challenges, particularly in a rising rate environment.
Additionally, PINE's commercial loan portfolio introduces credit risk, which the company mitigates through its underwriting process and ongoing monitoring. The company's geographic concentration in certain states, such as New Jersey, Michigan, and Ohio, could also expose it to regional economic fluctuations.
The Party City bankruptcy and the vacant theater in Reno are two specific challenges that PINE is currently navigating, as these properties are expected to have a short-term negative impact on the company's earnings.
Conclusion Alpine Income Property Trust has established itself as a well-diversified and well-managed REIT, with a focus on delivering consistent growth and shareholder value. The company's investment strategy, which balances investment-grade tenants and higher-yielding opportunities, has positioned it for continued success. While PINE faces some near-term headwinds, the company's robust financial position, experienced management team, and disciplined approach to capital allocation suggest it is well-equipped to navigate the challenges and capitalize on future opportunities. The company's performance is closely tied to the broader commercial real estate market and economic conditions, and as a small-cap REIT operating exclusively in the United States, it remains sensitive to domestic market trends and fluctuations.