PINE - NYSE

Good day, and thank you for standing by. Welcome to the Alpine Q4 Year-end 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jenna McKinney, Finance Director. Please go ahead.

Thank you. Joining me and participating on the call this morning are John Albright, President and CEO; Philip Mays, CFO; and other members of the executive team who will be available to answer questions during the call. As a reminder, many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q and other SEC filings. You can find our SEC reports, earnings release and most recent investor presentation, which contain reconciliations of the non-GAAP financial measures we use on our website at www.alpinereit.com. With that, I will turn the call over to John.

Thank you, Jenna, and good morning, everyone. We are pleased to report a strong fourth quarter highlighted by 22.7% growth in AFFO per common share and $142.1 million of investments to complete an annual record of $277.7 million of investments for 2025. This record annual investment volume consisted in driving 8.6% growth in AFFO per common share for the full year 2025. Beyond investment volume, we successfully executed on all areas of our business plan during the year. Specifically, as it relates to property acquisitions, during the fourth quarter, we acquired 8 properties for approximately $40 million at a weighted average initial cash cap rate of 6.9%. For the full year, we acquired 13 properties for $100.6 million at a weighted average initial cap rate of 7.4% and Notably, these acquisitions are representative of our strategic barbell approach to acquisitions. It included investment-grade rated tenants such as Lowe's and Walmart, plus higher-yielding property investments like the headquarters and manufacturing facility for Germ-free labs. Alongside this 2025 acquisition activity in the fourth quarter, we also continue to successfully execute our strategic recycling plan, selling 9 noncore properties for $38.4 million at weighted average exit cap rate of 7.7% and bringing property disposition volume for the full year 2025 to $72.8 million, consisting of $67.4 million of income-producing properties at a weighted average exit cap rate of 8% and $5.3 million related to vacant properties. As a result of this combined 2025 property portfolio activity, 51% of our ABR is now generated from investment-grade-rated tenants. Notably, Lowe's, Dick's Sporting Goods and Walmart are now all within the top 5 tenants, collectively representing 29% and of our ABR. Further, Walgreens currently represents 4% of ABR and has fallen to our ninth tenant with only 5 remaining locations in our portfolio. More broadly, at year-end, our property portfolio consisted of 127 properties, totaling 4.3 million square feet across 32 states with a WALT of 8.4 years and 99.5% occupancy. Now moving to the exciting growth in our commercial loan portfolio. As a result of our long-standing reputation and deep industry relationships, we continue to see and capitalize on compelling opportunities to originate high-yielding commercial loans with quality sponsors at attractive risk-adjusted returns. During the fourth quarter, we originated 5 commercial loan investments and amended one commercial loan totaling a combined $102.3 million of commitments at a weighted average initial coupon of 13.5%, bringing our full year to $177 million of commercial loan originations at weighted average initial coupon of 12%, including paid-in-kind interest when applicable. The high-quality real estate projects underlying these loans are located in major MSAs, supported by strong sponsors and have been many years in the making, and we are excited to be a part of these projects. Additionally, during the fourth quarter, we sold a $10 million senior interest in our previously announced commercial loan secured by a luxury residential development located in Austin, Texas metropolitan area. This sale reduced concentration in one of our largest commercial loans. From time to time, we will likely consider additional sales of senior interest in larger loan investments to efficiently manage diversification while enhancing the yield of our net interest. At year-end, our net commercial loan portfolio was approximately $129.8 million, up from $48 million at the beginning of the year highlighting the significant scale and momentum captured by our platform during the past year. Additionally, we are targeting our commercial loan portfolio to generally run at approximately 20% of our total undepreciated asset value complementing our property portfolio investments and increasing our overall yield on our total assets, although timing of funding and repayments of loan investments may vary quarter-to-quarter. Combined, completed property acquisitions and loan originations were approximately $142.1 million for the fourth quarter at a weighted average initial yield of 11.7% and $277.7 million for the full year at a weighted average initial yield of 10.3%. The $277.7 million of investments completed was our most productive year in our company's history. To support this level of investment activity, we've not only generated capital through strategic asset sales, but also opportunistically access the capital markets. In November, we issued a $50 million of a new Series A preferred stock with an 8% coupon. Additionally, late in the fourth quarter of 2025, early in the first quarter of 2026, we utilized both our common ATM and the Series A preferred ATM programs raising the combined $18.3 million of equity. Lastly, as we look to 2026, we're excited about the outlook for the company. We believe our investment activity, equity raises and recent debt refinancings for which Phil will provide more details, have positioned the company well as we start the new year. Further, our Board recently decided to increase our quarterly common dividend per share of 5.3% to $0.30 per share beginning in the first quarter of this year. And with that, I will turn the call over to Phil.

Thanks, John. Beginning with a quick summary of financial results. For the fourth quarter, total revenue was $16.9 million, including lease income of $12.7 million and interest income from commercial loan investments of $4 million. Both FFO and AFFO attributable to common stockholders for the quarter were $0.54 per diluted share, representing 22.7% growth over the comparable quarter of the prior year. For the full year, total revenue was $60.5 million, including lease income of $48.7 million and interest income from commercial loan investments of $11.4 million. FFO and AFFO attributable to common stockholders were $1.88 and $1.89 per diluted share, respectively, representing approximately 8.6% growth over the prior year. Earnings growth for the quarter and the year was primarily driven by the investment activity John discussed, combined with disciplined balance sheet management. Moving to the balance sheet. Similar to our investment activity, we had significant amount of capital markets activity in the fourth quarter of 2025 and early in the first quarter of 2026. First, on November 12, we completed a public offering of 2 million shares of Series A preferred stock at a price of $25 per share with an 8% coupon. This preferred offering resulted in $50 million of gross proceeds before deducting the underwriting discount and other operating expenses with net proceeds totaling $48.1 million. We supplemented the preferred offering proceeds with a modest amount of issuance under both our Series A preferred and common equity ATM programs. Beginning with our preferred ATM program. From late fourth quarter to early in the first quarter of 2026, we issued just over 116,000 shares of our Series A preferred stock at a weighted average price of $24.92 per share for total net proceeds of approximately $2.8 million. Likewise, during this time, under our common stock ATM program, we issued just over 918,000 shares at a weighted average price of $17.13 for total net proceeds of approximately $15.5 million. Additionally, earlier this week, we closed a new unsecured credit facility and completely recast the company's unsecured debt. The new credit facility consists of a $250 million revolving credit facility with an initial term of 4 years with two 6-month extension options, a $100 million 3-year term loan, and a $100 million 5-year term loan. The proceeds from the new credit facility were used to fully repay and retire the company's prior revolving credit facility and term loans, resulting in the company now having no debt maturities for 3 years. Further, pricing for borrowings under the new credit facility improved by 10 to 15 basis points, and it provides for more flexibility and borrowing capacity related to our commercial loan investments. Please see our recent press release related to this credit facility for more details. We ended the year with net debt to pro forma adjusted EBITDA of 6.7x compared to 7.4x at the beginning of the year. Additionally, we had $65.8 million of liquidity, consisting of approximately $25.3 million of cash available for use and $40.6 million available under our revolving credit facility. However, with in-place bank commitments, the availability under our revolving credit facility can expand by an additional $31.4 million as we acquire properties and fund commercial loans providing for total potential liquidity of $97.3 million at year-end. Summarizing our investments at year-end, our property portfolio had annualized base rent of $46.2 million on a straight-line basis and our net commercial loan portfolio had loans with an aggregate face amount of $129.8 million at a weighted average coupon rate of 12.4%. One additional note regarding our commercial loan portfolio. Two loan investments totaling $7.2 million at year-end with a weighted average coupon rate of approximately 11.5% were repaid in January of 2026. Additionally, as we noted previously, our property portfolio includes approximately $3.8 million of ABR related to 3 single-tenant restaurant properties acquired in 2024 through a sale-leaseback transaction. Although these properties constitute real estate for both legal and tax purposes, GAAP requires them to be accounted for as a financing. Accordingly, current annual cash payments of approximately $2.8 million are reflected as interest income rather than lease income. To provide more information about this matter and our commercial loan program, we have added additional disclosures to our press release including the supplemental table providing details for both the loan portfolio and related interest earnings. We hope you find this additional information helpful in understanding our investments. Now turning to our 2026 outlook. Our initial earnings guidance for the full year of 2026 is $2.07 to $2.11 for FFO per diluted common share and $2.09 to $2.13 per AFFO per diluted common share. Key assumptions reflected in our initial guidance include investment volume of $70 million to $100 million, and disposition volume of $30 million to $60 million. I do want to note that our 2026 guidance and growth in earnings reflects dispositions generally closing earlier than acquisitions. Furthermore, our revenue for 2025 included $221,000 in the fourth quarter and $525,000 for the full year related to fees we receive for managing and selling the third-party properties that supported our portfolio loan. During the fourth quarter of 2025, substantially all these third-party assets were sold and the portfolio loan was repaid in full. Accordingly, these fees will not be a significant source of revenue in 2026. One last note. As John discussed, the Board has increased our quarterly common dividend to $0.30 per share beginning in the first quarter of 2026. Even with this increase, our dividend remains well covered. Specifically, this new quarterly common dividend rate represents just a 56% AFFO payout ratio computed on AFFO for the fourth quarter of 2025. With that, operator, please open the call to questions.

[Operator Instructions] And our first question will be coming from Michael Goldsmith of UBS.

First question on the loan portfolio. It looks like you set kind of an upward boundary of 20% of the portfolio. So can you just talk a little bit about how you came to setting it at that level? I guess, where the loan portfolio steps today, stands today relative to that and then just how much more you can do to kind of hit that max? And if you expect to hit that this year?

Yes. Michael, this is John. I think that really on 20% I felt like that was a reasonable number, and I'm making it too large, of course. And something that obviously is complementary to the company and the business. So it's really not incredibly magic number, but it's low enough where it's not a distraction to our investors and enough to be interesting investments for sure. And so I'll let Phil talk about kind of where we are. But as you could see from Phil's comments that we've already had a couple of loans repay. And so that will continue as we do find sources for new investments as well.

Yes, Michael. So probably the easiest way to think about kind of where we stand in the runway is, John mentioned 20% of total undepreciated assets. So end of the year, that would have been $770 million, so 20%, $155 million, $160 million. The portfolio had $130 million or so outstanding. So kind of runway for another $25 million, $30 million on top of opposite outstanding at the end of the year.

And then my follow-up is you continue to reduce your exposure to some of the tenants that aren't in favor. Walgreens has moved considerably down the list, I guess, just where do you stand with that? Is there more work to do? Are you happy with where you're at? Just trying to get a sense of are we at the end of that activity? Or is there just a little bit more to do?

Yes, there's definitely a little more to do, and we're actively on selling an additional Walgreens now. And so we'll continue chipping away at it, and it will be gone at some point. But now that we've gotten it way down the list is not as sort of like super focused on it. We just want to take our time and find the right buyers and not just sell it, just to sell it. So we'll take the cash flow and be prudent about selling them, but we're working on continuing that sales process.

And our next question will be coming from Jay Kornreich of Cantor Fitzgerald.

I guess just following up on that first question about the 20% threshold for the loan investments. That's really been such a strong source of growth for you guys and continues to be -- and as a large swath of the investments this past year was focused on that. So I guess, even though you've outlined how much more room you have to 20%, I mean, why not push much greater beyond that 20% threshold? Do you guys, I guess, consider doing that? Do you want to do that as you think about your opportunities in 2026?

No, I don't think we -- I mean certainly we could. I mean there's enough volume out there, but it's really not wanting to flip the script, if you will, as far as our primary sources business, which is the net lease properties, core properties. So this business has been fantastic. It gets us deeper into developer relationships and tenant relationships and it provides us a source of future net lease investments. And it's very much complementary, but I don't want it to be sort of a distraction.

I appreciate that. And then just one follow-up. You talked about some of the capital raising you did in the fourth quarter. And I guess I wanted to talk about the $10 million on the ATM that you adapt. And just curious about how you think about deploying more equity capital at these current stock prices I guess, assessing your cost of equity. I'm assuming that's really being more used for the higher-yield divestment loans. So just curious how you think about deal spreads relative to your cost of capital versus the investment loans, just how you target that and think about issuing more.

Yes. I mean we'll be prudent about it. But clearly, as you mentioned that most of it is to fund these highly accretive investments. And so even though the stock price is not kind of where we'd like it, it does work, the math does work. And certainly, as you've seen with many companies that investors seem to have a lot more interest in companies where there's more liquidity and ability. And so a lot of -- you think about it, we bought back a lot of stock last year. And we're, in essence, reissuing some of those shares. So it's not any sort of massive dilution sort of activity. It's just being prudent with funding some of these very accretive investments.

And our next question will be coming from Wesley Golladay of Baird.

Just a question on the dividend. You definitely raised it again. And when you think about that, is that mainly driven by the earnings growth that you have and having to pay out a dividend that's a little bit higher? And why not trying to retain more cash flow?

Phil, I'll let you address that.

Yes. So it was earnings growth but also just taxable income growth. So that kind of balanced the 2. I didn't catch the last part of your question there, Wes.

Just seeing why basically increased because you had to pay it out just because you're issuing stock here, just why not just retain more cash flow versus raise the dividend?

It's a lot of it's growth in taxable income. When you think about the loan portfolio, right, there's no depreciation that goes with that. So even though it's 20% of total assets and the properties make up more, there is no kind of tax cover or depreciation to go with it. So it does help drive taxable income up. So the raise was really just to kind of be where we need to be to pay out taxable income.

Got it. That makes sense. One question on the loan where you have the developer for the Phase I. Are you starting to see any lot sales there? And when can you expect to get repaid? And then a follow-up would be, would you expect the second loan to start funding before the first one starts paying off?

Yes. I mean the loan is already starting to be repaid as lot sales are happening. And it is going to the senior participation we sold off. And so I would not -- the loan that we have out now won't be fully repaid by the time that the second portion is funded. But you can expect really the activity on the repayment will probably come more to us late spring. So it will really be going to the first mortgage sort of participation first.

And then I guess when you look at your pipeline of potential loans, what are you seeing in there? I mean you have a big residential loan here. Do you have other sectors that you're looking at, does it diversify it a bit?

Yes. So we're really pleased with the pipeline for sure. We're talking about more kind of grocery-anchored development and also investment-grade credit development with terrific tenants and new relationships. It's old relationships with new relationships for Pine. And so we're very excited as we continue to work on the pipeline. So more to come.

And our next question will come from R.J. Milligan of Raymond James.

Just wanted to follow up on the loan book. John, longer term, as some of these loans are paid off, do you expect to continue to redeploy that capital and maintain that 20% allocation over the next several years? Or do you expect that to come down over time?

Thanks, RJ. No, we intend and see the opportunity to keep it at that 20%. The pipeline is very strong right now. So as loans burn off, they will be -- we fully intend them to be refilled.

Got it. So this is a longer-term 20% allocation part of the Pine strategy?

Correct.

Great. And then, Phil, I just had -- wanted some housekeeping on fourth quarter. Obviously, a pretty big number and beat relative to consensus. I think there may have been some onetime items in the fourth quarter. I was wondering maybe you can sort of talk about those and sort of how we get to a good run rate going into first quarter of this year?

Yes. Thanks, RJ. There are several onetime items in there. And just a good way to see it is when we -- in one of our schedules, the debt to EBITDA, we have a line item that says nonrecurring items in there, and it was a little over $300,000 for the quarter. That's primarily the management fees that I talked about on my prepared remarks that are going away and then also prepayments only we got from one of the loans that paid off early, that made up that 300-and-some thousand. So that's a couple of cents that nonrecurring. And then also keep in mind, the fourth quarter doesn't have the full burden of the prep outstanding and the management fee that goes with that. So the $0.54, if you take it down for all those items, you're probably at $0.50, $0.51 on a run rate at the end of the quarter.

And our next question will be coming from Gaurav Mehta of Alliance Global Partners.

I wanted to follow up on the balance sheet and wondering if you would comment on your leverage expectations in 2026?

I mean we're pretty happy with where we currently stand. And we're in a nice pricing tier on our debt. So I think kind of where we're currently at is about where we expect it to run for the year. But obviously, that depends on the opportunities we see.

Second follow-up on the investment opportunities. In the prepared remarks, you commented on falling a barbell approach in '26. Just wondering if you could comment on, I guess, the opportunities that you're seeing both on the investment and non-investment grade part of the portfolio for acquisitions?

Yes. We're very excited about some of the opportunities we see on the net lease side, where we had the ability to possibly bring in new investment-grade credits further up into the top 5, top 10 tenancy. And so we're really focused on that. And so we have a good portfolio that opportunities that we're looking at right now. So pretty excited about the composition of the net lease portfolio this year.

Our next question will be coming from Jason Weaver of Jones Trading.

Congrats on a big year in '25. First, on the acquisition and disposition guide, which is down a lot versus '25 with the capital base growing. Is there anything we can read into that, just taking from a point of conservatism? Is it some sort of hesitance about market conditions? Or is there something else that is out there?

Yes. We just want to be really have a cadence that something we feel very, very comfortable hitting without having such a big number that you feel like you're forced into buying things that maybe you're not too excited about. So we just want to be real careful on curating a super strong portfolio and not being forced into more commodity assets.

Got it. That's fair enough. And then next, I wonder if you can clue us into the expected funding mix on any new investments and as well as the unfunded commitments, whether that will be done with some combination of ATM draw versus credit facility credit facility drawdown. And sort of what mix thereof are you looking to target?

I'll just kind of start off and let Phil dive deeper. But clearly, our mix in the past probably is somewhat reflective of what's going to be in the future. And that's still recycling, still selling down noncore sort of credits and using that for investments. And then obviously, we talked about a little bit of the loans naturally maturing and paying off. But then there'll be a mix of perhaps the ATM and the line, but keeping everything pretty modest.

And our next question will be coming from Craig Kucera of Lucid Capital Markets.

Phil, you included the PIK interest earned in AFFO, and I understand that makes sense this quarter because there was hardly anything that wasn't collected in cash. Is that your expectation for the foreseeable future?

Yes, I think we'll stick with that. What we also did, Craig, just to be clear on how much PIK is in there at the bottom of the table, we added a schedule that shows the cash interest and the PIK interest, and we'll continue to also include that. So you'll know exactly what is included. But just felt like that was an easier way to go.

Yes. No, that was helpful. I did see that. changing gears in your discussions with your developers that still have unfunded commitments, do you expect those guys to pull down most of that capital in 2026? Or I know a lot of those loans mature later in '27 and even '28, but just some thoughts on that?

Yes. We fully expect that those will be drawn down for sure. It's part of the project. And as the project gets going, that's fully kind of specified for those needs.

And in the schedule of your commercial loans, you mentioned that Phase 2 in Austin has some conditions that are unmet. Can you give us some color on what that is and when you think those conditions might be met and the loan is funded?

I'll let Phil answer that.

Yes. So on the funding, probably 2Q. But keep in mind, as with the first phase, we sold off our participation of $10 million. So just kind of using round numbers. The first phase was $30 million. The second phase is $30 million. we sold off a participation already for $10 million. There's likely to be another sell on that. And so altogether, we might sell off another $10 million, $20 million, so the net hold might be closer to half. But yes, probably late first quarter, early second quarter, for the second phase funding and simultaneously with that, we'll also probably have some participation out of 10 or 20, somewhere in that range.

Got it. So that's in the guidance then?

Yes.

Appreciate that. And I guess when that first phase was initially structured, I think it was 17% for like 6 months and then dropped to 16% for 6. Once you sold that participation interest it's now yielding north of 20%. Can you walk us through the math of how it adjusts net of the participation interest? Is there any change in the way that, that loan is going to roll down?

The participation interest has a constant rate of 10%, and that hyperamortize so that gets repaid first, and then we get repaid second. Is that helpful?

Yes. I'll probably just circle back to you offline just to make sure I'm getting the math right. And finally, you did mention you amended the loan this quarter. Was that just a loan extension? Or can you just give us some additional color on that loan?

Yes, it was just an extension.

Our next question will come from John Massocca of B. Riley Securities.

So maybe just going back to guidance a little bit. What's kind of the -- be kind of broad ranges, but expected yield on the investment volume you're kind of putting into guidance? And I guess, kind of implied in that question is how do you see the mix in that expected volume being demarked between structured investments versus net lease investments?

I think on the loan side, I talked earlier about the runway being $25 million to $30 million, and look, it could bounce around a little bit depending on when draws happen, when fundings happen and repayments. But out of that, out of the guidance, you should expect about that much to come from the loan side, and that will probably ramp up over the first half of the year. And then the balance of the guidance you can expect to be on the property side.

And kind of where do you think that puts you from a yield perspective? Or where do you think yields are today for structured loans and the type of net lease investments you're looking at?

Yes. So the -- in the current book and what's expected to fund...

The yields -- the loan yields really are not too dissimilar to what we've done in the past. So there's no really tightening in the market, if you will even though there's a lot of capital out there, as we all know. It's just that the flexibility structure and the quickness of how we can react to opportunities leads to a little bit higher rates that we're able to achieve.

Yes. The rate at the end of the quarter is a decent rate to use for the balance of the year.

And I guess on the net lease side, kind of where are you seeing cap rates today? I know you closed something subsequent to quarter end at an 8.5%. But is that maybe a little higher than what your target in the market today? Or is that kind of indicative of what you can invest at?

On the more investment grade sort of properties that we've been looking at, that will be lower than what we just did on that acquisition in Aspen. But very similar to the Sam's Club we purchased and so forth. So I would say, on cap rate direction, certainly, for quality properties is still very tight. But a lot of the investments we have made in the past in the past 5 years, we'll look at really strong real estate, very strong MSAs and maybe have a shorter lease duration where the likelihood of a tenant renewing is very high because the rental rates they're paying are very, very low. So they're almost like covered land plays, and we can get those at obviously higher yields than if it was like a fresh 15-year lease. And so that's where we like to play where we're picking up investment-grade credits in large MSAs that way below market interest rates. And so those cap rates will still be similar to kind of what we did last year as well.

I appreciate that color. And then maybe on the -- you mentioned it in the context of the Austin structured investment. But are there opportunities for more participation interest sales on other structured loans in the portfolio or other deals that may be your kind of contemplated in guidance?

I mean we could sell off a lot if we wanted to, but we -- I mean, they are fantastic loans, and we'd rather hold them all, but we will certainly sell senior participations to fund activity if we need to.

I guess as it pertains to kind of like you're seeing the world today, it's often is going to be primarily where that comes from?

I'm sorry, I missed that last point. Can you say it one more time?

We just -- I mean you mentioned kind of what you were expecting to do on the participation interest sales side with the Austin structured investment. Is that kind of all that's really contemplated as we stand today?

As we stand today, and that's really -- we're really doing it as an accommodation for them coming in early on. Otherwise, you wouldn't even want to sell that participation. But certainly want to be good counterparties and keep that participation investor there in case we'd like to do another one.