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Real Estate - REIT - Diversified - NASDAQ - US
$ 1.8
-0.552 %
$ 9.76 M
Market Cap
-0.68
P/E
EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2021 - Q4
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Operator

Good morning, ladies and gentlemen, welcome to the Generation Income Properties Fourth Quarter and Fiscal Year 2021 Earnings Call. At this time, all lines have been placed in a list only mode. Please note that today's conference call is being recorded.

Replay information is included on March 17th press release, which can be found on the Investor Relations section of company's website at gipreit.com, along with the fourth quarter and fiscal year earnings release. I'll now turn the conference over to the company's Investor Relations representative, Mary Jensen. Mary, please go ahead. .

Mary Jensen

Thank you, Operator. Good morning, everyone. I’m joined this morning by David Sobelman, Chief Executive Officer; and Allison Davies, Chief Financial Officer. David will provide an overview of the company's growth strategy, business and capital markets activity, 2021 milestones and the 2022 outlook.

Allison will review our quarterly and year-end financial results and balance sheet.

Today's conference call includes forward looking statements and projections that reflect the company's current views with respect to among other things, our pipeline and planned acquisition activity, anticipated market size, expected consolidation in the industry, future events and financial performance.

These forward looking statements are subject to the inherent uncertainties in predicting future results and conditions.

Certain factors could cause actual results to differ materially from those projected in these forward looking statements, new risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect it. Therefore you should not place undue reliance on these forward-looking statements.

During this call, we will refer to FFO, core FFO, AFFO and core AFFO, which are each non-GAAP financial measures. Reconciliations and net income to the most comparable GAAP measures to these non-GAAP measures can be found in our earnings release or in the investor presentation available on our website.

We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward looking statements and projections including the risk factors included in our form 10-K for the 2021 fiscal year to be filed with the SEC.

As such it is important to note that management's comments include time sensitive information that may or may not be accurate as of today's date Friday, March 18th, 2022. Following management prepared remarks, the call will be open for your questions.

We request that you ask only one question and one follow-up to allow ample time for everyone to ask questions. If time permits, we will welcome you to re-queue, to ask additional questions. With that, I will now turn the call over to our Chief Executive Officer, David Sobelman. .

David Sobelman Chairman, Chief Executive Officer, President, Secretary & Assistant Treasurer

One, active property management, which includes dedicated tenant relations, and two maximize the value of the underlying real estate through diligent asset management. This is exemplified by the value of our ongoing asset analyses.

Through this process, we identified shifting demographics and market dynamics that revealed an opportunity to recycle capital. In the third quarter of 2021, we sold a 15,000 square foot Walgreens located in Cocoa, Florida for a gain of approximately $900,000.

We will use the proceeds to fund investments that are better aligned with our current investment strategy. This sale proved out our thesis of acquiring real estate with attractive underlying supply and demand fundamentals, strong credit tenants, and shorter term leases to drive all net asset value.

Through the second half of 2021 and into the new-year, GIPR has continued to execute on its external growth strategy. Since our September equity offering, we have acquired four properties at approximately $17.3 million, including one property that was part of an UPREIT transaction at an average, going in year one yield of 7.7%.

As of today, GIPR’s gross asset value, including the tenant in common, stands at approximately $61 million based on acquisition costs. Since December 31, we have closed on another three properties, which increase GIPR's gross asset value by 26%.

We continue to target single tenant real estate asset in markets and submarkets that display strong economic and socioeconomic drivers that help our tenants’ businesses thrive. With our in-house tenant relations and asset management capabilities. We are confident in our investment thesis, which we believe will generate long term value.

Last quarter, we said that we were on track to have the majority of the offering proceeds deployed. I'm pleased to report that the GIPR team achieved that goal, and we continue to develop a robust investment pipeline in various stages of negotiation and due diligence.

Our external growth drives greater efficiency in leveraging our fixed costs, but we must always be mindful of having the right resources in place to support continued growth. Moving on to our human capital. As you know, our part-time CFO, Rick Russell, and GIPR, decided it was time for the company to have a full-time CFO.

Rick has passed the baton to Allison Davies who joined us just a few weeks ago from Regency Centers, a $12 billion shopping center REIT. We are thrilled to welcome Allison to the team.

In her most recent role at Regency, she led a team of approximately 65 employees who work closely with the capital markets, joint venture initiatives, underwriting, as well as with the acquisitions dispositions teams.

Allison will pick up where Rick left off and lead the accounting, corporate finance and capital markets functions, working in concert with GIPR's Executive Management team and Board of Directors to establish GIPR as a best-in-class real estate investment trust.

We, again, thank Rick for his tremendous support in facilitating a smooth transition as well as all of his other contributions, not at the least obtaining our NASDAQ listing.

In addition to our executive team, we also expanded the skill sets of our Board of Directors by welcoming Gena Cheng as a new Independent Director, and will serve on the governance and compensation committees. With more than 20 years of experience in Real Estate, she has proven expertise in corporate strategy and capital markets.

Gina will utilize her extensive Wall Street and private equity industry expertise to help GIPR achieve its long-term goals. All of these changes are vital to positioning GIPR for future growth. As we move into 2022, our growth strategy remains squarely focused on a multifaceted approach.

First and foremost is continued external growth by adding properties to our portfolio through disciplined capital allocation and adhering to our investment principles.

Second is internal growth by increasing cash flows through contractual rent growth and carefully managing expenses while also looking for opportunities to increase any potential revenue sources within our current asset base.

Third is what I loosely refer to as infrastructure, attracting and retaining high caliber talent and developing first class internal systems and controls. And most importantly, of course is our stakeholders, as we are focused on expanding our shareholder base.

Our investment strategy is the driving force to differentiating us from others in our industry. The net lease sector certainly remains very active. Last year, the sector saw about $90 billion in transaction volume as reported by the Boulder Group, and yet, the sector remains highly fragmented.

Public net lease REITs comprised less than 10% of investors, thus private investors represent the vast majority who we believe rarely perform meaningful underwriting diligence. Moreover, those investors are often focused on securing long-term income streams and hence, ignore shorter lease duration opportunities.

We see this as an incredible opportunity for us to take advantage of a fragmented market by acquiring properties at attractive valuations, because they're often overlooked by the vast majority of net lease owners. With that, I'm delighted to turn over the call to our new CFO, Allison Davies..

Allison Davies

reduce outstanding mortgage debt by $3.9 million; pay off a $1.1 million related loan; redeem a $1.2 million redeemable non-controlling interest; and pay our common and operating unit distributions in addition to other corporate activities.

GIPR ended the year with $10.6 million in cash and cash equivalent, as well as $29 million of outstanding debt. With that, I'll turn the call back over to David. .

David Sobelman Chairman, Chief Executive Officer, President, Secretary & Assistant Treasurer

Before opening the call for your questions, I want to remind you that the name Generation Income Properties was derived from our ethos of generating income, not just for today, but for the generational long term.

It is our philosophy that the multi-generational families benefit from making decisions affecting not only those who begin the legacies, but those that come after. It also has been our goal to be a part of that effort for all stakeholders of GIPR. And we thank you for the confidence you have placed in us for your generations.

With that, operator, please open the call for questions. .

Operator

Our first question today is coming from Michael Diana from Maxim Group. Your line is now live. .

Michael Diana

Hey, thank you. Dave, you mentioned your pipeline for potential acquisitions is robust. Can you give us some feel for the state of the acquisition market right now in terms of availability what's going on with cap rates? Those sort of things. .

David Sobelman Chairman, Chief Executive Officer, President, Secretary & Assistant Treasurer

Good morning, Michael. It's good to hear from you. So multi-part question. What we are seeing is cap rates have compressed, about 100 basis points or so, and that is making it a challenging environment for most investors in today's market. However, like we noted, our cap rate for our new acquisitions, average cap rate for our new acquisitions, was 7.7%.

So, well above what we would consider a market cap rate for credit quality assets in today's market. We feel like our pipeline is robust, like you mentioned, and supportive of our capital requirements. .

Michael Diana

Is there any of your various property types or any of them more active than others in the market -- in the availability?.

David Sobelman Chairman, Chief Executive Officer, President, Secretary & Assistant Treasurer

Yeah, we are finding opportunities in the three asset classes in which we target, which are retail, industrial and office. So depending on the market, we focus on those to diversify our portfolio. .

Operator

We’ve reached the end of our question-and-answer session. I'd like to turn the floor back over to David for any further closing remarks..

David Sobelman Chairman, Chief Executive Officer, President, Secretary & Assistant Treasurer

We realize this is a crucial time in our company's history and at the threshold of a greater profile. In short, our work is just beginning, and we are focused on creating generational wealth as our company name implies. Thank you for joining us. Have a great weekend. And we look forward to speaking with you again next quarter. .

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today..

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