Good morning, ladies and gentlemen. And welcome to the Generation Income Properties Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. Please note that today’s conference call is being recorded.

Replay information is included in our March 17th press release, which can be found on the Investor Relations section of the company’s website at gipreit.com, along with the fourth quarter and fiscal year earnings release. After the speaker’s prepared remarks, there will be a question-and-answer period.

[Operator Instructions] I will now turn the conference over to the company’s Chief of Staff, Emily Cusmano..

Thank you, Operator, and good morning, everyone. I am joined today 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 activities, 2022 milestones and 2023 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 may refer to FFO, core FFO, AFFO and core AFFO, which are each non-GAAP financial measures.

Reconciliations of net income, the most comparable GAAP measure 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 2022 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 only be accurate as of today’s date, Tuesday, March 28, 2023. Following management’s prepared comments, 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 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..

Thank you, Emily. Good morning, everyone. And thank you for joining Generation Income Properties year-end earnings call. In a few minutes, Allison Davies, our CFO, will be reviewing our financial results for 2022.

Until then, I’m happy to report that our patients proved to be a good strategy for our shareholders as we’re now showing meaningful signs of the net lease market leading more towards our favor and pricing of assets is expected to allow us to more actively grow our company.

However, before we recount some of the milestones we accomplished in our first full calendar year as a NASDAQ company, let us remind you of how GIPR differentiates itself from its net lease REIT peers.

As our name suggests, we not only generate income, but we think generationally, that translates into having an investment philosophy that puts the underlying real estate first. This increases the likelihood of both renewals with the current tenant and the ability to efficiently re-tenant an asset.

This protects our downside risk, as well as gives our shareholders the best chance to have stabilized and, hopefully, increasing rents from our properties.

Additionally, to create value for shareholders and stabilized assets, we seek out net lease properties that are typically overlooked by the majority of investors by targeting short-term leased properties.

By focusing on this segment of the market, we were able to purchase assets at what is traditionally a higher cap rate than the same assets with over 10 years remaining.

This, coupled with our active management of our portfolio allows us to increase value in the assets by recognizing rental rate increases quicker, extending the lease terms of our assets and gaining a deeper understanding of the specific sites performance.

As we all know, 2022 put an end to what was an ever-increasing bull market pertaining to net lease valuations. Public REITs suffered last year as they continue to today. But in the face of a tremendous adversity, we believe that GIPR is weathering these challenges well.

While the spike in interest rates led to the ultimate dislocation between seller’s pricing expectations and our underwritten valuation of assets and made us paused our acquisitions beginning in April 2022, we were by no means stagnant in our efforts to grow the company. Some of the milestones we achieved last year included 100% rent collection.

We averaged 3.5% same-property rent growth year-over-year. Our large portfolio refinance resulting in all debt for the portfolio being fixed at approximately 35% lower interest rates than today’s rates. Our $25 million debt commitment from American Momentum Bank remains in place and has a zero balance in order to opportunistically use when needed.

Our hands-on asset management and relational approach that we value proved to be beneficial with the increase in direct communication with our tenants. We added additional experience and governance to our accounting team by hiring a 15-year REIT accounting professional as our new CFO in addition to our first full-time corporate controller.

And we qualified as a REIT, as defined by the IRS, which has been a goal of ours since our inception. So the question that most people will have as it pertains to our short-term and long-term goals is, how does GPR grow? Subsequent to year-end measures, 2023 has proven to be somewhat of a launching pad for the company.

We had one tenant Maersk Shipping hold over in their space before they vacated, which provided us the opportunity to negotiate to its final form a lease with the Department of Defense funded contractor at an increased rental rate, which we hope to execute in the near term.

Additionally, we have executed an engagement agreement with Baird, one of the premier middle market investment banks to advise the company on implementing growth strategies in various forms.

Lastly, we recently signed a contract to purchase a retail asset occupied by an investment-grade credit tenant at a cap rate that correlates with today’s interest rates and is directly in line with our overall value investment thesis of well-located, high credit and shorter term net lease properties.

The portfolio remains stable and we are, as our investment thesis lends itself to consistently contemplating potential risks. Our 13 assets are well positioned in their specific markets and the tenant’s performance at these locations is providing them with ample revenue to continue paying their rents as originally planned.

The distribution between asset classes is currently 46% retail, 17% industrial and 36% office. We believe that a diversified high credit portfolio will be able to weather markets well.

While we’re not providing guidance for 2023, we hope we are clearly conveying that we are being patient, while working diligently to not only add value to our current portfolio, but also to externally grow by traditional acquisitions, contributions through our successful UPREIT program, our proven joint venture JV structure, as well as keeping our options open for alternative opportunities.

I and our Board believe that GIPR has set the proverbial table to capitalize on our long-term value investing strategy that has been working well since our inception. It will not come without some bumps in the road as we’re all experiencing now.

But as Charlie Munger, Vice Chairman of Berkshire Hathaway has stated in the past, I think, the record shows the advantage of a peculiar mindset, not seeking action for its own sake, but instead combining extreme patients with extreme decisiveness. With that, I’m pleased to introduce my colleague, GIPR CFO, Allison Davies..

Thank you, David. My first full year at GIPR has been eventful to say the least. While I’m adjusting to working with a small yet highly productive team, I can honestly say that my time here has been very fulfilling and fruitful. The path towards growth for the company is becoming increasingly clear and I’m honored to be a part of the story.

Last night, we issued a press release announcing our financial and operating results for the three months and 12 months ended December 31, ‘22. Net cash provided by operations for the year was $584,000, as compared to net cash used in operations of $173,000 in 2021. Same property NOI increased by 7% and rent growth was 3.1%.

This was driven by our resilient real estate portfolio with high credit quality tenants. We believe our tenant base and the well-located real estate assets that comprise our portfolio kept GIPR relatively insulated from shifting economic headwinds and potential impacts from future pandemics.

Nothing demonstrates this better than our portfolio’s occupancy and rent collections remaining steady at 100% throughout the COVID-19 crisis and through 2022. GIPR ended 22 with occupancy of 100% and a weighted average lease term of 5.3 years. We had one lease expired in January of 2023 and have no expirations through the remainder of the year.

This represents 7% of current annualized base rent. And as David mentioned earlier, we are finalizing a lease with a high quality Department of Defense contractor at higher rents, which clearly proves our ability to execute GIPR strategy.

Net cash used in investing activities for the year ended was $13.3 million, as compared to $3.9 million in 2021, as a result of our acquisition activity over the last two years, net of the sale of one asset.

Net cash generated by financing activities for the years ended December 31, 2022 and 2021 were $5.8 million and $13.6 million, respectively, highlighting our ability to raise capital even in this challenging market.

The refinance of the majority of our mortgage loans in April has certainly positioned us well considering the continued interest rate hikes. Additionally, with limited debt maturities in 2023, we can continue to focus on building our portfolio. With that, I will turn the call back to David..

Thanks, Allison. And with that, Operator, please open the call for questions..

Thank you. [Operator Instructions] Our first question today comes from Gaurav Mehta of EF Hutton. Please proceed with your question..

Thank you. Good morning. First question I wanted to ask you was on the 7% vacancy. You talked about finalizing a deal with DoD contractor.

Can you just maybe provide some color on the timing that you guys expect that deal to be finalized and the tenant to move in?.

Yeah. Good morning, Gaurav. We are very close to executing a lease on that and we feel really confident that the transaction will happen. We’re in direct communication with the prospective tenant on a regular basis, almost weekly, and we feel like we’re at the final end of getting that finalized..

Okay.

Second question, can you provide some color on the acquisition that you have under contract? Any color on the cap rate and how you’re looking to finance that acquisition?.

Sure. We -- it’s a Best Buy in Overland Park, Kansas. Cap rate is roughly 7.7%. We’ll be funding it 50% debt, 50% equity. You probably using some JV equity, like we mentioned, has been one of our growth strategies..

And so I guess for the debt, where do you think the intrastate would be?.

Yeah. That’s a great question. We’re definitely in the 6s right now and we’re hoping to lock that in as soon as possible. As we all know, interest rates for debt are a moving target these days..

Okay.

And lastly, can you provide some color on what your expectation is to cover your common dividend?.

Yeah. It’s absolutely a goal of ours. We’re doing everything in our power to have that happen as soon as possible, but that is 100% a priority for us..

Okay. Thank you for taking my questions..

Thank you..

[Operator Instructions] Our next question comes from Michael Diana of Maxim Group. Please proceed with your question..

Hi, David.

Can you hear me?.

Yeah. I can..

Okay. Great. Yeah. So quarter-over-quarter the rental revenue was down.

Was that because of the expiration of the lease or?.

Quarter-over-quarter, yes, that would be related to the expiration of the lease that actually happened in Q1, though. So that would be part of our Q1 results..

Okay. Okay. All right.

And then the interest expense was up and what did that relate mainly to?.

We have an additional guarantee, the expense that we incur part of DoD Security or part of DoD agreement to provide -- guarantees the expense. So it’s just a little bit more six months every quarter..

Okay. Great. Okay. Thank you..

[Operator Instructions] There appears to be no additional questions at this time. I would like to hand it back to....

Thank you, Operator. Yeah. Thank you, Operator, and thank you for listening to the Generation Income Properties year-end earnings call..

This concludes today’s conference. You may disconnect your lines at this time and thank you for your participation..