Alpine Income Property Tr reports 4.5% AFFO growth in Q3, raises 2025 earnings outlook amid strategic investments

OPERATOR - (00:01:23)

Good day and thank you for standing by. Welcome to the Alpine Income Property Tr Q3 earnings call. @ this time all participants are in a listen only mode. After the speakers' presentation, there'll be a question and answer session. To ask the question during the session, you'll need to press Star one one on your telephone. You will then hear an automated message device if your hand is raised. To withdraw your question. Please press star 11 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jenna McKinney. Please go ahead.

Jenna McKinney - (00:01:52)

Thank you. Joining me and participating on the call this morning are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer and other members of the executive team that 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 10K, Form 10Q 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.alpineincome.com. with that, I will turn the call over to John.

John Albright - President and Chief Executive Officer - (00:02:50)

Thank you Jenna and good morning everyone. We are pleased to report another strong quarter highlighted by AFFO per share growth of 4.5% compared to the same quarter last year and meaningful investment activity both during and shortly after the quarter end. We believe this investment activity has set a foundation for continued earnings growth through the remainder of 2025 and into 2026. Starting with our investment activity during the quarter we acquired two properties ground lease to Lowe's for $21.1 million at a weighted average initial cap rate of 6% and a weighted average lease term or Walt of 11.6 years. Investment graded Lowe's is now our largest tenant by AVR surpassing investment grade rated Dick's Sporting Goods which Now ranks number two year to date. Through the third quarter property acquisition volume totaled $60.8 million at a weighted average initial cap rate of 7.7% in a WALT of 13.6 years. Regarding the property dispositions during the quarter we sold three assets for 6.2 million, including an advanced Auto parts our vacant theater in Reno in a vacant property formerly leased to a convenience store year to date disposition volume through September 30 was 34.3 million, of which 29 million excluding vacant properties was sold at a weighted average exit cap rate of 8.4%. As of quarter end, our property portfolio consisted of 128 properties totaling 4.1 million square feet across 34 states with approximately 99.4% occupied with 48% of ABR derived from investment grade rated tenants and a wallet of 8.7 years. Additionally, after the quarter end we acquired a 4 property portfolio for 3.8 million with a weighted average initial cap rate of 8.4% and went non-refundable on a sales contract of one of our eight remaining Walgreens store for 5.5 million. Now moving to our loan investments as a result of our long term reputation and deep relationships, we continue to see and capitalize on exciting opportunities to originate high yielding quality loans with strong sponsors at compelling risk adjusted returns. During the quarter we originated two loans and one upsized loan totaling 28.6 million at a weighted average initial yield of 10.6%. This included a first mortgage loan for industrial redevelopment and a seller financing note related to the sale of our former theater in Reno. Year to date through September 30, we originated 74.8 million of commitments for loan investments at a weighted average initial cash yield of 9.9%. Additionally, as disclosed in our earnings release, we have originated three loans since the quarter end, most notably a first mortgage loan secured by a luxury residential development located in Austin, Texas metropolitan area. Under this loan agreement we have funded 14.1 million at closing related to a phase one loan with a total commitment of 29.5 million. The loan agreement also provides for phase two loan with a commitment of up to 31.8 million. All additional funding is subject to the borrower satisfaction of certain conditions. Currently, we anticipate funding the balance of the phase one loan by year end and the phase two loan in early 2026. The 36 month loan initially bears interest at 17% inclusive of 4% paid in kind interest for the full loan term stepping down to 16% for months 7 to 12 and 14% thereafter. The loan will be repaid as collateralized home lots are sold with such sales anticipated to begin as early as late 2025. We believe this loan as all of our loans is secured by strong real estate backed by high quality sponsor. As is often the case with our larger loans, there is institutional interest in pursuing a purchase of a senior tranche of this loan and we currently anticipate participating a portion of it out to reduce our net hold and further enhance our yield. In summary, we believe that our recent investment activity across both property and loan investment positions pine for continued growth through the remainder of 2025 and into 2026. With that, I'll turn the call over to Phil.

Philip Mays - Chief Financial Officer - (00:07:29)

Thanks, John Beginning with financial Results for the third quarter, total revenue was $14.6 million, including lease income of $12.1 million and interest income from loan investments of $2.3 million. FFO and AFFO for the quarter were both $0.46 per diluted share, representing 2.2% and 4.5% growth, respectively, over the comparable quarter of the prior year. Year to date through September 30, total revenue was $43.6 million, including lease income of $36 million and interest income from loan investments of $7.4 million. FFO and AFFO were both $1.34 per share, representing 3.9% and 3.1% growth, respectively, over the comparable period of the prior year. Remember, regarding our common dividend as previously announced during the quarter, we declared and paid a quarterly cash dividend of 28 and a half cents. Our dividend represents an annualized yield of approximately 8.25% and remains well covered with an approximate AFFO payout ratio of 62% for the third quarter. Moving to the balance sheet, we ended the quarter with net debt to pro forma adjusted EBITDA at 7.7 times and $61 million of liquidity consisting of approximately $1.2 million of cash available for use and $60.2 million available under our revolving credit facility. However, with in place bank commitments, the available capacity on our revolving credit facility can expand an additional $31.3 million as we acquire properties providing total potential liquidity of more than $90 million. Regarding our property portfolio, we ended the quarter with annualized base rent of $46.3 million on a straight line basis. As noted before, this amount includes approximately $3.8 million of ABR related to three single tenant restaurant properties acquired in 2024 through a sales leaseback transaction under Generally Accepted Accounting Principles (GAAP), we are accounting for these specific sales leaseback transactions as financings. Accordingly, their current annual cash payments of approximately $2.9 million are reflected as interest income in our Statement of Operations as opposed to lease income. Given the level of loan activity after quarter end, let me provide a current update. Our loan portfolio as of today, reflecting the activity John discussed and some other recent activity, is now approximately $94 million at a weighted average interest rate of 11.5%. Notably, of this amount, approximately $21 million at a weighted average rate of 10.4% is scheduled to mature in 2026. We currently expect to utilize proceeds from these 2026 maturities selling a senior tranche and one or more loan investments, property dispositions and existing capacity on our revolving credit facility to fund loan commitments. One quick note. The $1.9 million impairment charge recorded this quarter relates to Walgreens that is currently under contract to be sold. Now turning to guidance. As a result of our recent elevated investment activity, we are increasing both our FFO and AFFO outlook for the full year of 2025 to a new range of $1 to $1.85 per diluted share from the previous range of $1.74 to $1.77 per diluted share. With that operator, please open the call to questions.

OPERATOR - (00:11:18)

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered or resume of yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q and A roster. Our first question comes from Michael Goldsmith with ubs. Your line is open.

Michael Goldsmith - Equity Analyst at UBS - (00:11:40)

Good morning. Thanks a lot for taking my questions. A lot of investment activity both during the quarter and subsequent to quarter end. So can you just provide a little color on how you're thinking about funding all of this activity?

John Albright - President and Chief Executive Officer - (00:11:57)

Hey, Michael. John, thanks. Look, we, as you know, we've been very busy on the recycling side, so some of that's going to come from asset sales as we keep on continuing to increase the credit quality of our portfolio. And then a little bit of this is our loans maturing. And then basically a little bit going to be net growth in anticipation of additional sales. So a little bit of balance on both sides.

Michael Goldsmith - Equity Analyst at UBS - (00:12:32)

Got it. Thanks for that, John. And then, you know, all this loan activity, you're seeing really nice yields on that. I guess the way it could cut the other way is it can generate lumpiness in the quarters as they come due. So can you talk a little bit about how you're thinking about managing that and lease expiration and these loan expirations just to ensure the AFFO doesn't move around too much.

John Albright - President and Chief Executive Officer - (00:13:03)

Yeah. So, you know, obviously. Good question. I mean, when we started this, you know, kind of loan program about three years ago, you know, that was a little bit of the pushback was, you know, well, you can't replace these loans at these rates. But here we are, we're Doing it with really existing relationships without even trying to. And so certainly as we see more opportunities, part of that funding mechanism that Phil mentioned is selling off senior pieces of these loans. And these loans are very bite sized and there's a lot of capital out there, so there's a lot of opportunity. So I'm not worried about replacing these and having kind of earnings coming down because these are not just one-time opportunities. We're seeing a strong pipeline of super high quality kind of assets and sponsorships.

Michael Goldsmith - Equity Analyst at UBS - (00:14:03)

Got it. Well, if you're doing this without really trying, excited to see what you do when you put some effort into it. I'm just kidding. Thank you very much. Good luck in the fourth quarter.

John Albright - President and Chief Executive Officer - (00:14:13)

Thank you.

OPERATOR - (00:14:15)

One moment for our next question. Our next question comes from RJ Milligan with Raymond James. Your line is open.

RJ Milligan - Equity Analyst at Raymond James - (00:14:24)

Hey, good morning, guys. John, you know, with the recent activity now in residential development, I think you have a lot going on. You guys have a loan in industrial properties. Can you tell us how you're thinking about other property types and if you plan to continue pursuing them?

John Albright - President and Chief Executive Officer - (00:14:37)

You're going to continue to pursue things outside of retail? Yes, it's not by design that we're going out here, just these unique opportunities with very strong sponsors and very strong assets. The industrial property that we did in Fremont outside of San Francisco, that was actually a retail property that the sponsor is basically converting to industrial to a higher and best use. So, you know, part of our underwriting on that is if it was, if we ever had to foreclose, roughly, you know, 50% of the acquisition, it could still be retail and work on our basis. So to answer your question, we're going to stay more focused on the retail side for sure, but, you know, not. But if we see unique opportunities in their short duration, we're not opposed to taking on those opportunities.

RJ Milligan - Equity Analyst at Raymond James - (00:15:40)

Okay, that's helpful. And then Phil, you talked about some of the sources of capital next year, some of the loan maturities, potential asset sales, should we expect that to get. reinvested or will those proceeds be used to pay down debt, lower leverage?

Philip Mays - Chief Financial Officer - (00:15:58)

A little bit of both. But I think first they're going to get reinvested into a lot of the loans that were recently done. RJ, so the maturities coming back from the 26 alones, you know, are going to, we're just kind of proactively redeploying that capital a little early with the loans going out first, the new loans going out first. So a lot of that's going to just recycle into that. But you know, on the margin, if you could see leverage tick down a Little bit. Okay, that's helpful. Thanks, guys.

RJ Milligan - Equity Analyst at Raymond James - (00:16:30)

Thanks.

OPERATOR - (00:16:30)

One moment for our next question. Our next question comes from Alex Fagan with Baird. Your line is open.

Alex Fagan - Equity Analyst at Baird - (00:16:39)

Hey, good morning, and thanks for taking my question. So on the luxury residential development in Austin, can you talk about how you got comfortable with the loan and what stage of development it currently is at?

John Albright - President and Chief Executive Officer - (00:16:53)

Yeah. So, you know, we're familiar, you know, if you think back at our origins of CTO, and when I got here 14 years ago, we had 14,000 acres of land in Daytona beach to sell. So we are very familiar with residential lot developments through that experience. So with regards to kind of where this project is, it's really at the finish line of delivering lots. And actually there'll be some lot sales starting next week, in fact. So it's really kind of coming in at the late stage and not on the early stage.

Alex Fagan - Equity Analyst at Baird - (00:17:38)

Nice. And kind of on that loan, how much of the loan are you looking to sell?

John Albright - President and Chief Executive Officer - (00:17:46)

Probably look to sell potentially 50% of. Really depends on how fast the proceeds come back. So it could be. Could be less, but potentially up to 50%.

Alex Fagan - Equity Analyst at Baird - (00:18:01)

Nice. And switching gears, with the vacant assets that were sold in the quarter, how are those affecting operations? much do we need to remove from the operating expenses?

Philip Mays - Chief Financial Officer - (00:18:08)

Operating expenses that you're carrying? Yeah, this is Phil. So the two largest vacant properties we have are the theater in Reno, which was sold, that had an annual run rate on expense size of about 400,000. And the one that we have left that's large is the former Party City, that also has a run rate of close to 400,000 on an annual basis. So you can. If you were to run rate the current quarter, that'll come down another about 400 grand on an annual basis once Party City is sold. And Party City wasn't sold this quarter. It was not. Reno was sold in the quarter. It was sold early in the quarter. So pretty much the full impact of that is reflected. But Party City is not sold yet. Okay, there were two vacant assets sold in the quarter. So is the other one just minor? Yeah, there was a little former. We have. Those are the two largest. Reno and Party City. We have a few. We had former convenience stores that are really small. There's sold one during the quarter. There's two left altogether. Those don't even come up to 100 grand on an annual run rate. So they're very small and on the margin.

Alex Fagan - Equity Analyst at Baird - (00:19:23)

Got it. Thank you, guys.

OPERATOR - (00:19:27)

One more, kid. One moment for our next question. Our next question comes from Rob Stevenson with Janie Montgomery Scott. Your line is open.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:19:38)

Good morning, guys. Is the Sale of the large loan.

Philip Mays - Chief Financial Officer - (00:19:42)

Interest that you may do. Is that in the disposition guidance or are dispositions just properties? In terms of the guidance. If we were. It's not. It would be on the high end, Rob. If that happened, or exceeding the high end. If it happens before the end of the year, you know, the timing on it is a little hard to predict. It could be just before the end of the year, or it could be a little bit after the end of the year. If it were to happen before the end of the year, that would put us on the high end or over the high end of guidance on the dispo side.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:20:16)

Okay, but you would classify that as a disposition?

Philip Mays - Chief Financial Officer - (00:20:20)

Yeah.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:20:21)

Okay.

Philip Mays - Chief Financial Officer - (00:20:21)

We've historically put dispositions of loans with properties there. And if you look at guidance, we kind of added a line for that, a little bucket. When we put year to date actuals, and there was a line that had loan sales and it showed zero. Just to kind of help clarify that, we do kind of look at that as a disposition. But if the loan one were to happen, we would probably be just over our high end.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:20:47)

Okay. Because the reason why I ask is if I look at the year to date investment and disposition volumes versus the guidance, they're sort of implying between 50 and 65 million of net investments in the fourth quarter. You got 27.5 million in terms of rough numbers from the proceeds from the repayment of Publix and Verizon. Just trying to figure out how you're going to finance that, especially given where the stock price is. I do not know, John, if you're comfortable issuing equity here or whether or not you guys just used the line, but was sort of curious as to like how you guys are thinking about the sort of incremental there and where does sort of leverage peak out at here in the fourth quarter, if you do decide to fund any of those net investments on the line.

Philip Mays - Chief Financial Officer - (00:21:36)

Yes, just before. And then I can. I'll let John answer. But on the investments, you know, we always put the full amount for the properties, obviously. And for the loans, we put the origination or the initial amount committed. So today we're sitting at almost 200 million, if you include all the subsequent activity on investments. And of that 130, 135 is loans, Rob, but only 72 have funded so far. So we also, in the guidance, put in brackets there kind of on the loans. Just to help clarify, because it's a great question, you know, how much of the loans have funded year to date? So the full amount of that won't fund because the loans won't fully fund by the end of the year.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:22:21)

Okay. So the net would wind up being lower than that sort of 50 to 65 million that you're implying because that's including the full value.

Philip Mays - Chief Financial Officer - (00:22:30)

Yeah, I mean, there could be 50, 60 million of that. That's loans that are not funded.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:22:35)

Okay, that's helpful because it was, it was looking like that leverage was going to peak out at something more substantial here if you guys did it all on the line.

Philip Mays - Chief Financial Officer - (00:22:44)

Yeah. So, yeah, so there could be 50 to 60 million of that number. That's loan related, that's unfunded by year end. And then on top of that, you could also see like an, a note sale prior to the end of the year. That would further help lighten that load for funding.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:22:57)

Okay. And then I guess, John, what is sort of left within the property portfolio that you want to sell? I mean, is that, is this going through and you know, sort of cleaning up anything remaining? Is it, you know, whittling down some of the dollar stuff? How are you thinking about, you know, when you look at dispositions not only in the fourth quarter, but in 2026, like, what are you sort of thinking that you're going to wind up selling and where is the market for those type of assets today?

John Albright - President and Chief Executive Officer - (00:23:36)

Yeah, so as we discussed previously, we still have some Walgreens that we definitely are moving through and dollar stores as you hit on certainly will be something we'll trim back on. And then there's some other. We've sold advanced auto parts and that sort of things and tractor supplies. And so those sort of assets will continue to kind of grind through, if you will, as we see good pricing. So it's just really using that as a way to kind of reinvest in some of the high credits that we put on this quarter, lows and so forth. So you'll see us be active at the end of the year here with continuingly bringing in some real super high quality type credits. And we're looking forward to kind of what this company looks like starting next year.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:24:38)

And then I guess given the acquisition of the Lowe's, was that opportunistic or just from your standpoint, is the property acquisitions going forward going to be more targeted towards the higher credit quality, basically investment grade and, you know, above quality tenants? Or are you still looking to acquire stuff across the spectrum on a property specific basis?

John Albright - President and Chief Executive Officer - (00:25:06)

Yeah, on the Lowe's that was off market. It was a relationship driven. We had seen these assets before a couple years ago and they're pulled off the market. So we're extremely excited about having those in our portfolio with regards to. So you'll see more of the high quality credit, big box sort of assets coming in. You probably won't see us be active in buying a generic tractor supply. Clearly we don't have any car washes, so we like that distinction that no car washes in the portfolio. So we feel like we're set up pretty strong to kind of offer investors something a little bit different. Getting the Lowe's and dicks in the top five just gives investors an exposure that they they can't get other locations.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:26:07)

Okay, and then last one for me, is all of Beachside open and producing at this point or is there still some of that stuff that's down and that you're getting insurance payments on?

John Albright - President and Chief Executive Officer - (00:26:21)

No, it's all been open for a while. I mean, they open those up less than four months after the hurricane last year. And interesting enough, when they opened, they weren't obviously, as polished looking as they were previous to the hurricane, but they did better sales than they did pre hurricane. So a lot of pent up demand from customers. And unfortunately some of their competition did not reopen. So it just kind of drove more traffic to those restaurants.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:26:58)

Okay, so rent coverage today is actually higher than where it was pre hurricane?

John Albright - President and Chief Executive Officer - (00:27:04)

Yes.

Rob Stevenson - Equity Analyst at Janie Montgomery Scott - (00:27:05)

Okay, thanks guys. Appreciate the time and have a great weekend.

OPERATOR - (00:27:09)

You too. One moment for questions. Our next question comes from Gaurav Mehta with Alliance Global Partners.

Gaurav Mehta - Equity Analyst at Alliance Global Partners - (00:27:18)

Your line is open. Thank you. Good morning. I wanted to ask you if you had any update on your properties that are leased to At Home?

John Albright - President and Chief Executive Officer - (00:27:29)

Yes. So you know, those properties as we kind of, one is in Concord, North Carolina that you know, could be sold in the not too distant future. And the others, you know, are the same situation where we're monitoring kind of, you know, what at home's doing. But if they come back, we have working on replacement tenants. So the idea would be if at home vacated one of the properties, we would have a replacement tenant in and then we would sell it at a better cap rate than as at home. So it's a manageable exposure and potential upside.

Gaurav Mehta - Equity Analyst at Alliance Global Partners - (00:28:15)

Okay, second question. I want to go back to the two loans that you did after September. The interest rates on both of them are higher than the year to date loan activity. Can you provide some color on why the rates were higher at 17 and 16%? Phil, you want to handle that?

Philip Mays - Chief Financial Officer - (00:28:35)

Yeah. So he was just asking about why the interest rates on the residential and the mixed use are significantly higher than the blended Rate for the portfolio. Yeah. So on that, basically because it's such short duration loan that kind of give you more background than maybe you want, is that the competition for a loan for that sort of product would be mainly from an opportunity fund, or a credit fund,. And those funds really aren't looking to invest where the duration is less than two years in order to kind of get a multiple. So we're able to give highly flexible loan, but for that we charge a much higher rate. And so just the flexibility of our loan in the short duration gives us that higher interest rate investment.

Gaurav Mehta - Equity Analyst at Alliance Global Partners - (00:29:43)

All right, that's all I had. Thank you.

OPERATOR - (00:29:47)

One moment for our next question. Our next question comes from John Masucka with B Rally Securities. Your line is open.

John Masucka - Equity Analyst at B Riley Securities - (00:29:58)

Good morning. Morning. So maybe given all of the investment activity on the loan front, in particular subsequent quarter end, do you view that as maybe kind of the max level you want to be at in terms of a loan balance once this all kind of blends out? Or could you kind of pursue more. Of that and become, I guess maybe more of like a mixed loan net lease type reit? It feels like the amount of loan investments are starting to certainly in terms of the investment activity, outweigh the net lease transactions.

John Albright - President and Chief Executive Officer - (00:30:36)

You know, I would say that it just kind of really kind of came together here this last quarter. But the loan activity could tick up from here for sure. But as it's a little bit in anticipation of things burning off, paying down, paying off, and then we are super active on the core net lease side with larger type assets. So you'll see this similar balance. But we think we're delivering, we know we're delivering really strong free cash flow and high earnings. And there's other net lease REITs out there that do the loan program as well. And then you have REITs like Vici that have a balance of net lease and loans. So it's not like we're in a new frontier here.

John Masucka - Equity Analyst at B Riley Securities - (00:31:39)

I remember thinking, and maybe I'm misremembering, the loans were kind of an opportunistic thing a couple of years ago, and now it feels like they've become a bigger part of the investment strategy. And I'm wondering if that's something you view as permanent on a go forward basis or if it's still something that's temporary where you found this kind of opportunistic way to kind of accretively deploy your capital even in a challenged equity market?

John Albright - President and Chief Executive Officer - (00:32:03)

No, it's definitely a good point. Yes. So when we were opportunistically Thinking that it was like a one time opportunity. It's become repeat customers are coming back to us because of the flexibility and the speed that we can transact on. They're willing to pay higher rate. And then as you know, we get right of first refusal on acquiring these assets. So if the market stalls and cap rates tick up, we have the opportunity to bring these into our portfolio. Like I've said before, we're getting paid a much higher yield than going out and buying some sort of generic net lease property out in the middle of nowhere. We're basically in Austin with very opportunistic type yields with very high quality sponsor and high quality asset. And then, you know, the Publix that we had pay off in Charlotte, you know, Publix in Charlotte, you know, I think that paid off because they sold it at five and a quarter cap. You know, so these are, you know, we're getting double digit unlevered yields on assets that will sell for, you know, really, really low cap rates. So it's great to see the opportunities that we're able to kind of, it's become more, more of a permanent fixture as the, you know, the sponsors are still very active in the development side on these credit tenants. And the banking system just really is slower, less proceeds. And this is, we're just basically providing an answer to their capital needs in a much more efficient fashion.

John Masucka - Equity Analyst at B Riley Securities - (00:33:48)

Understood. And then maybe on a very micro level with Cornerstone Exchange,, pretty significant jump up in the amount you're kind of lending on that project. Why? I guess maybe why did it increase by so much?

John Albright - President and Chief Executive Officer - (00:34:05)

It's basically they ended up signing some additional leases. So as they've proven out their development with leases, we wouldn't loan on it until they have a signed lease. And so that's, that's what happened. The development's gotten larger as they've signed leases.

John Masucka - Equity Analyst at B Riley Securities - (00:34:27)

Makes sense. And that's it for me. Thank you very much.

John Albright - President and Chief Executive Officer - (00:34:30)

Great, thanks.

OPERATOR - (00:34:31)

One moment for our next question. Our next question comes from Greg Kucera with Lucid Capital Markets. Your line is open.

Barry Oxford - Equity Analyst at Colliers International - (00:34:43)

Hey, good morning, guys. John, I want to circle back with. A few questions on the Austin loans. It sounds like you're not taking any entitlement or approval risk, at least on phase one. Is that a fair assessment? Does phase two need to be approved?

John Albright - President and Chief Executive Officer - (00:34:57)

It's fair assessment on both. The entitlements are there for both phases and everything needed to basically deliver.

Barry Oxford - Equity Analyst at Colliers International - (00:35:08)

Okay, great. And what is the current Loan-to-Value (LTV) at those loans?

John Albright - President and Chief Executive Officer - (00:35:15)

You know, I would put that one in kind of the, on a discount NPV basis, we're in the 70s.

Barry Oxford - Equity Analyst at Colliers International - (00:35:23)

Okay. And if you were to sell the. Senior tranche or a portion of those. Loans, and I think Phil mentioned it might be upwards of 50%, what would.

John Albright - President and Chief Executive Officer - (00:35:34)

Your yield be if you're holding the junior piece? You know, I don't want to, like, go out there with it may not be higher. I don't want to give you specific numbers.

Barry Oxford - Equity Analyst at Colliers International - (00:35:45)

Fair enough. All right. Changing gears to Lake Coxaway mixed use development. Is that just raw land now or has the developer started or kind of where in the process is that development?

John Albright - President and Chief Executive Officer - (00:35:57)

Yeah, the developer has started. So kind of we're coming in, like when they really need to really start doing some additional work and delivering pads and that sort of thing.

Barry Oxford - Equity Analyst at Colliers International - (00:36:11)

Okay. Okay, that's it for me. Thanks, guys.

John Albright - President and Chief Executive Officer - (00:36:15)

Thank you.

OPERATOR - (00:36:20)

One moment for our next question. Our next question comes from Barry Oxford with Colliers International. Your line is open.

Barry Oxford - Equity Analyst at Colliers International - (00:36:32)

Great. Thanks, guys. John, real quick, couple questions on the dividend. Given what I'm hearing on the conference call, you want to retain as much capital as possible. Is it fair to say that even though you could raise the dividend, for lack of a better word, substantially, any dividend increase will probably be minimal because you want to retain as much capital from an asset allocation.

John Albright - President and Chief Executive Officer - (00:37:02)

That's right. As we progress here, earnings grow, you know, there'll be pressure to raise a dividend just based on what we need to pay out as a reit.

Barry Oxford - Equity Analyst at Colliers International - (00:37:17)

Right. So you don't run afoul of the REIT rules?

John Albright - President and Chief Executive Officer - (00:37:20)

Well, we don't want to pay a check to the irs. We'd rather give it to our shareholders.

Barry Oxford - Equity Analyst at Colliers International - (00:37:26)

Right, right, right. And then, you know, one thing that I noticed, you know, in the press release was the credit rated tenants, now your investment-grade tenants, the percent of the portfolio was still roughly the same, but you had a fairly good drop with the credit rated tenants. What was going on there? Just the credit rated as a percentage of the total portfolio. So at the end of the last quarter, it was 51%. It went from. Yeah, it went from 81 to 66. Yeah, yeah, the credit is fine. That was more Barry. That's more the Walgreens and the like that used to have a credit rating dropping them that were very low and had gone from credit rating to, you know, not from investment grade to not investment grade. But we're still carrying a rating. It's more for related to a couple of tenants like that. They got home, Walgreens and such, dropping the credit rating altogether. And that's what caused that decrease. Okay, makes sense. All right, guys, thanks. Have a good weekend. You're welcome.

OPERATOR - (00:38:40)

And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.