PART I
When we refer to “we,” “us,” “our,” “PINE,” or “the Company,” we mean Alpine Income Property Trust, Inc. and its consolidated subsidiaries. References to “Notes to Financial Statements” refer to the Notes to the Consolidated Financial Statements of Alpine Income Property Trust, Inc. included in Item 8 of this Annual Report on Form 10-K. Also, when the Company uses any of the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, the Company is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements. Certain factors that could cause actual results or events to differ materially from those the Company anticipates or projects are described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Given these uncertainties, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Annual Report on Form 10-K or any document incorporated herein by reference. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this Annual Report on Form 10-K.
ITEM 1. BUSINESS
OVERVIEW
We are a real estate company that owns and operates a high-quality portfolio of single-tenant commercial properties all located in the United States. Our properties are primarily leased to industry leading, creditworthy tenants, many of which operate in industries we believe are resistant to the impact of e-commerce. Our portfolio consists of 48 single-tenant, primarily net leased, retail and office properties located in 34 markets in 18 states. Twenty of these properties, representing our initial portfolio, were acquired from CTO Realty Growth, Inc. (“CTO”), a public company listed on the New York Stock Exchange (the “NYSE”) under the symbol “CTO”, in the Formation Transactions (defined below) utilizing $125.9 million of proceeds from our initial public offering of our common stock (the “IPO”) and the issuance of 1,223,854 units of our operating partnership (the “OP Units”) that had an initial value of $23.3 million based on the IPO price of $19.00 per share (the “IPO Price”). The remaining 28 properties, net of one property disposed of during 2020, were acquired during the year ended December 31, 2020. For four of our properties in our portfolio, we own the land and are the lessor in a long-term ground lease to the tenant. See Note 17, “Subsequent Events” to the consolidated and combined financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for information related to the single-tenant income properties acquired subsequent to December 31, 2020.
Our portfolio is comprised of single-tenant retail and office properties primarily located in or in close proximity to major Metropolitan Statistical Areas (“MSAs”), growth markets and other markets in the United States with favorable economic and demographic conditions. The properties in our portfolio are primarily triple-net leases, which generally require the tenant to pay all of the property operating expenses such as real estate taxes, insurance, assessments and other governmental fees, utilities, repairs and maintenance expenses and certain capital expenditures.
We have elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with our short taxable year beginning on November 26, 2019 and ending on December 31, 2019. We believe that, commencing with such short taxable year, we have been organized and have operated in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws. We intend to continue to operate in such a manner, but no assurances can be given that we will continue to operate in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws.
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Our primary objective is to maximize cash flow and value per share by generating stable and growing cash flows and attractive risk-adjusted returns through owning, operating and growing a diversified portfolio of high-quality single-tenant, net leased commercial properties with strong long-term real estate fundamentals. The 48 properties in our portfolio are 100% occupied and represent 1.6 million of gross rentable square feet with leases that have a weighted average lease term of 8.4 years (weighting based on annualized base rent as of December 31, 2020). None of our material leases expire prior to January 31, 2024. Our portfolio is representative of our investment strategy, which consists of one or more of the following core investment criteria:
| ● | Attractive Locations. The 48 properties in our portfolio represent 1.6 million gross rentable square feet, are 100% occupied and are primarily located in or in close proximity to major MSAs and in markets in the United States with favorable economic and demographic conditions. As of December 31, 2020, a total of 77% of our portfolio’s annualized base rent was derived from properties located in MSAs with populations greater than one million people. |
| ● | Creditworthy Tenants. 46% of our portfolio’s annualized base rent as of December 31, 2020 was derived from tenants that have (or whose parent company has) an investment grade credit rating from a recognized credit rating agency. Our largest tenant, Wells Fargo N.A., has an ‘A+’ credit rating from S&P Global Ratings and contributed 15% of our portfolio’s annualized base rent as of December 31, 2020. |
| ● | Geographically Diversified. Our portfolio is spread across 34 markets in 18 states. Our largest property, as measured by annualized base rent, is located in the Portland, Oregon MSA. |
| ● | 100% Occupied with Primarily Long Duration Leases. Our portfolio is 100% leased and occupied. The leases in our portfolio have a weighted average remaining lease term of 8.4 years (weighted based on annualized base rent as of December 31, 2020), with no material leases expiring prior to January 31, 2024. |
| ● | Contractual Rent Growth. As of December 31, 2020, 44% of the leases in our portfolio (based on annualized base rent as of December 31, 2020) provide for increases in contractual base rent during the lease term. |
Organization and Formation Transactions
The Company is a Maryland corporation. We closed the IPO on November 26, 2019 and our common stock is listed on the NYSE under the symbol “PINE.” We sold 7,500,000 shares of our common stock at $19.00 per share in the IPO. CTO purchased 421,053 of the shares of our common stock that we sold in the IPO. We refer to the IPO, the CTO Private Placement (defined below), and the other transactions executed at the time of our listing on the NYSE collectively as the “Formation Transactions”.
We conduct the substantial majority of our operations through Alpine Income Property OP, LP (the “Operating Partnership”). Our wholly owned subsidiary, Alpine Income Property GP, LLC (“PINE GP”), is the sole general partner of the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. As of December 31, 2020, we have a total ownership interest in the Operating Partnership of 85.9%, with CTO holding, directly and indirectly, a 14.1% ownership interest in the Operating Partnership. Our interest in the Operating Partnership generally entitles us to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to our percentage ownership. We, through PINE GP, generally have the exclusive power under the partnership agreement to manage and conduct the business and affairs of the Operating Partnership, subject to certain approval and voting rights of the limited partners. Our Board of Directors (the “Board”) manages our business and affairs.
Each limited partner of the Operating Partnership has the right to require the Operating Partnership to redeem part or all of its OP Units for cash, based upon the value of an equivalent number of shares of our common stock at the time of the redemption, or, at our election, shares of our common stock on a one-for-one basis, beginning on and after the date that is 12 months after issuance of such OP Units, subject to certain adjustments and the restrictions on ownership and transfer of our stock set forth in our charter. Each redemption of OP Units will increase our percentage ownership interest in the Operating Partnership and our share of its cash distributions and profits and losses.
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