2024 ANNUAL REPORT
NYSE: PINE
Dear Fellow Shareholders:
PINE had a successful year in 2024 with strong investment activity driving growth in FFO per
common share by 17.7%, notwithstanding an economic backdrop marked by uncertainty.
Specifically, as the year began, there was optimism that inflation was coming under control, and
the Federal Reserve was expected to enact a series of interest rate cuts. However, as 2024
progressed, inflation remained elevated, leading to predictions for fewer rate cuts and creating
some headwinds for many triple net lease REITs.
Accordingly, during 2024, we modified our strategic focus from primarily investment-grade rated
tenants to a “barbell” approach with regards to property acquisitions. While we continued to invest
in select investment grade-rated tenants to provide consistent and stable cash flow, we also
successfully pursued higher-yielding opportunities to provide growth and diversification.
Additionally, we complemented our property investments by selectively originating commercial
loans that could add a potential pipeline of properties to own over time.
During 2024, we invested approximately $135 million at a weighted average initial yield of 8.7%,
consisting of approximately $104 million in properties at a weighted average initial cash cap rate of
8.2%, and approximately $31 million in commercial loans at a weighted average initial yield of
10.7%. These investments reflected our revised strategy and included investment grade rated
tenants Dick’s Sporting Goods and Lowe’s, along with higher-yielding restaurants. Furthermore, our
acquisition activity enabled us to increase our weighted average remaining lease term from 7.0
years to 8.7 years.
We also selectively pruned our portfolio, selling approximately $62 million of properties at a
weighted average exit cash cap rate of 6.9%, almost 200 basis points lower than the weighted
average initial yield on our 2024 investments. These dispositions reflected a strategic focus to
reduce exposure to Walgreens, which at year-end had moved from our largest tenant to our fourth
largest. Importantly, our dispositions combined with our property investments resulted in
investment grade rated Dick’s Sporting Goods and Lowe’s becoming our two largest tenants,
together representing 20% of our annualized base rents (“ABR”) as of December 31, 2024.
To assist with funding our net investment activity and managing our balance sheet, we
opportunistically raised approximately $19 million of common equity at a weighted average gross
price per share of $18.04. Notably, we ended the year with ample liquidity and no debt maturing
until the second quarter of 2026.
During the year, there were a few changes to our leadership team. Regarding our Board of Directors,
two of our founding directors, Mark Decker, Jr. and Jeffrey Yarckin, decided to step down after five
years of dedicated service. Thank you Mark and Jeff. In addition, we welcomed Brenna Wadleigh to
the Board as an additional Director. Brenna’s considerable experience in the commercial real
estate and net lease industry is a valuable asset for the company. Finally, regarding the
management team, we hired Philip R. Mays as our new Chief Financial Officer. Phil brings decades
of REIT accounting and CFO experience and has quickly become a valuable member of our team.
He shares the same dedication to increasing shareholder value as the rest of our team.
announced a new $10 million share repurchase program to opportunistically buy back common
stock when we believe there is a significant market dislocation relative to its value. Furthermore,
our acquisition pipeline remains robust with attractive opportunities, providing a runway for growth
in 2025 and beyond.
In conclusion, we believe our strategy will continue to improve the quality and diversification of our
portfolio and produce earnings growth, which we believe will translate to investor returns. PINE
provides an opportunity for investors to diversify into better credit, invest at an attractive valuation,
and receive a higher yield with an exciting and growing triple net lease company. I want to thank our
shareholders for their ongoing belief in the Company, the Board of Directors for their support and
insights, and the team for their contributions to our success.
2024
2023
$134.7 Million
$121.5 Million
8.7%
7.9%
51%
65%
Dick's Sporting Goods
Walgreens
8.7 Years
7.0 Years
$16.45
$15.56
6.9%
7.1%
64%
74%
53%
51%
7.4x
7.7x
6%
(6%)
Investments:
Investments – Weighted Average Initial Yield:
Investment-Grade Tenant Exposure (% of ABR (1)
Attributable to Investment Grade Rated Tenants as of
December 31):
Largest Tenant (as a % of ABR (1) as of December 31):
Weighted Average Remaining Lease Term:
Closing Stock Price (as of Annual Meeting Record
Date):
Annualized Dividend Yield (based on cash dividend for
the first quarter of the year and the closing stock price
as of the Annual Meeting Record Date):
Year-End AFFO Payout Ratio:
Net Debt-to-Total Enterprise Value:
Net Debt-to-Total Pro Forma Adjusted EBITDA:
PINE Total Shareholder Return (2)
:
RMS Index Total Return
9%
14%
(1) ABR: Annualized Based Rent ("ABR") represents the annualized in-place straight-line base rent required by the
tenant’s lease.
(2) Total return is sourced from Bloomberg and assumes dividends are reinvested.
John P. Albright
President and Chief Executive Officer
(2)
:
(2)
:
PINE PROPERTY LOCATIONS
As of December 31, 2024
Net Lease Portfolio:
2024
2023
2022
2021
Number of Properties
134
138
148
113
Number of States with a Property
35
35
34
32
Square Feet (in millions)
3.9
3.8
3.7
3.3
Year-End Portfolio Occupancy
98.0%
99.1%
99.5%
100%
Weighted Average Remaining Lease Term
8.7 years
7.0 years
7.6 years
7.9 years
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-39143
ALPINE INCOME PROPERTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland
84-2769895
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
369 N. New York Avenue, Suite 201
Winter Park, Florida
32789
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code
(407) 904-3324
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Name of each exchange on which
Title of each class
Trading Symbol
registered
COMMON STOCK, $0.01 PAR VALUE
PINE
NYSE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒
On June 28, 2024, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the Registrant’s
common stock held by non-affiliates of the Registrant was $192,841,102 based on the closing sales price of the Registrant’s common stock on such date
as reported on the New York Stock Exchange. For purposes of this computation, all officers, directors and 10% beneficial owners of the Registrant’s
common stock of which the Registrant is aware are deemed to be affiliates. Such determination should not be deemed to be an admission that such
officers, directors or 10% beneficial owners are, in fact, affiliates of the Registrant.
The number of shares of the registrant’s common stock outstanding on January 30, 2025 was 14,692,498.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2025 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange
Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2024, are incorporated by reference in Part III of this report.
(This page has been left blank intentionally.)
TABLE OF CONTENTS
Page #
PART I
Item 1.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Item 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Item 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Item 1C. CYBERSECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Item 2.
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
Item 3.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
Item 4.
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . .
51
Item 6.
RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . .
63
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Item 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Item 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE . . . . . . . . . . . . . .
64
Item 11.
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
2
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 the 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.
Special Note Regarding Forward-Looking Statements
This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)). The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “will,”
“could,” “may,” “should,” “plan,” “potential,” “predict,” “forecast,” “project,” and similar expressions and variations
thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made.
Forward-looking statements are made based upon management’s expectations and beliefs concerning future developments
and their potential effect upon the Company. There can be no assurance that future developments will be in accordance
with management’s expectations or that the effect of future developments on the Company will be those anticipated by
management.
Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. These risks and uncertainties include, but are not limited
to, the strength of the real estate market; the impact of a prolonged recession or downturn in economic conditions; our
ability to successfully execute acquisition or development strategies; credit risk associated with us investing in commercial
loans and investments; any loss of key management personnel; changes in local, regional, national and global economic
conditions affecting the real estate development business and properties, including unstable macroeconomic conditions
due to, among other things, geopolitical conflicts, inflation and higher interest rates; the impact of competitive real estate
activity; the loss of any major property tenants; the ultimate geographic spread, severity and duration of pandemics, actions
that may be taken by governmental authorities to contain or address the impact of such pandemics, and the potential
negative impacts of such pandemics on the global economy and our financial condition and results of operations; and the
availability of capital. These risks and uncertainties may cause our actual future results to be materially different than those
expressed in our forward-looking statements.
See “Item 1A. Risk Factors” within this Annual Report on Form 10-K for further discussion of these risks, as well as
additional risks and uncertainties that could cause actual results or events to differ materially from those described in the
Company’s forward-looking statements. Given these risks and 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. 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.
3
ITEM 1. BUSINESS
OVERVIEW
We are a real estate investment trust (“REIT”) that owns and operates a high-quality portfolio of commercial net lease
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 134
net leased properties located in 35 states. The properties in our portfolio are primarily subject to long-term leases, which
generally require the tenant to pay directly or reimburse us for property operating expenses such as real estate taxes,
insurance, assessments and other governmental fees, utilities, repairs and maintenance and certain capital expenditures.
We may also acquire or originate commercial loans and investments. Our investments in commercial loans are generally
secured by real estate or the borrower’s pledge of its ownership interest in an entity that owns real estate.
The Company operates in two primary business segments: income properties and commercial loans and investments.
The Company has no employees and is externally managed by Alpine Income Property Manager, LLC (our
“Manager”), a Delaware limited liability company and a wholly owned subsidiary of CTO Realty Growth, Inc. (NYSE:
CTO) (“CTO”). CTO is a Maryland corporation that is a publicly traded diversified REIT and the sole member of our
Manager.
The Company elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its initial taxable
year ended December 31, 2019. We believe we have been organized and have operated in such a manner as to qualify and
maintain our qualification 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 and
maintain our qualification for taxation as a REIT under the U.S. federal income tax laws.
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 the ownership, operation and growth through acquisition of a diversified portfolio
of high-quality, net leased commercial properties with attractive long-term real estate fundamentals and through the
investment of commercial loans secured by commercial real estate. The 134 properties in our income property portfolio
are 98% occupied and represent 3.9 million of gross rentable square feet with leases that have a weighted average lease
term of 8.7 years (weighting based on annualized base rent as of December 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 134 properties in our portfolio represent 3.9 million gross rentable square feet, are
98% occupied, and are primarily located in, or in close proximity to major metropolitan statistical areas, or MSAs,
and in markets in the United States with favorable economic and demographic conditions supporting the
underlying businesses of our tenants. As of December 31, 2024, approximately 55% of our portfolio’s annualized
base rent was derived from properties located in MSAs with populations greater than one million people.
•
Creditworthy Tenants. 51% of our portfolio’s annualized base rent as of December 31, 2024 was derived from
tenants that have (or whose parent company has) an investment grade credit rating from a recognized credit rating
agency. The Company defines an investment grade credit rating as a rating from S&P Global Ratings, Moody’s
Investors Service, Fitch Ratings or the National Association of Insurance Commissioners of Baa3, BBB-, or
NAIC-2 or higher. If applicable, in the event of a split rating between S&P Global Ratings and Moody’s Investors
Services, the Company utilizes the higher of the two ratings as its reference point as to whether a tenant has an
investment grade credit rating.
•
Geographic Diversity. Our portfolio is spread across 100 markets in 35 states. Our largest property, as measured
by annualized base rent, is located in the Tampa-St. Petersburg, Florida MSA.
•
98% Occupied with Primarily Long Duration Leases. Our portfolio is 98% occupied. The leases in our
portfolio have a weighted average remaining lease term of 8.7 years (weighted based on annualized base rent as
of December 31, 2024).
4
In addition to our income property portfolio, as of December 31, 2024, our business included a portfolio of nine
commercial loan investments secured by real estate, of which three were acquired pursuant to a sale-leaseback transaction
whereby the tenant has a future repurchase right.
Organization
The Company is a Maryland corporation formed on August 19, 2019. On November 26, 2019, the Company closed
its initial public offering (“IPO”). Our common stock is listed on the New York Stock Exchange (“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. Concurrently with the closing of the IPO, CTO invested $15.5
million in exchange for 815,790 shares of our common stock (the “CTO Private Placement”). We refer to the IPO, the
CTO Private Placement, and the other transactions executed at the time of our listing on the NYSE collectively as the
“Formation Transactions.” See Note 19, “Related Party Management Company” in the Notes to the Financial Statements
for the Company’s disclosure related to CTO’s purchase of PINE common stock subsequent to the IPO.
We are externally managed by our Manager and conduct the substantial majority of our operations through, and
substantially all of our assets are held by, 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.
As of December 31, 2024, we have a total ownership interest in the Operating Partnership of 92.3%, with CTO holding,
directly and indirectly, a 7.7% 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 units of the Operating Partnership (“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.
Capital Markets
Equity. On December 1, 2020, the Company filed a shelf registration statement on Form S-3, relating to the
registration and potential issuance of its common stock, preferred stock, warrants, rights, and units with a maximum
aggregate offering price of up to $350.0 million (the “2020 Registration Statement”). The Securities and Exchange
Commission (the “SEC”) declared the 2020 Registration Statement effective on December 11, 2020.
On September 27, 2023, the Company filed a shelf registration statement on Form S-3, relating to the registration and
potential issuance of its common stock, preferred stock, debt securities, warrants, rights, and units with a maximum
aggregate offering price of up to $350.0 million (the “2023 Registration Statement”). The 2020 Registration Statement
was terminated concurrently with the filing of the 2023 Registration Statement. The SEC declared the 2023 Registration
Statement effective on September 29, 2023.
In June 2021, the Company completed a follow-on public offering of 3,220,000 shares of common stock, which
included the full exercise of the underwriters’ option to purchase an additional 420,000 shares of common stock. Upon
closing, the Company issued 3,220,000 shares and received net proceeds of $54.3 million, after deducting the underwriting
discount and expenses.
On December 14, 2020, the Company implemented a $100.0 million “at-the-market” equity offering program (the
“2020 ATM Program”) pursuant to which the Company may sell, from time to time, shares of the Company’s common
stock. During the year ended December 31, 2022, the Company sold 446,167 shares under the 2020 ATM Program for
gross proceeds of $8.7 million at a weighted average price of $19.44 per share, generating net proceeds of $8.6 million
after deducting transaction fees totaling $0.1 million. During the year ended December 31, 2021, the Company sold
761,902 shares under the 2020 ATM Program for gross proceeds of $14.0 million at a weighted average price of $18.36
per share, generating net proceeds of $13.8 million after deducting transaction fees totaling $0.2 million. The Company
5
was not active under the 2020 ATM Program during the year ended December 31, 2020. The 2020 ATM Program was
terminated in advance of implementing the 2022 ATM Program, hereinafter defined.
On October 21, 2022, the Company implemented a $150.0 million “at-the-market” equity offering program (the “2022
ATM Program”) pursuant to which the Company may sell, from time to time, shares of the Company’s common stock.
During the year ended December 31, 2024, the Company sold 1,059,271 shares under the 2022 ATM Program for gross
proceeds of $19.1 million at a weighted average price of $18.04 per share, generating net proceeds of $18.8 million after
deducting transaction fees totaling $0.3 million. During the year ended December 31, 2023, the Company sold 665,929
shares under the 2022 ATM Program for gross proceeds of $12.6 million at a weighted average price of $18.96 per share,
generating net proceeds of $12.4 million after deducting transaction fees totaling $0.2 million. During the year ended
December 31, 2022, the Company sold 1,479,241 shares under the 2022 ATM Program for gross proceeds of $27.8 million
at a weighted average price of $18.81 per share, generating net proceeds of $27.4 million after deducting transaction fees
totaling $0.4 million. As of December 31, 2024, we have $90.4 million of availability under the 2022 ATM Program.
In the aggregate, under the 2020 ATM Program and 2022 ATM Program, during the year ended December 31, 2022,
the Company sold 1,925,408 shares for gross proceeds of $36.5 million at a weighted average price of $18.96 per share,
generating net proceeds of $36.0 million after deducting transaction fees totaling $0.5 million.
Debt. Credit Facility. On September 30, 2022, the Company and the Operating Partnership entered into a credit
agreement (the “2022 Amended and Restated Credit Agreement”) with KeyBank National Association, as administrative
agent, and certain other lenders named therein, which amended and restated the 2027 Term Loan Credit Agreement
(hereinafter defined) to include, among other things:
•
the origination of a new senior unsecured revolving credit facility in the amount of $250 million (the “Credit
Facility”) which matures on January 31, 2027, with the option to extend for one year;
•
an accordion option that allows the Company to request additional revolving loan commitments and additional
term loan commitments, provided the aggregate amount of revolving loan commitments and term loan
commitments shall not exceed $750 million;
•
the amendment of certain financial covenants; and
•
the addition of a sustainability-linked pricing component pursuant to which the Company will receive interest
rate reductions up to 0.025% based on performance against sustainability performance targets.
Pursuant to the 2022 Amended and Restated Credit Agreement, the indebtedness outstanding under the Credit Facility
accrues at a rate ranging from SOFR plus 0.10% plus a range of 125 basis points to 220 basis points, based on the total
balance outstanding under the Credit Facility as a percentage of the total asset value of the Company, as defined in the
2022 Amended and Restated Credit Agreement. The Company may utilize daily simple SOFR or term SOFR, at its
election. The Credit Facility also accrues a fee of 15 or 25 basis points for any unused portion of the borrowing capacity
based on whether the unused portion is greater or less than 50% of the total borrowing capacity.
2026 Term Loan. On May 21, 2021, the Operating Partnership, the Company and certain subsidiaries of the Company
entered into a credit agreement (the “2026 Term Loan Credit Agreement”) with Truist Bank, N.A. as administrative agent,
and certain other lenders named therein, for a term loan (the “2026 Term Loan”) in an aggregate principal amount of $60.0
million with a maturity of five years. On April 14, 2022, the Company entered into the Amendment, Increase and Joinder
to the 2026 Term Loan Credit Agreement (the “2026 Term Loan Amendment”), which increased the term loan
commitment under the 2026 Term Loan by $40 million to an aggregate of $100 million. The 2026 Term Loan Amendment
also effectuated the transition of the underlying variable interest rate from LIBOR to SOFR.
On October 5, 2022, the Company entered into an amendment which, among other things, amends certain financial
covenants and adds a sustainability-linked pricing component consistent with what is contained in the 2022 Amended and
Restated Credit Agreement (the “2026 Term Loan Second Amendment”), effective September 30, 2022.
2027 Term Loan. On September 30, 2021, the Operating Partnership, the Company and certain subsidiaries of the
Company entered into a credit agreement (the “2027 Term Loan Credit Agreement”) with KeyBank National Association
as administrative agent, and certain other lenders named therein, for a term loan (the “2027 Term Loan”) in an aggregate
principal amount of $80.0 million (the “Term Commitment”) maturing in January 2027. On April 14, 2022, the Company
entered into the Amendment, Increase and Joinder to the 2027 Term Loan Credit Agreement (the “2027 Term Loan
6
Amendment”), which increased the Term Commitment by $20 million to an aggregate of $100 million. The 2027 Term
Loan Amendment also effectuated the transition of the underlying variable interest rate from LIBOR to SOFR.
On September 30, 2022, the Company entered into the 2022 Amended and Restated Credit Agreement which amended
and restated the 2027 Term Loan Credit Agreement to include the origination of a new revolving credit facility in the
amount of $250.0 million as previously described. The 2022 Amended and Restated Credit Agreement includes an
accordion option that allows the Company to request additional revolving loan commitments and additional term loan
commitments not to exceed $750.0 million in the aggregate.
Mortgage Notes Payable. On June 30, 2021, in connection with the acquisition of six net lease properties from CTO
(the “CMBS Portfolio”), the Company assumed an existing $30.0 million secured mortgage, which bears interest at a fixed
rate of 4.33% (the “CMBS Loan”). On December 1, 2022, the Company completed the defeasance of the CMBS Loan,
unencumbering the CMBS Portfolio. The Company sold four of the six properties subsequent to the defeasance, during
the year ended December 31, 2022.
Market Opportunity
We believe that investor demand remains resilient for the net lease industry with the total addressable market
continuing to expand through sale-leaseback transactions and new developments. Unlike a gross lease, which places the
financial responsibility for most expenses with the property owner, the net lease structure shifts the majority or entirety of
costs for property taxes, insurance, maintenance and often utilities and capital expenditures, to the lessee, in addition to
rent payments. Net leases are generally executed for an initial term of 10 to 15 years, but 20- and 25-year leases are not
uncommon. Lease agreements often include multiple options for the tenant to extend and may include terms for periodic
rent increases. Comparatively, multi-tenant commercial real estate properties under gross leases often have average initial
lease terms between five and ten years with shorter or fewer options to extend. Rent escalation is also commonly embedded
in the net lease terms as a specified percentage increase of existing rent per year or determined by reference to an inflation
measure such as the Consumer Price Index. With cash flows that are intended to be passive, stable and paid at regular
intervals, net leased real estate is similar, in many ways, to interest-bearing corporate bonds, but with the additional
potential for appreciation in the value of the underlying property.
Investment Strategy
We seek to acquire, own and operate primarily freestanding, commercial real estate properties located in the United
States leased primarily pursuant to triple-net, long-term leases. We focus on investments primarily in retail properties. We
target tenants in industries that we believe are favorably impacted by current macroeconomic trends that support consumer
spending, such as strong and growing employment and positive consumer sentiment, as well as tenants in industries that
have demonstrated resistance to the impact of the growing e-commerce retail sector or who use a physical presence as a
component of their omnichannel strategy. We also seek to invest in properties that are net leased to tenants that we
determine have attractive credit characteristics, stable operating histories and healthy rent coverage levels, are well-located
within their respective markets and have rents at-or-below market rent levels. Furthermore, we believe that the size of our
company allows us, for at least the near term, to focus our investment activities on the acquisition of single properties or
smaller portfolios of properties that represent a transaction size that most of our publicly-traded net lease REIT peers will
not pursue on a consistent basis.
Our strategy for investing in income-producing properties is focused on factors including, but not limited to, long-
term real estate fundamentals, including those markets experiencing significant economic growth. We employ a
methodology for evaluating targeted investments in income-producing properties which includes an evaluation of: (i) the
attributes of the real estate (e.g., location, market demographics, comparable properties in the market, etc.); (ii) an
evaluation of the existing tenant(s) (e.g., credit-worthiness, property level sales, tenant rent levels compared to the market,
etc.); (iii) other market-specific conditions (e.g., tenant industry, job and population growth in the market, local economy,
etc.); and (iv) considerations relating to the Company’s business and strategy (e.g., strategic fit of the asset type, property
management needs, alignment with the Company’s structure, etc.).
We believe that the net leased properties we own and intend to acquire will provide our stockholders with investment
diversification and can deliver strong risk-adjusted returns. We expect the majority of our net leased properties will be
retail properties. We believe the risk-adjusted returns for retail properties within our portfolio are compelling and offer
7
attractive investment yields, rental rates at or below prevailing market rental rates and an investment basis below
replacement cost.
We may also acquire or originate commercial loans and investments associated with commercial real estate located
in the United States. Our investments in commercial loans are generally secured by real estate or the borrower’s pledge of
its ownership interest in an entity that owns real estate. The Company seeks to invest in commercial loans and investments
secured by real estate with the same general fundamentals as our net lease property investments.
Property Portfolio
As of December 31, 2024, the Company owned 134 properties in 35 states. The following is a summary of the relevant
leases attributable to these properties:
Description
Location
Rentable Square
Feet
Annualized Base Rent
($000’s) (1)
Beachside Hospitality Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anna Maria, FL
10,600
1,996
Dicks Sporting Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Victor, NY
120,908
1,871
Walmart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Howell, MI
214,172
1,369
Bass Pro Shops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hermantown, MN
66,033
1,364
Lowe’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Knoxville, TN
142,092
1,363
BJ’s Wholesale Club . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concord, NC
108,532
1,255
Beachside Hospitality Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bradenton Beach, FL
22,131
1,168
At Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concord, NC
108,338
947
Lowe’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston, TX
131,644
917
Kohl’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chandler, AZ
86,584
894
Lowe’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Logan, WV
114,731
870
Burlington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Richland Hills, TX
70,891
859
At Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Canton, OH
89,902
801
Lowe’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adrian, MI
101,287
703
Home Depot (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woodridge, IL
110,626
693
Best Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Downers Grove, IL
62,860
684
Beachside Hospitality Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Longboat Key, FL
6,520
657
At Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Turnersville, NJ
89,460
641
Live Nation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Troy, WI
- (2)
634
Dicks Sporting Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Downers Grove, IL
38,297
630
Academy Sports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florence, SC
58,410
625
Lowe’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fremont, OH
125,357
603
Dicks Sporting Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chesterfield, MI
49,979
603
Crunch Fitness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buford, GA
24,800
514
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Feasterville-Trevose, PA
14,820
509
Best Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lafayette, LA
45,611
507
AMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tyngsborough, MA
39,474
507
Sportsman’s Warehouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Morgantown, WV
30,547
498
Dicks Sporting Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
50,000
496
Dicks Sporting Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McDonough, GA
46,315
495
Party City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oceanside, NY
15,500
490
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Blackwood, NJ
14,820
464
Dicks Sporting Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Glen Allen, VA
23,635
458
Old Time Pottery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Orange Park, FL
84,180
439
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Hartford, CT
12,805
430
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brick, NJ
14,550
418
Best Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dayton, OH
45,535
409
CVS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baton Rouge, LA
13,813
383
HomeGoods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
30,006
375
Verizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
6,034
359
Home Depot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
125,218
353
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decatur, IL
14,820
353
Best Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McDonough, GA
30,038
338
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewater, MD
14,820
328
Verizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Turnersville, NJ
6,027
326
Michaels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
24,000
318
Old Time Pottery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Chicago, IL
78,721
313
Office Depot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albuquerque, NM
30,346
300
Best Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
20,460
297
Ashley HomeStore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dayton, OH
33,310
285
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taylorville, IL
14,550
261
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tacoma, WA
14,125
259
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albany, GA
14,770
258
Walmart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hempstead, TX
52,190
253
8
Marshalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
22,910
245
Walmart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malden, MO
48,081
240
Circle K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indianapolis, IN
4,283
231
Nawabi Hyderabad House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concord, NC
7,480
229
Walgreens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Glen Burnie, MD
14,490
228
7-Eleven (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Olathe, KS
4,165
219
Office Depot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gadsden, AL
23,638
217
Boot Barn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concord, NC
10,037
195
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lynn, MA
9,228
176
Mattress Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richmond, IN
5,108
175
Mattress Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lake City, FL
4,577
170
Tractor Supply Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington Court, OH
39,984
159
Advance Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
St. Paul, MN
7,201
150
Harbor Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington, MO
23,466
150
Advance Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severn, MD
6,876
148
Red Robin (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
4,575
141
O’Reilly Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Angels Camp, CA
7,066
128
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kermit, TX
10,920
126
Burger King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plymouth, NC
3,142
125
Carrabba’s Italian Grill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concord, NC
6,382
124
Harbor Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Midland, MI
14,624
124
Mattress Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gadsden, AL
7,237
122
Tractor Supply Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owensville, MO
38,452
121
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chazy, NY
9,277
119
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auburn, NE
10,577
118
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Odessa, TX
9,127
117
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McKenney, VA
10,531
116
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Willis, TX
9,138
114
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medicine Lodge, KS
10,566
114
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lake City, AR
10,424
114
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amsterdam, OH
10,500
113
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winthrop, NY
9,167
113
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burlington, KS
10,500
113
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burlington, NC
11,394
113
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caneyville, KY
10,604
112
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caney, KS
10,555
112
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cut and Shoot, TX
9,096
112
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sulphur, OK
10,000
112
Advance Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ware, MA
6,889
112
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tipton, MO
10,557
111
Pet Supplies Plus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Canton, OH
8,400
110
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Milford, ME
9,128
110
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demopolis, AL
10,159
110
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Madill, OK
9,682
109
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Superior, NE
10,500
109
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sabetha, KS
10,500
108
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Phillipsburg, KS
10,500
106
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Van Buren, MO
10,500
106
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salem, NY
9,199
105
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plainville, KS
10,500
105
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McGehee, AR
10,993
105
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gladewater, TX
10,111
105
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stilwell, OK
9,828
105
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Town Creek, AL
10,545
104
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tecumseh, NE
10,644
104
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anthony, KS
10,500
104
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bingham, ME
9,345
104
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Harrisville, NY
9,309
104
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Murfreesboro, AR
10,500
104
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Heuvelton, NY
9,342
104
Firestone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pittsburgh, PA
10,629
103
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barker, NY
9,275
102
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limestone, ME
9,167
100
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anderson, AL
10,607
99
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hammond, NY
9,219
98
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Des Arc, AR
10,555
98
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Somerville, TX
9,252
96
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dearing, GA
9,288
95
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seguin, TX
9,155
90
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albuquerque, NM
10,023
85
Re-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jackson, MS
1,920
84
Dollar Tree/Family Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lake Village, AR
14,592
84
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Newtonsville, OH
9,290
83
9
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Del Rio, TX
9,219
83
Advance Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Athens, GA
6,871
78
Re-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leland, MS
3,343
76
Starbucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
1,500
75
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warsaw, NY
14,495
74
O’Reilly Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Duluth, MN
11,182
72
Salon Lofts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Canton, OH
4,000
72
Advance Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ludington, MI
6,604
63
Advance Auto Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Baltimore, MI
6,784
63
Sushi Lovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
1,999
60
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perry, NY
9,181
59
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dansville, NY
9,174
57
Dollar General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ellicottville, NY
9,144
56
Century Theater Center (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reno, NV
52,474
43
Philly Pretzel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
1,505
40
7Brew (3) (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Orange Park, FL
-
-
Chipotle (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Turnersville, NJ
2,627
-
Bounce Hopper (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Victor, NY
20,055
-
Vacant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cadiz, OH
1,292
-
Vacant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lorain, OH
900
-
Vacant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vineland, NJ
3,002
-
3,906,526 $
44,327
(1)
Annualized straight-line base rental income in place as of December 31, 2024.
(2)
The Alpine Valley Music Theatre, leased to Live Nation Entertainment, Inc., is an entertainment venue consisting of a two-sided, open-air,
7,500-seat pavilion; an outdoor amphitheater with a capacity for 37,000; and over 150 acres of green space.
(3)
We are the lessor in a ground lease with the tenant. Rentable square feet represents improvements on the property that revert to us at the expiration
of the lease.
(4)
The Century Theater lease expired on November 30, 2024 and the property was vacant as of December 31, 2024.
(5)
Tenants represent active leases with rent to commence subsequent to December 31, 2024.
Certain individual tenants in the Company’s portfolio of income properties accounted for more than 10% of lease
income from the Company’s income properties during the years ended December 31, 2024 and 2023. No individual tenant
accounted for more than 10% of lease income from the Company’s income properties during the year ended December 31,
2022. For the years ended December 31, 2024 and 2023, Walgreens represented 11% of lease income from the Company’s
income properties. As of December 31, 2024, 11% of the Company’s income property portfolio, based on square footage,
was located in each of the states of New Jersey and Michigan. As of December 31, 2023, 13%, 11%, and 11% of the
Company’s income property portfolio, based on square footage, was located in the states of Texas, New Jersey, and
Michigan, respectively.
Commercial Loans and Investments
Our investments in commercial loans are generally secured by real estate or the borrower’s pledge of its ownership
interest in the entity that owns the real estate. As of December 31, 2024 and 2023, our investments in commercial loans
were all associated with commercial real estate located in the United States, are current and performing, and bear interest
at a fixed rate.
2024 Commercial Loans and Investments Portfolio. During the year ended December 31, 2024, the Company invested
in three commercial loans with a total funding commitment of $31.1 million. The Company also acquired three single-
tenant income properties (“the Tampa Properties”) in the greater Tampa Bay, Florida area for $31.4 million during the
year ended December 31, 2024, through a sale-leaseback transaction that includes a tenant repurchase option. Due to the
existence of the tenant repurchase option, and pursuant to FASB ASC Topic 842, Leases, GAAP requires that the $31.4
million investment be accounted for as a financing arrangement, and accordingly the related assets and corresponding
revenue are included in the Company’s commercial loans and investments in the Company’s consolidated balance sheets
and consolidated statement of operations. However, as the Tampa Properties constitute real estate assets for both legal and
tax purposes, we have included them in the property portfolio when describing our property portfolio and for purposes of
providing statistics related thereto. Also during the year ended December 31, 2024, the Company sold a $13.6 million A-1
participation interest in the Company’s initial $23.4 million portfolio loan. As of December 31, 2024, the Company’s
commercial loan investments portfolio included five construction loans, one mortgage note, and three properties acquired
pursuant to a sale-leaseback transaction whereby the tenant has a future repurchase right, with a total carrying value of
10
$89.6 million. See Note 4, “Commercial Loans and Investments” in the Notes to the Financial Statements for additional
disclosures related to the Company’s commercial loans and investments as of December 31, 2024.
2023 Commercial Loans and Investments Portfolio. During the year ended December 31, 2023, the Company invested
in three commercial loans with a total funding commitment of $38.6 million. As of December 31, 2023, the Company’s
commercial loan investments portfolio included two construction loans and one mortgage note with a total carrying value
of $35.1 million. See Note 4, “Commercial Loans and Investments” in the Notes to the Financial Statements for additional
disclosures related to the Company’s commercial loans and investments as of December 31, 2023.
Management Agreement
On November 26, 2019, the Operating Partnership and PINE entered into a management agreement with the Manager
(the “Management Agreement”). Pursuant to the terms of the Management Agreement, our Manager manages, operates
and administers our day-to-day operations, business and affairs, subject to the direction and supervision of the Board and
in accordance with the investment guidelines approved and monitored by the Board. We pay our Manager a base
management fee equal to 0.375% per quarter of our “total equity” (as defined in the Management Agreement and based
on a 1.5% annual rate), calculated and payable in cash, quarterly in arrears.
Our Manager has the ability to earn an annual incentive fee based on our total stockholder return exceeding an 8%
cumulative annual hurdle rate (the “Outperformance Amount”) subject to a high-water mark price. We would pay our
Manager an incentive fee with respect to each annual measurement period in the amount of the greater of (i) $0.00 and
(ii) the product of (a) 15% multiplied by (b) the Outperformance Amount multiplied by (c) the weighted average shares.
No incentive fee was due for the years ended December 31, 2024, 2023, or 2022.
On July 18, 2024, the Operating Partnership and PINE entered into an amendment (the “Amendment”) to the
Management Agreement with the Manager. The Amendment extended the expiration date of the initial term of the
Management Agreement from November 26, 2024 to January 31, 2025 and the initial term will automatically renew for
an unlimited number of successive one-year periods thereafter, unless the agreement is not renewed or is terminated in
accordance with its terms.
Our independent directors review our Manager’s performance and the management fees annually and, following the
initial term, the Management Agreement may be terminated annually upon the affirmative vote of two-thirds of our
independent directors or upon a determination by the holders of a majority of the outstanding shares of our common stock,
based upon (i) unsatisfactory performance by the Manager that is materially detrimental to us or (ii) a determination that
the management fees payable to our Manager are not fair, subject to our Manager’s right to prevent such termination due
to unfair fees by accepting a reduction of management fees agreed to by two-thirds of our independent directors. We may
also terminate the Management Agreement for cause at any time, including during the initial term, without the payment
of any termination fee, with 30 days’ prior written notice from the Board. During the initial term of the Management
Agreement, we may not terminate the Management Agreement except for cause.
We pay directly, or reimburse our Manager for certain expenses, if incurred by our Manager. We do not reimburse
any compensation expenses incurred by our Manager or its affiliates. Expense reimbursements to our Manager are made
in cash on a quarterly basis following the end of each quarter. In addition, we pay all of our operating expenses, except
those specifically required to be borne by our Manager pursuant to the Management Agreement.
ROFO Agreement
On November 26, 2019, PINE also entered into an Exclusivity and Right of First Offer Agreement with CTO (the
“ROFO Agreement”). During the term of the ROFO Agreement, CTO will not, and will cause each of its affiliates (which
for purposes of the ROFO Agreement will not include our company and our subsidiaries) not to, acquire, directly or
indirectly, a single-tenant, net leased property, unless CTO has notified us of the opportunity and we have affirmatively
rejected the opportunity to acquire the applicable property or properties.
11
The terms of the ROFO Agreement do not restrict CTO or any of its affiliates from providing financing for a third
party’s acquisition of single-tenant, net leased properties or from developing and owning any single-tenant, net leased
property.
Pursuant to the ROFO Agreement, neither CTO nor any of its affiliates (which for purposes of the ROFO Agreement
does not include our company and our subsidiaries) may sell to any third party any single-tenant, net leased property that
was owned by CTO or any of its affiliates as of the closing date of the IPO; or that is developed and owned by CTO or
any of its affiliates after the closing date of the IPO, without first offering us the right to purchase such property.
The term of the ROFO Agreement will continue for so long as the Management Agreement with our Manager is in
effect.
Conflicts of Interest
Conflicts of interest may exist or could arise in the future with CTO and its affiliates, including our Manager, the
individuals who serve as our executive officers and executive officers of CTO, any individual who serves as a director of
our company and as a director of CTO and any limited partner of the Operating Partnership. Conflicts may include, without
limitation: conflicts arising from the enforcement of agreements between us and CTO or our Manager; conflicts in the
amount of time that executive officers and employees of CTO, who are provided to us through our Manager, will spend
on our affairs versus CTO’s affairs; and conflicts in future transactions that we may pursue with CTO and its affiliates.
We do not generally expect to enter into joint ventures with CTO, but if we do so, the terms and conditions of our joint
venture investment will be subject to the approval of a majority of disinterested directors of the Board.
In addition, we are subject to conflicts of interest arising out of our relationships with our Manager. Pursuant to the
Management Agreement, our Manager is obligated to supply us with our senior management team. However, our Manager
is not obligated to dedicate any specific CTO personnel exclusively to us, nor are the CTO personnel provided to us by
our Manager obligated to dedicate any specific portion of their time to the management of our business. Additionally, our
Manager is a wholly owned subsidiary of CTO. All of our executive officers are executive officers and employees of CTO
and one of our officers (John P. Albright) is also a member of CTO’s board of directors. As a result, our Manager and the
CTO personnel it provides to us may have conflicts between their duties to us and their duties to, and interests in, CTO.
We may acquire or sell net leased properties that would potentially fit the investment criteria for our Manager or its
affiliates. Similarly, our Manager or its affiliates may acquire or sell net leased properties that would potentially fit our
investment criteria. Although such acquisitions or dispositions could present conflicts of interest, we nonetheless may
pursue and consummate such transactions. Additionally, we may engage in transactions directly with our Manager or its
affiliates, including the purchase and sale of all or a portion of a portfolio asset. If we acquire a net leased property from
CTO or one of its affiliates or sell a net leased property to CTO or one of its affiliates, the purchase price we pay to CTO
or one of its affiliates or the purchase price paid to us by CTO or one of its affiliates may be higher or lower, respectively,
than the purchase price that would have been paid to or by us if the transaction were the result of arm’s length negotiations
with an unaffiliated third party.
In deciding whether to issue additional debt or equity securities, we will rely, in part, on recommendations made by
our Manager. While such decisions are subject to the approval of the Board, our Manager is entitled to be paid a base
management fee that is based on our “total equity” (as defined in the Management Agreement). As a result, our Manager
may have an incentive to recommend that we issue additional equity securities at dilutive prices.
All of our executive officers are executive officers and employees of CTO. These individuals and other CTO personnel
provided to us through our Manager devote as much time to us as our Manager deems appropriate. However, our executive
officers and other CTO personnel provided to us through our Manager may have conflicts in allocating their time and
services between us, on the one hand, and CTO and its affiliates, on the other. During a period of prolonged economic
weakness or another economic downturn affecting the real estate industry or at other times when we need focused support
and assistance from our Manager and the CTO executive officers and other personnel provided to us through our Manager,
we may not receive the necessary support and assistance we require or that we would otherwise receive if we were self-
managed.
12
Additionally, the ROFO Agreement does contain exceptions to CTO’s exclusivity for opportunities that include only
an incidental interest in single-tenant, net leased properties. Accordingly, the ROFO Agreement will not prevent CTO
from pursuing certain acquisition opportunities that otherwise satisfy our then-current investment criteria.
Our directors and executive officers have duties to our company under applicable Maryland law in connection with
their management of our company. At the same time, PINE GP has fiduciary duties, as the general partner, to the Operating
Partnership and to the limited partners under Delaware law in connection with the management of the Operating
Partnership. These duties as a general partner to the Operating Partnership and its partners may come into conflict with
the duties of our directors and executive officers to us. Unless otherwise provided for in the relevant partnership agreement,
Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards
under which it owes its limited partners the highest duties of loyalty and care and which generally prohibits such general
partner from taking any action or engaging in any transaction as to which it has a conflict of interest. The partnership
agreement provides that in the event of a conflict between the interests of our stockholders on the one hand and the limited
partners of the Operating Partnership on the other hand, PINE GP will endeavor in good faith to resolve the conflict in a
manner not adverse to either our stockholders or the limited partners; provided, however, that so long as we own a
controlling interest in the Operating Partnership, any such conflict that we, in our sole and absolute discretion, determine
cannot be resolved in a manner not adverse to either our stockholders or the limited partners of the Operating Partnership
shall be resolved in favor of our stockholders, and we shall not be liable for monetary damages for losses sustained,
liabilities incurred or benefits not derived by the limited partners in connection with such decisions.
COMPETITION
The real estate business, generally, is highly competitive. We intend to focus on investing in commercial real estate
that produces income primarily through the leasing of assets to tenants and on acquiring or originating commercial loans
and investments associated with commercial real estate located in the United States. To identify investment opportunities
in income-producing real estate assets and commercial loans and investments and to achieve our investment objectives,
we compete with numerous companies and organizations, both public as well as private, of varying sizes, ranging from
organizations with local operations to organizations with national scale and reach, and in some cases, we compete with
individual real estate investors. In all the markets in which we compete to acquire net leased properties, price is the
principal method of competition, with transaction structure and certainty of execution also being significant considerations
for potential sellers. We face competition for acquisitions of real property and acquisitions and originations of commercial
loans and investments from investors, including traded and non-traded public REITs, private equity investors, institutional
investment funds, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers,
insurance companies, mutual funds, investment banking firms, financial institutions, hedge funds, governmental bodies
and other entities, many of which have greater financial resources than we do, a greater ability to borrow funds to acquire
or originate properties or other investments and the ability to accept more risk. This competition may increase the demand
for the types of properties or commercial loans and investments in which we typically invest and, therefore, reduce the
number of suitable investment opportunities available to us and increase the prices paid for such acquisition properties or
commercial loans and investments. This competition will increase if investments in real estate become more attractive
relative to other forms of investment.
As a landlord, we compete in the multi-billion-dollar commercial real estate market with numerous developers and
owners of properties, many of which own properties similar to ours in the same markets in which our properties are located.
Some of our competitors have greater economies of scale, lower costs of capital, access to more resources and greater
name recognition than we do. If our competitors offer space at rental rates below current market rates or below the rental
rates we currently charge our tenants, we may lose our tenants or prospective tenants and we may be pressured to reduce
our rental rates or to offer substantial rent abatements, tenant improvement allowances, early termination rights or below-
market renewal options in order to retain tenants when our leases expire.
REGULATION
General. Our properties are subject to various laws, ordinances and regulations, including those relating to fire and
safety requirements, and affirmative and negative covenants and, in some instances, common area obligations. Our tenants
13
have primary responsibility for compliance with these requirements pursuant to our leases. We believe that each of our
properties has the necessary permits and approvals.
Americans With Disabilities Act. Under Title III of the Americans with Disabilities Act (“ADA”), and
rules promulgated thereunder, in order to protect individuals with disabilities, public accommodations must remove
architectural and communication barriers that are structural in nature from existing places of public accommodation to the
extent “readily achievable.” In addition, under the ADA, alterations to a place of public accommodation or a commercial
facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable
by disabled individuals. The “readily achievable” standard considers, among other factors, the financial resources of the
affected site and the owner, lessor or other applicable person.
Compliance with the ADA, as well as other federal, state and local laws, may require modifications to properties we
currently own or may purchase or may restrict renovations of those properties. Failure to comply with these laws or
regulations could result in the imposition of fines or an award of damages to private litigants, as well as the incurrence of
the costs of making modifications to attain compliance, and future legislation could impose additional obligations or
restrictions on our properties. Although our tenants are generally responsible for all maintenance and repairs of the property
pursuant to our lease, including compliance with the ADA and other similar laws or regulations, we could be held liable
as the owner of the property for a failure of one of our tenants to comply with these laws or regulations.
ENVIRONMENTAL MATTERS
Federal, state and local environmental laws and regulations regulate, and impose liability for, releases of hazardous
or toxic substances into the environment. Under various of these laws and regulations, a current or previous owner, operator
or tenant of real estate may be required to investigate and clean up hazardous or toxic substances, hazardous wastes or
petroleum product releases or threats of releases at the property, and may be held liable to a government entity or to third
parties for property damage and for investigation, clean-up and monitoring costs incurred by those parties in connection
with the actual or threatened contamination. These laws may impose clean-up responsibility and liability without regard
to fault, or whether the owner, operator or tenant knew of or caused the presence of the contamination. The liability under
these laws may be joint and several for the full amount of the investigation, clean-up and monitoring costs incurred or to
be incurred or actions to be undertaken, although a party held jointly and severally liable may seek to obtain contributions
from other identified, solvent, responsible parties of their fair share toward these costs. These costs may be substantial and
can exceed the value of the property. In addition, some environmental laws may create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the contamination. As the owner or operator
of real estate, we may also be liable under common law to third parties for damages and injuries resulting from
environmental contamination emanating from the real estate. The presence of contamination, or the failure to properly
remediate contamination, on a property may adversely affect the ability of the owner, operator or tenant to sell or rent that
property or to borrow using the property as collateral and may adversely impact our investment in that property.
Some of our properties contain, have contained or are adjacent to or near other properties that have contained or
currently contain storage tanks for the storage of petroleum products or other hazardous or toxic substances. Similarly,
some of our properties were used in the past for commercial or industrial purposes, or are currently used for commercial
purposes, that involve or involved the use of petroleum products or other hazardous or toxic substances or are adjacent to
or near properties that have been or are used for similar commercial or industrial purposes. These operations create a
potential for the release of petroleum products or other hazardous or toxic substances, and we could potentially be required
to pay to clean up any contamination. In addition, environmental laws regulate a variety of activities that can occur on a
property, including the storage of petroleum products or other hazardous or toxic substances, air emissions, water
discharges and exposure to lead-based paint. Such laws may impose fines or penalties for violations and may require
permits or other governmental approvals to be obtained for the operation of a business involving such activities. As a result
of the foregoing, we could be materially and adversely affected.
Environmental laws also govern the presence, maintenance, and removal of asbestos-containing materials (“ACM”).
Federal regulations require building owners and those exercising control over a building’s management to identify and
warn, through signs and labels, of potential hazards posed by workplace exposure to installed ACM in their building. The
regulations also have employee training, record keeping and due diligence requirements pertaining to ACM. Significant
14
fines can be assessed for violation of these regulations. As a result of these regulations, building owners and those
exercising control over a building’s management may be subject to an increased risk of personal injury lawsuits by workers
and others exposed to ACM. The regulations may affect the value of a building containing ACM in which we have
invested. Federal, state and local laws and regulations also govern the removal, encapsulation, disturbance, handling and/or
disposal of ACM when those materials are in poor condition or in the event of construction, remodeling, renovation or
demolition of a building. These laws may impose liability for improper handling or a release into the environment of ACM
and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal
injury or improper work exposure associated with ACM.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if
the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne
toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor
or outdoor sources and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne
toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including
allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our
properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne
contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or
other airborne contaminants could expose us to liability from our tenants, employees of our tenants or others if property
damage or personal injury occurs.
We obtain Phase I environmental assessments for properties acquired. Phase I environmental site assessments are
limited in scope and therefore may not reveal all environmental conditions affecting a property. However, if recommended
in the initial assessments, we may undertake additional assessments such as soil and/or groundwater samplings or other
limited subsurface investigations and ACM or mold surveys to test for substances of concern. A prior owner or operator
of a property or historic operations at our properties may have created a material environmental condition that is not known
to us or the independent consultants preparing the site assessments. Material environmental conditions may have arisen
after the review was completed or may arise in the future, and future laws, ordinances or regulations may impose material
additional environmental liability. If environmental concerns are not satisfactorily resolved in any initial or additional
assessments, we may obtain environmental insurance policies to insure against potential environmental risk or loss
depending on the type of property, the availability and cost of the insurance and various other factors we deem relevant.
Our ultimate liability for environmental conditions may exceed the policy limits on any environmental insurance policies
we obtain, if any.
Generally, our leases require the lessee to comply with environmental law and provide that the lessee will indemnify
us for any loss or expense we incur as a result of the lessee’s violation of environmental law or the presence, use or release
of hazardous materials on our property attributable to the lessee. If our lessees do not comply with environmental law, or
we are unable to enforce the indemnification obligations of our lessees, our results of operations would be adversely
affected.
We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or
future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist on
our properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend
funds to remedy environmental problems. If we or our tenants were to become subject to significant environmental
liabilities, we could be materially and adversely affected.
EMPLOYEES
The Company has no employees and is externally managed and advised by our Manager pursuant to the Management
Agreement. Our Manager is a wholly owned subsidiary of CTO. All of our executive officers also serve as executive
officers of CTO, and one of our executive officers and directors, John P. Albright, also serves as an executive officer and
director of CTO.
15
AVAILABLE INFORMATION
The Company maintains a website at www.alpinereit.com. The Company is providing the address to its website solely
for the information of investors. The information on the Company’s website is not a part of, nor is it incorporated by
reference into this Annual Report on Form 10-K. Through its website, the Company makes available, free of charge, its
annual proxy statement, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after the Company electronically files such material with, or furnishes
them to, the SEC. The public may read and obtain a copy of any materials the Company files electronically with the SEC
at www.sec.gov.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks summarized
below in this Item 1A, “Risk Factors” included in this Annual Report on Form 10-K. These risks include, but are not
limited to, the following:
•
We are subject to risks related to the ownership of commercial real estate that could affect the performance and
value of our properties.
•
Adverse changes in U.S., global and local regions or markets that impact our tenants’ businesses may materially
and adversely affect us generally and the ability of our tenants to make rental payments to us pursuant to our
leases.
•
Our business is dependent upon our tenants successfully operating their businesses, and their failure to do so
could materially and adversely affect us.
•
Our assessment that certain of our tenants’ businesses are insulated from e-commerce pressure may prove to be
incorrect, and changes in macroeconomic trends may adversely affect our tenants, either of which could impair
our tenants’ ability to make rental payments to us and thereby materially and adversely affect us.
•
Properties occupied by a single tenant pursuant to a single lease subject us to significant risk of tenant default.
•
Our portfolio has geographic market concentrations that make us susceptible to adverse developments in those
geographic markets.
•
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant
could materially and adversely affect us.
•
Certain of our tenants are not rated by a recognized credit rating agency or do not have an investment grade rating
from such an agency. Leases with unrated or non-investment grade rated tenants may be subject to a greater risk
of default.
•
The decrease in demand for retail space may materially and adversely affect us.
•
We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at
all.
•
The tenants that occupy our properties compete in industries that depend upon discretionary spending by
consumers. A reduction in the willingness or ability of consumers to use their discretionary income in the
businesses of our tenants and potential tenants could adversely impact our tenants’ and potential tenants’
businesses and thereby adversely impact our ability to collect rents and reduce the demand for leasing our
properties.
•
The vacancy of one or more of our properties could result in us having to incur significant capital expenditures
to re-tenant the space.
•
We may be unable to identify suitable property acquisitions or developments, which may impede our growth, and
our future acquisitions and developments may not yield the returns we expect.
•
We face significant competition for tenants, which may adversely impact the occupancy levels of our portfolio
or prevent increases of the rental rates of our properties.
•
A part of our investment strategy is focused on investing in commercial loans and investments which may involve
credit risk or repayment risk.
•
Our origination or acquisition of construction loans exposes us to an increased risk of loss.
16
•
We may invest in fixed-rate loan investments, and an increase in market interest rates may adversely affect the
value of these investments, which could adversely impact our financial condition, results of operations and cash
flows.
•
The commercial loans or similar financings we may acquire that are secured by commercial real estate typically
depend on the ability of the property owner to generate income from operating the property. Failure to do so may
result in delinquency and/or foreclosure.
•
We may suffer losses when a borrower defaults on a loan and the value of the underlying collateral is less than
the amount due.
•
We may experience a decline in the fair value of our real estate assets or investments which could result in
impairments and would impact our financial condition and results of operations.
•
The costs of compliance with or liabilities related to environmental laws may materially and adversely affect us.
•
Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and
costs of remediation.
•
Our senior management team is required to operate two publicly traded companies, CTO and our company, which
could place a significant strain on our senior management team and the management systems, infrastructure and
other resources of CTO on which we rely.
•
We have no employees and are entirely dependent upon our Manager for all the services we require, and we
cannot assure you that our Manager will allocate the resources necessary to meet our business objectives.
•
CTO may be unable to obtain or retain the executive officers and other personnel that it provides to us through
our Manager.
•
The base management fee payable to our Manager pursuant to the Management Agreement is payable regardless
of the performance of our portfolio, which may reduce our Manager’s incentive to devote the time and effort to
seeking profitable investment opportunities for us.
•
The incentive fee payable to our Manager pursuant to the Management Agreement may cause our Manager to
select investments in more risky assets to increase its incentive compensation.
•
There are conflicts of interest in our relationships with our Manager, which could result in outcomes that are not
in our best interests.
•
Termination of the Management Agreement could be difficult and costly, including as a result of payment of
termination fees to our Manager, and may cause us to be unable to execute our business plan, which could
materially and adversely affect us.
•
The Management Agreement with our Manager and the ROFO Agreement with CTO were not negotiated on an
arm’s-length basis and may not be as favorable to us as if they had been negotiated with unaffiliated third parties.
•
Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would
substantially reduce funds available for distributions to our stockholders.
•
Even if we remain qualified as a REIT, we may face other tax liabilities that could reduce our cash flows and
negatively impact our results of operations and financial condition.
•
Failure to make required distributions would subject us to U.S. federal corporate income tax.
•
Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to
incur tax liabilities.
•
The prohibited transactions tax may limit our ability to dispose of our properties.
•
The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse
consequences to our stockholders.
•
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
Risks Related to Our Income Properties Segment
We are subject to risks related to the ownership of commercial real estate that could affect the performance and
value of our properties.
Factors beyond our control can affect the performance and value of our properties. Our core business is the ownership
of commercial net leased properties. Accordingly, our performance is subject to risks incident to the ownership of
commercial real estate, including:
17
•
inability to collect rents from tenants due to financial hardship, including bankruptcy;
•
changes in local real estate conditions in the markets where our properties are located, including the availability
and demand for the properties we own;
•
changes in consumer trends and preferences that affect the demand for products and services offered by our
tenants;
•
adverse changes in national, regional and local economic conditions;
•
inability to lease or sell properties upon expiration or termination of existing leases;
•
environmental risks, including the presence of hazardous or toxic substances on our properties;
•
the subjectivity of real estate valuations and changes in such valuations over time;
•
illiquidity of real estate investments, which may limit our ability to modify our portfolio promptly in
response to changes in economic or other conditions;
•
zoning or other local regulatory restrictions, or other factors pertaining to the local government institutions
which inhibit interest in the markets in which our properties are located;
•
changes in interest rates and the availability of financing;
•
competition from other real estate companies similar to ours and competition for tenants, including
competition based on rental rates, age and location of properties and the quality of maintenance, insurance
and management services;
•
acts of God, including natural disasters and global pandemics, such as the COVID-19 Pandemic, which impact
the United States, which may result in uninsured losses;
•
acts of war or terrorism, including consequences of terrorist attacks;
•
changes in tenant preferences that reduce the attractiveness and marketability of our properties to
tenants or cause decreases in market rental rates;
•
costs associated with the need to periodically repair, renovate or re-lease our properties;
•
increases in the cost of our operations, particularly maintenance, insurance or real estate taxes
which may occur even when circumstances such as market factors and competition cause a reduction in our
revenues;
•
changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related
costs of compliance with laws and regulations, fiscal policies and ordinances including in response to global
pandemics whereby our tenants’ businesses are forced to close or remain open on a limited basis only; and
•
commodities prices.
The occurrence of any of the risks described above may cause the performance and value of our properties to decline,
which could materially and adversely affect us.
Adverse changes in U.S., global and local regions or markets that impact our tenants’ businesses may materially
and adversely affect us generally and the ability of our tenants to make rental payments to us pursuant to our leases.
Our results of operations, as well as the results of operations of our tenants, are sensitive to changes in U.S., global
and local regions or markets that impact our tenants’ businesses. Adverse changes or developments in U.S., global or
regional economic conditions may impact our tenants’ financial condition, which may adversely impact their ability to
make rental payments to us pursuant to the leases they have with us and may also impact their current or future leasing
practices. Adverse economic conditions such as high unemployment levels, rising interest rates, increased tax rates and
increasing fuel and energy costs may have an impact on the results of operations and financial conditions of our tenants,
which would likely adversely impact us. During periods of economic slowdown and declining demand for real estate, we
may experience a general decline in rents or increased rates of default under our leases. A lack of demand for rental space
could adversely affect our ability to maintain our current tenants and gain new tenants, which may affect our growth,
profitability and ability to pay dividends.
Our business is dependent upon our tenants successfully operating their businesses, and their failure to do so could
materially and adversely affect us.
Most of our income properties are occupied by a single tenant. Therefore, the success of our investments in these
properties is materially dependent upon the performance of each property’s respective tenants. The financial performance
18
of any one of our tenants is dependent on the tenant’s individual business, its industry and, in many instances, the
performance of a larger business network that the tenant may be affiliated with or operate under. The financial performance
of any one of our tenants could be adversely affected by poor management, unfavorable economic conditions in general,
changes in consumer trends and preferences that decrease demand for a tenant’s products or services or other factors,
including the impact of a global pandemic which affects the United States, over which neither they nor we have control.
Our portfolio includes properties leased to single tenants that operate in multiple locations, which means we own multiple
properties operated by the same tenant. To the extent we own multiple properties operated by one tenant, the general failure
of that single tenant or a loss or significant decline in its business could materially and adversely affect us.
At any given time, any tenant may experience a decline in its business that may weaken its operating results or the
overall financial condition of individual properties or its business as a whole. Any such decline may result in our tenant
failing to make rental payments when due, declining to extend a lease upon its expiration, delaying occupancy of our
property or the commencement of the lease or becoming insolvent or filing for bankruptcy protection. We depend on our
tenants to operate their businesses at the properties we own in a manner which generates revenues sufficient to allow them
to meet their obligations to us, including their obligations to pay rent, maintain certain insurance coverage, pay real estate
taxes, make repairs and otherwise maintain our properties. The ability of our tenants to fulfill their obligations under our
leases may depend, in part, upon the overall profitability of their operations. Cash flow generated by certain tenant
businesses may not be sufficient for a tenant to meet its obligations to us pursuant to the applicable lease. We could be
materially and adversely affected if a tenant representing a significant portion of our operating results or a number of our
tenants were unable to meet their obligations to us.
Our assessment that certain of our tenants’ businesses are insulated from e-commerce pressure may prove to be
incorrect, and changes in macroeconomic trends may adversely affect our tenants, either of which could impair our
tenants’ ability to make rental payments to us and thereby materially and adversely affect us.
We invest in properties leased, in many instances, to tenants engaged in businesses that we believe are generally
insulated from the impact of e-commerce. While we believe our assessment to be accurate, businesses previously thought
to be resistant to the pressure of the increasing level of e-commerce have ultimately been proven to be susceptible to
competition from e-commerce. Overall business conditions and the impact of technology, particularly in the retail industry,
are rapidly changing, and our tenants may be adversely affected by technological innovation, changing consumer
preferences and competition from non-traditional sources. To the extent our tenants face increased competition from non-
traditional competitors, such as internet vendors, their businesses could suffer. There can be no assurance that our tenants
will be successful in meeting any new competition, and a deterioration in our tenants’ businesses could impair their ability
to meet their lease obligations to us and thereby materially and adversely affect us.
Additionally, we believe that many of the businesses operated by our tenants are benefiting from macroeconomic
trends that support consumer spending, such as low unemployment and positive consumer sentiment. Economic conditions
are generally cyclical, and developments that discourage consumer spending, such as increasing unemployment, wage
stagnation, decreases in the value of real estate, inflation or increasing interest rates, could adversely affect our tenants,
impair their ability to meet their lease obligations to us and materially and adversely affect us.
Properties occupied by a single tenant pursuant to a single lease subject us to significant risk of tenant default.
Most of our properties are occupied by a single tenant. Therefore, the financial failure of, or default in payment by, a
tenant under its lease is likely to cause a significant reduction or complete cessation of our rental revenue from that property
and possibly a reduction in the value of the property. We may also experience difficulty or a significant delay in re-leasing
or selling such property. This risk is magnified in situations where we lease multiple properties to a single tenant and the
financial failure of the tenant’s business affects more than a single property. A failure or default by such a tenant could
reduce or eliminate rental revenue from multiple properties and reduce the value of such properties, which could materially
and adversely affect us.
We may experience a decline in the fair value of our real estate assets which could result in impairments and would
impact our financial condition and results of operations.
19
A decline in the fair market value of our long-lived assets may require us to recognize an impairment against such
assets (as defined by Financial Accounting Standards Board, or the FASB, authoritative accounting guidance) if certain
conditions or circumstances related to an asset were to change and we were to determine that, with respect to any such
asset, that the cash flows no longer support the carrying value of the asset. The fair value of our long-lived assets depends
on market conditions, including estimates of future demand for these assets, and the revenues that can be generated from
such assets. If such a determination were to be made, we would recognize the estimated unrealized losses through earnings
and write down the depreciated cost of such assets to a new cost basis, based on the fair value of such assets on the date
they are considered to be impaired. Such impairment charges reflect non-cash losses at the time of recognition, and
subsequent dispositions or sales of such assets could further affect our future losses or gains, as they are based on the
difference between the sales price received and the adjusted depreciated cost of such assets at the time of sale.
Our portfolio has geographic market concentrations that make us susceptible to adverse developments in those
geographic markets.
In addition to general, regional, national, and global economic conditions, our operating performance is impacted by
the economic conditions of the specific geographic markets in which we have concentrations of properties. Our portfolio
includes substantial holdings in New Jersey and Michigan as of December 31, 2024 (based on square footage). Our
geographic concentrations could adversely affect our operating performance if conditions become less favorable in any of
the states or markets within such states in which we have a concentration of properties. Such geographic concentrations
could be heightened by the fact that our investments may be concentrated in certain areas that are affected by epidemics
or pandemics such as COVID-19 more than other areas. We cannot assure you that any of our markets will grow, not
experience adverse developments or that underlying real estate fundamentals will be favorable to owners and operators of
commercial properties. Our operations may also be affected if competing properties are built in our markets. A downturn
in the economy in the states or regions in which we have a concentration of properties, or markets within such states or
regions, could adversely affect our tenants operating businesses in those states or regions, impair their ability to pay rent
to us and thereby, materially and adversely affect us.
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant
could materially and adversely affect us.
We have in the past and may in the future have significant tenant and property concentrations. In the event that a
tenant that occupies a significant number of our properties or whose lease payments represent a significant portion of our
rental revenue, were to experience financial difficulty or file for bankruptcy protection, it could have a material adverse
effect on us.
Certain of our tenants are not rated by a recognized credit rating agency or do not have an investment grade rating
from such an agency. Leases with unrated or non-investment grade rated tenants may be subject to a greater risk of
default.
As of December 31, 2024, 49% of our tenants or parent entities thereof (based on annualized straight-line base rent)
were not rated or did not have an investment grade credit rating from a recognized rating agency. Leases with non-
investment grade or unrated tenants may be subject to a greater risk of default. Unrated tenants or non-investment grade
tenants may also be more likely to experience financial weakness or file for bankruptcy protection than tenants with
investment grade credit ratings. When we consider the acquisition of a property with an in-place lease with an unrated or
non-investment grade rated tenant or leasing a property to a tenant that does not have a credit rating or does not have an
investment grade rating, we evaluate the strength of the proposed tenant’s business at the property level and at a corporate
level, if applicable, and may consider the risk of tenant/company insolvency using internally developed methodologies or
assessments provided by third parties. If our evaluation of an unrated or non-investment grade tenant’s creditworthiness is
inaccurate, the default or bankruptcy risk related to the tenant may be greater than anticipated. In the event that any of our
unrated tenants were to experience financial weakness or file for bankruptcy protection, it could have a material adverse
effect on us.
The decrease in demand for retail space may materially and adversely affect us.
20
As of December 31, 2024, 100% of leases based on annualized straight-line base rent were with tenants operating
retail businesses. In the future, we intend to acquire additional properties leased to a single tenant operating a retail business
at the property. Accordingly, decreases in the demand for leasing retail space may have a greater adverse effect on us than
if we had fewer investments in retail properties. The market for leasing of retail space has historically been adversely
affected by weakness in the national, regional and local economies, the adverse financial condition of some large retail
companies, consolidation in the retail industry, the excess amount of retail space in a number of markets and increasing e-
commerce pressure. To the extent that adverse conditions arise or continue, they are likely to negatively affect market
rents for retail space and could materially and adversely affect us.
We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at
all.
Our results of operations depend on our ability to lease our properties, including renewing expiring leases, leasing
vacant space and re-leasing space in properties where leases are expiring, and leasing space related to new project
development. In leasing or re-leasing our properties, we may be unable to optimize our tenant mix or execute leases on
more economically favorable terms than the prior in-place lease. Our tenants may decline, or may not have the financial
resources available, to renew their leases, and there can be no assurance that leases that are renewed will have terms that
are as economically favorable to us as the expiring lease terms. If tenants do not renew their leases as they expire, we will
have to source new tenants to lease our properties, and there can be no assurance that we will be able to find new tenants
or that our properties will be re-leased at rental rates equal to or above the previous in-place lease or current average rental
rates or that substantial rent abatements, tenant improvement allowances, early termination rights or below-market renewal
options will not be offered to attract new tenants. We may experience increased costs in connection with re-leasing our
properties, which could materially and adversely affect us.
Certain provisions of our leases may be unenforceable.
Our rights and obligations with respect to our leases are governed by written agreements. A court could determine
that one or more provisions of such an agreement are unenforceable. We could be adversely impacted if this were to
happen with respect to a property or group of properties.
The bankruptcy or insolvency of any of our tenants could result in the termination of such tenant’s lease and
material losses to us.
The occurrence of a tenant bankruptcy or insolvency in most cases diminishes the income we receive from that tenant’s
lease or leases, or forces us to re-tenant the affected property as a result of a default of the in-place tenant or a rejection of
a tenant lease by a bankruptcy court. When a tenant files for bankruptcy protection or becomes insolvent, federal law may
prohibit us from evicting such tenant based solely upon such bankruptcy or insolvency. In addition, a bankrupt or insolvent
tenant may be authorized to reject and terminate its lease or leases with us. Any claims against such bankrupt tenant for
unpaid rent or future rent would be subject to statutory limitations that would likely result in our receipt of rental revenues
that are substantially less than the contractually specified rent we are owed under the lease or leases. In addition, any claim
we have for unpaid past rent, if any, may not be paid in full. We may also be unable to re-lease a property in which the in-
place lease was not terminated or rejected or to re-lease it on comparable or more favorable terms. As a result, tenant
bankruptcies or insolvencies may materially and adversely affect us.
During the three months ended March 31, 2023, one of our tenants under three separate master leases filed for
bankruptcy protection and ultimately liquidation, resulting in the termination of such master leases, which covered seven
convenience store properties. During the year ended December 31, 2023, the Company recorded a $2.9 million impairment
charge representing the provision for losses related to these seven convenience store properties within our income
properties segment. The seven leases underlying these seven convenience store properties were rejected as a part of the
bankruptcy proceedings during August of 2023. The impairment charge of $2.9 million was equal to the estimated sales
prices for these seven convenience store properties (as set forth in executed letters of intent at the time the impairment was
estimated), less the book value of the assets as of December 31, 2023, less estimated costs to sell. During the year ended
December 31, 2024, the Company recorded an additional $1.1 million impairment charge representing the provision for
losses related to the same portfolio of convenience store properties within our income properties segment. The impairment
21
charge of $1.1 million is equal to the estimated sales prices for these assets pursuant to letters of intent for sale executed
during the year ended December 31, 2024, less the book value of the assets, less estimated costs to sell. Our estimated
costs to sell include certain property improvements, which are estimated at $0.6 million.
We may not acquire the properties that we evaluate in our pipeline.
We generally seek to maintain a robust pipeline of investment opportunities. Transactions may fail to close for a
variety of reasons, including the discovery of previously unknown liabilities or other items uncovered during our diligence
process. Similarly, we may never execute binding purchase agreements with respect to properties that are currently subject
to non-binding letters of intent, and properties with respect to which we are negotiating may never lead to the execution
of any letter of intent. For many other reasons, we may not ultimately acquire the properties in our pipeline.
As we continue to acquire properties, we may decrease or fail to increase the diversity of our portfolio.
While we generally seek to maintain or increase our portfolio’s tenant, geographic and industry diversification with
future acquisitions, it is possible that we may determine to consummate one or more acquisitions that actually decrease
our portfolio’s diversity. If our portfolio becomes less diverse, our business will be more sensitive to tenant or market
factors, including the bankruptcy or insolvency of tenants, to changes in consumer trends of a particular industry and to a
general economic downturn or downturns in a market or particular geographic area.
We may obtain only limited warranties when we acquire a property and may only have limited recourse if our due
diligence did not identify any issues that may subject us to unknown liabilities or lower the value of our property, which
could adversely affect our financial condition and ability to make distributions to you.
The seller of a property often sells the property in its “as is” condition on a “where is” basis and “with all faults,”
without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may
contain only limited warranties, representations and indemnifications that will survive for only a limited period after the
closing. The acquisition of, or purchase of, properties with limited warranties increases the risk that we may lose some or
all of our invested capital in the property, lose rental income from that property or may be subject to unknown liabilities
with respect to such properties.
Many of the tenants that occupy our properties compete in industries that depend upon discretionary spending by
consumers. A reduction in the willingness or ability of consumers to use their discretionary income in the businesses
of our tenants and potential tenants could adversely impact our tenants’ business and thereby adversely impact our
ability to collect rents and reduce the demand for leasing our properties.
Certain properties in our portfolio are leased to tenants operating retail, service-oriented or experience-based
businesses. Sporting goods, home improvement, dollar stores, casual dining, home furnishings, pharmacy, consumer
electronics and grocery represent a significant portion of the industries in our portfolio. The success of most of the tenants
operating businesses in these industries depends on consumer demand and, more specifically, the willingness of consumers
to use their discretionary income to purchase products or services from our tenants. The ability of consumers to use their
discretionary income may be impacted by issues including a global pandemic that impacts the United States. A prolonged
period of economic weakness, another downturn in the U.S. economy or accelerated dislocation of these industries due to
the impact of e-commerce, could cause consumers to reduce their discretionary spending in general or spending at these
locations in particular, which could have a material and adverse effect on us.
The vacancy of one or more of our properties could result in us having to incur significant capital expenditures to
re-tenant the space.
The loss of a tenant, either through lease expiration or tenant bankruptcy or insolvency, may require us to spend
significant amounts of capital to renovate the property before it is suitable for a new tenant and cause us to incur significant
costs to source new tenants. In many instances, the leases we enter into or assume through acquisition are for properties
that are specifically suited to the particular business of our tenants. Because these properties have been designed or
physically modified for a particular tenant, if the current lease is terminated or not renewed, we may be required to renovate
22
the property at substantial costs, decrease the rent we charge or provide other concessions in order to lease the property to
another tenant. In addition, in the event we decide to sell the property, we may have difficulty selling it to a party other
than the tenant due to the special purpose for which the property may have been designed or modified. This potential
limitation on our ability to sell a property may limit our ability to quickly modify our portfolio in response to changes in
our tenants’ business prospects, economic or other conditions, including tenant demand. These limitations may materially
and adversely affect us.
We may be unable to identify and complete suitable property acquisitions or developments, which may impede our
growth, and our future acquisitions and developments may not yield the returns we expect.
Our ability to expand through acquisitions and developments requires us to identify and complete acquisitions and
new property developments that are consistent with our investment and growth strategy and our investment criteria and to
successfully integrate newly acquired properties into our portfolio. Our Manager continually evaluates investment
opportunities for us, but our ability to acquire or develop new properties on favorable terms and successfully operate them
may be constrained by the following significant risks:
•
we face competition from commercial developers and other real estate investors with significant capital, including
REITs and institutional investment funds, which may be able to accept more risk than we can prudently manage,
including risks associated with paying higher acquisition prices;
•
we face competition from other potential acquirers which may significantly increase the purchase price for a
property we acquire, which could reduce our growth prospects;
•
we may incur significant costs and divert management attention in connection with evaluating and negotiating
potential acquisitions and developments, including ones that we are unable to complete;
•
we may acquire properties that are not accretive to our results of operations upon acquisition, and we may be
unsuccessful in managing and leasing such properties in accordance with our expectations;
•
our cash flow from an acquired or developed property may be insufficient to meet our required principal and
interest payments with respect to debt used to finance the acquisition or development of such property;
•
we may discover unexpected issues, such as unknown liabilities, during our due diligence investigation of a
potential acquisition or other customary closing conditions may not be satisfied, causing us to abandon an
investment opportunity after incurring expenses related thereto;
•
we may fail to obtain financing for an acquisition or new property development on favorable terms or at all;
•
we may spend more than budgeted amounts to make necessary improvements or renovations to acquired
properties;
•
market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and
•
we may acquire properties subject to (i) liabilities without any recourse, or with only limited recourse, with
respect to unknown liabilities such as liabilities for clean-up of undisclosed environmental contamination not
revealed in Phase I environmental site assessments or otherwise through due diligence, (ii) claims by tenants,
vendors or other persons dealing with the former owners of the properties, (iii) liabilities incurred in the ordinary
course of business, and (iv) claims for indemnification by general partners, directors, officers and others
indemnified by the former owners of the properties.
If any of these risks are realized, we may be materially and adversely affected.
We may be unable to complete acquisitions of properties owned by CTO that are covered by the ROFO Agreement,
and any completed acquisitions of such properties may not yield the returns we expect.
Although the ROFO Agreement provides us with a right of first offer with respect to certain single-tenant, net leased
properties owned by CTO, there can be no assurance that CTO will elect to sell these properties in the future. Even if CTO
elects to sell these properties in the future, we may be unable to reach an agreement with CTO on the terms of the purchase
of such properties or may not have the funds or ability to finance the purchase of such properties. Accordingly, there can
be no assurance that we will be able to acquire any properties covered by the ROFO Agreement in the future. Further,
even if we are able to acquire properties covered by the ROFO Agreement, there is no guarantee that such properties will
be able to maintain their historical performance, or that we will be able to realize the same returns from those properties
as CTO.
23
We face significant competition for tenants, which may adversely impact the occupancy levels of our portfolio or
prevent increases of the rental rates of our properties.
We compete with numerous developers, owners and operators of net leased properties, many of which are much larger
and own properties similar to ours in the same markets in which our properties are located. The size and financial
wherewithal of our competitors may allow them to offer space at rental rates below current market rates or below the rental
rates we charge our tenants. As a result, we may lose existing tenants or fail to obtain future tenants, and the downward
pressure caused by these other owners, operators and developers may cause us to reduce our rental rates or to offer more
substantial rent abatements, tenant improvements, early termination rights or below-market renewal options in order to
retain tenants when our leases expire. Competition for tenants could adversely impact the occupancy levels of our portfolio
or prevent increases of the rental rates of our properties, which could materially and adversely affect us.
Inflation may materially and adversely affect us and our tenants.
Increased inflation has in the past and could again in the future have an adverse impact on interest rates, which has
negatively impacted the cost of our or our tenants’ variable rate debt and would likely negatively impact the cost of any
variable rate debt that we obtain in the future. During times when inflation is increasing at a greater rate than the increases
in rent provided by our leases, our rent levels will not keep up with the costs associated with rising inflation. Increased
costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases they might
achieve in revenues, which may adversely affect the tenants’ ability to pay rent owed to us.
The redevelopment or renovation of our properties may cause us to experience unexpected costs and have other
risks that could materially and adversely affect us.
We may in the future redevelop, significantly renovate or otherwise invest additional capital in our properties to
improve them and enhance the opportunity for achieving attractive risk-adjusted returns. These activities are subject to a
number of risks, including risks associated with construction work and risks of cost overruns due to construction delays
or other factors that may increase the expected costs of a project. In addition, we may incur costs in connection with
projects that are ultimately not pursued to completion. Any of our redevelopment or renovation projects may be financed.
If such financing is not available on acceptable terms, our redevelopment and renovation activities may not be pursued or
may be curtailed. In addition, such activities would likely reduce the available borrowing capacity on the Credit Facility
or any other credit facilities that we may have in place in the future, which would limit our ability to use those sources of
capital for the acquisition of properties and other operating needs. The risks associated with redevelopment and renovation
activities, including but not necessarily limited to those noted above, could materially and adversely affect us.
Our real estate investments are generally illiquid, which could significantly affect our ability to respond to market
changes or adverse changes relating to our tenants or in the performance of our properties.
The real estate investments made, and expected to be made, by us are relatively difficult for us to sell quickly. As a
result, our ability to make rapid adjustments in the size and content of our portfolio in response to economic or other
conditions is limited. Illiquid assets typically experience greater price volatility, as a ready market does not exist, and can
be more difficult to value. In addition, validating third party pricing for illiquid assets may be more subjective than more
liquid assets. As a result, if we are required to quickly liquidate all or a portion of our portfolio, we may realize significantly
less than the value at which we have previously recorded our assets.
In addition, the Internal Revenue Code of 1986, as amended (the “Code”), imposes restrictions on a REIT’s ability to
dispose of properties that are not applicable to other types of real estate companies. In particular, the tax laws applicable
to REITs effectively require that we hold our properties for investment, rather than primarily for sale in the ordinary course
of business, which may cause us to forgo or defer sales of properties that otherwise would be in our best interest. Therefore,
we may not be able to vary our portfolio in response to economic or other conditions promptly or on favorable terms,
which may materially and adversely affect us.
We may not be able to dispose of properties we target for sale to recycle our capital.
24
Although we may seek to selectively sell properties to recycle our capital, we may be unable to sell properties targeted
for disposition due to adverse market or other conditions, or not achieve the pricing or timing that is consistent with our
expectations. This may adversely affect, among other things, our ability to deploy capital into the acquisition of other
properties and the execution of our overall operating strategy, which could, consequently, materially and adversely affect
us.
The development of new projects and/or properties may cause us to experience unexpected costs and have other
risks that could materially and adversely affect us.
We may develop new projects to enhance the opportunity for achieving attractive risk-adjusted returns. New project
development is subject to a number of risks, including risks associated with the availability and timely receipt of zoning
and other regulatory approvals, the timely completion of construction (including risks from factors beyond our control,
such as weather, labor conditions or material shortages) and risks of cost overruns due to construction delays or other
factors that may increase the expected costs of a project. These risks could result in substantial unanticipated delays and,
under certain circumstances, provide a tenant the opportunity to delay rent commencement, reduce rent or terminate a
lease. In addition, we may incur costs in connection with projects that are ultimately not pursued to completion. Any new
development projects may be financed. If such financing is not available on acceptable terms, our development activities
may not be pursued or may be curtailed. In addition, such activities would likely reduce the available borrowing capacity
on the revolving credit facility or any other credit facilities that we may have in place in the future, which would limit our
ability to use those sources of capital for the acquisition of properties and other operating needs. The risks associated with
new project development activities, including but not necessarily limited to those noted above, could materially and
adversely affect us.
The success of our activities related to new project development in which we will retain an ownership interest is
partly dependent on the availability of suitable undeveloped land at acceptable prices.
Our success in developing projects that we will retain an ownership interest in is partly dependent upon the availability
of undeveloped land suitable for the intended development. The availability of undeveloped land for purchase at acceptable
prices depends on a number of factors outside of our control, including the risk of competitive over-bidding on land and
governmental regulations that restrict the potential uses of land. If the availability of suitable land opportunities decreases,
the number of development projects we may be able to undertake could be reduced. Thus, the lack of availability of suitable
land opportunities could have a material adverse effect on our results of operations and growth prospects.
Risks Related to Our Commercial Loans and Investments Segment
A part of our investment strategy is focused on investing in commercial loans and investments which may involve
credit risk.
We have invested in commercial loans secured by commercial real estate and may from time to time in the future
opportunistically invest in additional commercial loans secured by commercial real estate or similar financings secured by
real estate. Investments in commercial loans or similar financings of real estate involve credit risk with regard to the
borrower, the borrower’s operations and the real estate that secures the financing. The credit risks include, but are not
limited to, the ability of the borrower to execute their business plan and strategy, the ability of the borrower to sustain
and/or improve the operating results generated by the collateral property, the ability of the borrower to continue as a going
concern, and the risk associated with the market or industry in which the collateral property is utilized. Our evaluation of
the investment opportunity in a mortgage loan or similar financing includes these elements of credit risk as well as other
underwriting criteria and factors. Further, we may rely on third party resources to assist us in our investment evaluation
process and otherwise in conducting customary due diligence. Our underwriting of the investment or our estimates of
credit risk may not prove to be accurate, as actual results may vary from our estimates. In the event we underestimate the
performance of the borrower and/or the underlying real estate which secures our commercial loan or financing, we may
experience losses or unanticipated costs regarding our investment and our financial condition, results of operations, and
cash flows may be adversely impacted.
25
Our commercial loans and investments segment is also generally exposed to risks associated with real estate
investments.
Any deterioration of real estate fundamentals generally, and in the United States in particular, could negatively impact
the performance of our commercial loans and investments segment by making it more difficult for borrowers to satisfy
their debt payment obligations, increasing the default risk applicable to borrowers and making it relatively more difficult
for us to generate attractive risk-adjusted returns in our commercial loans and investments segment. Real estate investments
are subject to various risks, including the risks described elsewhere in this Form 10-K with respect to the properties that
we own directly. Our borrowers may be impacted by these same risks, which may make it more difficult for them to satisfy
their debt payment obligations to us.
Our origination or acquisition of construction loans exposes us to an increased risk of loss.
We have originated, and may in the future, originate or acquire additional construction loans. If we fail to fund our
entire commitment on a construction loan or if a borrower otherwise fails to complete the construction of a project, there
could be adverse consequences associated with the loan, including, but not limited to: a loss of the value of the property
securing the loan, especially if the borrower is unable to raise funds to complete construction from other sources; a
borrower claim against us for failure to perform under the loan documents; increased costs to the borrower that the
borrower is unable to pay; a bankruptcy filing by the borrower; and abandonment by the borrower of the collateral for the
loan. A borrower default on a construction loan where the property has not achieved completion poses a greater risk than
a conventional loan, as completion would be required before the property is able to generate revenue. The process of
foreclosing on a property is time-consuming, and we may incur significant expense if we foreclose on a property securing
a loan under these or other circumstances.
Our investments in construction loans require us to make estimates about the fair value of land improvements that
may be challenged by the Internal Revenue Service (“IRS”).
We have originated and may in the future originate or acquire additional construction loans, the interest from which
will be qualifying income for purposes of the REIT income tests, provided that the loan value of the real property securing
the construction loan is equal to or greater than the highest outstanding principal amount of the construction loan during
any taxable year. For purposes of construction loans, the loan value of the real property is the fair value of the land plus
the reasonably estimated cost of the improvements or developments (other than personal property) that will secure the loan
and that are to be constructed from the proceeds of the loan. There can be no assurance that the IRS would not challenge
our estimate of the loan value of the real property.
We may invest in fixed-rate loan investments, and an increase in interest rates may adversely affect the value of
these investments, which could adversely impact our financial condition, results of operations and cash flows.
Increases in interest rates may negatively affect the market value of our investments, particularly any fixed-rate
commercial loans or other financings we have invested in. Generally, any fixed-rate commercial loans or other financings
will be more negatively affected by rising interest rates than adjustable-rate assets. Reductions in the fair value of our
investments could decrease the amounts we may borrow to purchase additional commercial loans or similar financing
investments, which could impact our ability to increase our operating results and cash flows. Furthermore, if our borrowing
costs are rising while our interest income is fixed for the fixed-rate investments, the spread between our borrowing costs
and the fixed-rate we earn on the commercial loans or similar financing investments will contract or could become negative
which would adversely impact our financial condition, results of operations, and cash flows.
The commercial loans or similar financings we have acquired and may acquire in the future that are secured by
commercial real estate typically depend on the ability of the property owner to generate income from operating the
property. Failure to do so may result in delinquency and/or foreclosure.
Commercial loans are secured by commercial property and are subject to risks of delinquency and foreclosure and
therefore risk of loss. The ability of a borrower to repay a loan secured by an income-producing property typically is
dependent primarily upon the successful operation of such property rather than upon the existence of independent income
26
or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan
may be impaired. In the event of any default under a commercial loan held directly by us, we will bear a risk of loss of
principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the
commercial loan, which could have a material adverse effect on our financial condition, operating results and cash flows.
In the event of the bankruptcy of a commercial loan borrower, the mortgage loan to such borrower will be deemed to be
secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the
bankruptcy court), and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or
debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a loan can be an expensive and
lengthy process, which could have a substantial negative effect on our anticipated return on the foreclosed commercial
loan. If the borrower is unable to repay a mortgage loan or similar financing, our inability to foreclose on the asset in a
timely manner, and/or our inability to obtain value from reselling or otherwise disposing of the asset for an amount equal
to our investment basis, would adversely impact our financial condition, results of operations, and cash flows.
We may suffer losses when a borrower defaults on a loan and the value of the underlying collateral is less than the
amount due.
If a borrower defaults on a non-recourse loan, we will only have recourse to the real estate-related assets collateralizing
the loan. If the underlying collateral value is less than the loan amount, we will suffer a loss. Conversely, commercial loans
we invest in may be unsecured or be secured only by equity interests in the borrowing entities. These loans are subject to
the risk that other lenders in the capital stack may be directly secured by the real estate assets of the borrower or may
otherwise have a superior right to repayment. Upon a default, those collateralized lenders would have priority over us with
respect to the proceeds of a sale of the underlying real estate. In such cases, we may lack control over the underlying asset
collateralizing our loan or the underlying assets of the borrower before a default and, as a result, the value of the collateral
may be reduced by acts or omissions by owners or managers of the assets.
Commercial loans we may invest in may be backed by individual or corporate guarantees from borrowers or their
affiliates which guarantees are not secured. If the guarantees are not fully or partially secured, we typically rely on financial
covenants from borrowers and guarantors which are designed to require the borrower or guarantor to maintain certain
levels of creditworthiness. Should we not have recourse to specific collateral pledged to satisfy such guarantees or recourse
loans, we will have recourse as an unsecured creditor only to the general assets of the borrower or guarantor, some or all
of which may be pledged as collateral for other lenders. There can be no assurance that a borrower or guarantor will comply
with its financial covenants, or that sufficient assets will be available to pay amounts owed to us under our loans and
guarantees. Because of these factors, we may suffer additional losses which could have a material adverse effect on our
financial condition, operating results and cash flows.
Upon a borrower bankruptcy, we may not have full recourse to the assets of the borrower to satisfy our loan.
Additionally, in some instances, our loans may be subordinate to other debt of certain borrowers. If a borrower defaults
on our loan or on debt senior to our loan, or a borrower files for bankruptcy protection, our loan will be satisfied only after
the senior debt receives payment. Where debt senior to our loan exists, the presence of inter-creditor arrangements may
limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through
“standstill” periods), and control decisions made in bankruptcy proceedings. Bankruptcy and borrower litigation can
significantly increase collection costs and the time needed for us to acquire title to the underlying collateral (if applicable),
during which time the collateral and/or a borrower’s financial condition may decline in value, causing us to suffer
additional losses.
If the value of collateral underlying a loan declines, or interest rates increase during the term of a loan, a borrower
may not be able to obtain the necessary funds to repay our loan at maturity through refinancing because the underlying
property revenue cannot satisfy the debt service coverage requirements necessary to obtain new financing. If a borrower
is unable to repay our loan at maturity, we could suffer additional loss which may adversely impact our financial condition,
operating results and cash flows.
As a result of any of the above factors or events, the losses we may suffer could adversely impact our financial
condition, results of operations and cash flows.
27
We could fail to continue to qualify as a REIT if the IRS successfully challenges our treatment of any mezzanine
loans in which we invest.
We may, in the future, originate or acquire mezzanine loans, which are loans secured by equity interests in an entity
that directly or indirectly owns real property, rather than by a direct mortgage of the real property. In Revenue Procedure
2003-65, the IRS established a safe harbor under which loans secured by a first priority security interest in ownership
interests in a partnership or limited liability company owning real property will be treated as real estate assets for purposes
of the REIT asset tests, and interest derived from those loans will be treated as qualifying income for both the 75% and
95% gross income tests, provided several requirements are satisfied. Although Revenue Procedure 2003-65 provides a
safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. Moreover, our mezzanine loans
may not meet all of the requirements for reliance on the safe harbor. Consequently, there can be no assurance that the IRS
will not challenge our treatment of such loans as qualifying real estate assets, which could adversely affect our ability to
continue to qualify as a REIT.
We may be subject to risks associated with commercial real estate loan participations.
Some of our commercial real estate loan investments may be held in the form of participation interests or co-lender
arrangements in which we share the loan rights, obligations and benefits with other lenders. With respect to such
participation interests, we may require the consent of these parties to exercise our rights under such loans, including rights
with respect to amendment of loan documentation, enforcement proceedings upon a default and the institution of, and
control over, foreclosure proceedings. In circumstances where we hold a minority interest, we may become bound to
actions of the majority to which we otherwise would object. We may be adversely affected by this lack of control with
respect to these interests.
Risks Related to Certain Events, Environmental Matters and Climate Change
Natural disasters, terrorist attacks, other acts of violence or war or other unexpected events could materially and
adversely affect us.
Natural disasters, terrorist attacks, other acts of violence or war or other unexpected events, including a global
pandemic that impacts the economy in the United States, could materially interrupt our business operations (or those of
our tenants), cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and
worldwide financial markets and economies. They also could result in or prolong an economic recession. Any of these
occurrences could materially and adversely affect us.
In addition, our corporate headquarters and certain of our properties are located in Florida, where major hurricanes
have occurred. Depending on where any hurricane makes landfall, our properties in Florida could experience significant
damage. In addition, the occurrence and frequency of hurricanes in Florida could also negatively impact demand for our
properties located in that state because of consumer perceptions of hurricane risks. In addition to hurricanes, the occurrence
of other natural disasters and climate conditions in Florida (and in other states where our properties are located), such as
tornadoes, floods, fires, unusually heavy or prolonged rain, droughts and heat waves, could have an adverse effect on our
tenants, which could adversely impact our ability to collect rental revenues. If a hurricane, earthquake, natural disaster or
other similar significant disruption occurs, we may experience disruptions to our operations and damage to our properties,
which could materially and adversely affect us.
Terrorist attacks or other acts of violence may also negatively affect our operations. There can be no assurance that
there will not be terrorist attacks against businesses within the U.S. These attacks may directly impact our physical assets
or business operations or the financial condition of our tenants, lenders or other institutions with which we have a
relationship. The U.S. may be engaged in armed conflict, which could also have an impact on the tenants, lenders or other
institutions with which we have a relationship. The consequences of armed conflict are unpredictable, and we may not be
able to foresee events that could have an adverse effect on our business. Any of these occurrences could materially and
adversely affect us.
28
Insurance on our properties may not adequately cover all losses and uninsured losses could materially and
adversely affect us.
Our leases typically provide that either the landlord or the tenant will maintain property and liability insurance for the
properties that are leased from us. If our tenants are required to carry liability and/or property insurance coverage, our
tenants are required to name us (and any of our lenders that have a mortgage on the property leased by the tenant) as
additional insureds on their liability policies and additional named insured and/or loss payee (or mortgagee, in the case of
our lenders) on their property policies. Depending on the location of the property, losses of a catastrophic nature, such as
those caused by hurricanes, earthquakes and floods, may be covered by insurance policies that are held by our tenant with
limitations such as large deductibles or co-payments that a tenant may not be able to meet. In addition, losses of a
catastrophic nature, such as those caused by wind, hail, hurricanes, terrorism or acts of war, may be uninsurable or not
economically insurable. In the event there is damage to our properties that is not covered by insurance and such properties
are subject to recourse indebtedness, we will continue to be liable for the indebtedness, even if these properties are
irreparably damaged.
Inflation, changes in building codes and ordinances, environmental considerations and other factors, including
terrorism or acts of war, may make any insurance proceeds we receive insufficient to repair or replace a property if it is
damaged or destroyed. In those circumstances, the insurance proceeds received may not be adequate to restore our
economic position with respect to the affected real property and its generation of rental revenue. Furthermore, in the event
we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property
to its existing specifications without significant capital expenditures which may exceed any amounts received pursuant to
insurance policies, as reconstruction or improvement of such a property would likely require significant upgrades to meet
zoning and building code requirements. The loss of our capital investment in or anticipated future returns from our
properties due to material uninsured losses could materially and adversely affect us.
The costs of compliance with or liabilities related to environmental laws may materially and adversely affect us.
The ownership of our properties may subject us to known and unknown environmental liabilities. Under various
federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real
property, we may be liable for costs and damages resulting from environmental matters, including the presence or
discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such property,
as well as costs to investigate or clean up such contamination and liability for personal injury, property damage or harm
to natural resources. We may face liability regardless of:
•
our knowledge of the contamination;
•
the timing of the contamination;
•
the cause of the contamination; or
•
the party responsible for the contamination of the property.
There may be environmental liabilities associated with our properties of which we are unaware. We obtain Phase I
environmental assessments for properties acquired. Phase I environmental site assessments are limited in scope and
therefore may not reveal all environmental conditions affecting a property. Therefore, there could be undiscovered
environmental liabilities on the properties we own. Some of our properties use, or may have used in the past, underground
tanks for the storage of petroleum-based products or waste products that could create a potential for release of hazardous
substances or penalties if tanks do not comply with legal standards. If environmental contamination exists on our
properties, we could be subject to strict, joint and/or several liability for the contamination by virtue of our ownership
interest. Some of our properties may contain asbestos-containing materials, or ACM. Environmental laws govern the
presence, maintenance and removal of ACM and such laws may impose fines, penalties or other obligations for failure to
comply with these requirements or expose us to third-party liability (for example, liability for personal injury associated
with exposure to asbestos). Environmental laws also apply to other activities that can occur on a property, such as storage
of petroleum products or other hazardous toxic substances, air emissions, water discharges and exposure to lead-based
paint. Such laws may impose fines and penalties for violations and may require permits or other governmental approvals
to be obtained for the operation of a business involving such activities.
29
The known or potential presence of hazardous substances on a property may adversely affect our ability to sell, lease
or improve the property or to borrow using the property as collateral. In addition, environmental laws may create liens on
contaminated properties in favor of the government for damages and costs it incurs to address such contamination.
Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in
which they may be used or businesses may be operated, and these restrictions may require substantial expenditures.
In addition, although our leases generally require our tenants to operate in compliance with all applicable laws and to
indemnify us against any environmental liabilities arising from a tenant’s activities on the property, we could be subject
to strict liability by virtue of our ownership interest. We cannot be sure that our tenants will, or will be able to, satisfy their
indemnification obligations, if any, under our leases. Furthermore, the discovery of environmental liabilities on any of our
properties could lead to significant remediation costs or to other liabilities or obligations attributable to the tenant of that
property or could result in material interference with the ability of our tenants to operate their businesses as currently
operated. Noncompliance with environmental laws or discovery of environmental liabilities could each individually or
collectively affect such tenant’s ability to make payments to us, including rental payments and, where applicable,
indemnification payments.
Our environmental liabilities may include property and natural resources damage, personal injury, investigation and
clean-up costs, among other potential environmental liabilities. These costs could be substantial. Although we may obtain
insurance for environmental liability for certain properties that are deemed to warrant coverage, our insurance may be
insufficient to address any particular environmental situation and we may be unable to continue to obtain insurance for
environmental matters, at a reasonable cost or at all, in the future. If our environmental liability insurance is inadequate,
we may become subject to material losses for environmental liabilities. Our ability to receive the benefits of any
environmental liability insurance policy will depend on the financial stability of our insurance company and the position
it takes with respect to our insurance policies. If we were to become subject to significant environmental liabilities, we
could be materially and adversely affected.
Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and
costs of remediation.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if
the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne
toxins or irritants. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety
of adverse health effects and symptoms, including allergic or other reactions. As a result, should our tenants or their
employees or customers be exposed to mold at any of our properties, we could be required to undertake a costly
remediation program to contain or remove the mold from the affected property. In addition, exposure to mold by our
tenants or others could subject us to liability if property damage or health concerns arise. If we were to become subject to
significant mold-related liabilities, we could be materially and adversely affected.
Our operations and financial condition may be adversely affected by climate change, including possible changes
in weather patterns, weather-related events, government policy, laws, regulations and economic conditions.
In recent years, the assessment of the potential impact of climate change has begun to impact the activities of
government authorities, the pattern of consumer behavior and other areas that impact the business environment in the U.S.,
including, but not limited to, energy-efficiency measures, water use measures and land-use practices. The promulgation of
policies, laws or regulations relating to climate change by governmental authorities in the U.S. and the markets in which
we own properties may require us to invest additional capital in our properties. In addition, the impact of climate change
on businesses operated by our tenants is not reasonably determinable at this time. While not generally known at this time,
climate change may impact weather patterns or the occurrence of significant weather events which could impact economic
activity or the value of our properties in specific markets. The occurrence of any of these events or conditions may
adversely impact our ability to lease our properties, which would materially and adversely affect us.
30
Risks Related to Other Aspects of our Operation and as a Public Company
We are highly dependent on information systems and certain third-party technology service providers, and systems
failures not related to cyber-attacks or similar external attacks could significantly disrupt our business, which may, in
turn, negatively affect the market price of our common stock and adversely impact our results of operations and cash
flows.
Our business is highly dependent on communications and information systems and networks. Any failure or
interruption of these systems or networks could cause delays or other problems in our operations and communications.
Through our relationship with CTO and our Manager, we rely heavily on CTO’s financial, accounting and other data
processing systems. In addition, much of the information technology (“IT”) infrastructure on which we rely is managed
by a third party and, as such, we also face the risk of operational failure, termination or capacity constraints by this third
party. It is difficult to determine what, if any, negative impact may directly result from any specific interruption or
disruption of the networks or systems on which our business relies or any failure to maintain performance, reliability and
security of our technological infrastructure, but significant events impacting the systems or networks on which our business
relies could materially and adversely affect us.
Our senior management team is required to operate two publicly traded companies, CTO and our company, which
could place a significant strain on our senior management team and the management systems, infrastructure and other
resources of CTO on which we rely.
Our senior management team operates two publicly traded companies, our company and CTO, and is required to
comply with periodic and current reporting requirements under applicable SEC regulations and comply with applicable
listing standards of the NYSE. This could place a significant strain on our senior management team and the management
systems, infrastructure and other resources of CTO made available to us through our Manager and on which we rely. There
can be no assurance that our senior management team will be able to successfully operate two publicly traded companies.
Any failure by our senior management team to successfully operate our company or CTO could materially and adversely
affect us.
If there are deficiencies in our disclosure controls and procedures or internal control over financial reporting, we
may be unable to accurately present our financial statements, which could materially and adversely affect us.
As a publicly traded company, we are required to report our financial statements on a consolidated basis. Effective
internal controls are necessary for us to accurately report our financial results. Section 404 of the Sarbanes-Oxley Act
requires us to evaluate and report on our internal control over financial reporting. However, for so long as we are a smaller
reporting company that is a non-accelerated filer, our independent registered public accounting firm will not be required
to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-
Oxley Act. An independent assessment of the effectiveness of our internal controls could detect problems that our
management’s assessment might not. There can be no guarantee that our internal control over financial reporting will be
effective in accomplishing all control objectives all of the time. Furthermore, as we grow our business, our internal controls
will become more complex, and we may require significantly more resources to ensure our internal controls remain
effective. Future deficiencies, including any material weakness, in our internal control over financial reporting which may
occur could result in misstatements of our results of operations that could require a restatement, failing to meet our public
company reporting obligations and causing investors to lose confidence in our reported financial information, which could
materially and adversely affect us.
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make
unanticipated expenditures that materially and adversely affect us.
Our properties are and will be subject to the Americans with Disabilities Act, or the ADA. Under the ADA, all public
accommodations must meet federal requirements related to access and use by disabled persons. Compliance with the ADA
requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S.
government or an award of damages to private litigants, or both. While our tenants are and will be obligated by law to
comply with the ADA and typically obligated under our leases to cover costs associated with compliance, if required
31
changes involve greater expenditures than anticipated or if the changes must be made on a more accelerated basis than
anticipated, the ability of our tenants to cover costs could be adversely affected. We could be required to expend our own
funds to comply with the provisions of the ADA, which could materially and adversely affect us.
In addition, we are and will be required to operate our properties in compliance with fire and safety regulations,
building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become
applicable to our properties. We may be required to make substantial capital expenditures to comply with those
requirements and may be required to obtain approvals from various authorities with respect to our properties, including
prior to acquiring a property or when undertaking renovations of any of our existing properties. There can be no assurance
that existing laws and regulatory policies will not adversely affect us or the timing or cost of any future acquisitions,
developments or renovations, or that additional regulations will not be adopted that increase such delays or result in
additional costs. Additionally, failure to comply with any of these requirements could result in the imposition of fines by
governmental authorities or awards of damages to private litigants. While we intend to only acquire properties that we
believe are currently in substantial compliance with all regulatory requirements, these requirements may change, and new
requirements may be imposed which would require significant unanticipated expenditures by us and could materially and
adversely affect us.
We have in the past and may in the future choose to acquire properties or portfolios of properties through tax
deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets.
We have in the past acquired, and may in the future acquire, properties or portfolios of properties through tax deferred
contribution transactions in exchange for common or preferred units of limited partnership interest in the Operating
Partnership, which may result in stockholder dilution. This acquisition structure may have the effect of, among other
things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and may
require that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our
ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their
tax bases. These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent
such restrictions.
Risks Related to Our Relationship with CTO and Our Manager and the Management Agreement
We have no employees and are entirely dependent upon our Manager for all the services we require, and we cannot
assure you that our Manager will allocate the resources necessary to meet our business objectives.
Because we are “externally managed,” we do not employ our own personnel, but instead depend upon CTO, our
Manager and their affiliates for virtually all of the services we require. Our Manager selects and manages the acquisition
and origination of properties and commercial loan investments that meet our investment criteria; administers the collection
of rents, monitors lease compliance by our tenants and deals with vacancies and re-letting of our properties; coordinates
the sale of our properties; provides financial and regulatory reporting services; communicates with our stockholders, causes
us to pay distributions to our stockholders and arranges for transfer agent services; and provides all of our other
administrative services. Accordingly, our success is largely dependent upon the expertise and services of the executive
officers and other personnel of CTO provided to us through our Manager.
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CTO may be unable to obtain or retain the executive officers and other personnel that it provides to us through
our Manager.
Our success depends to a significant degree upon the executive officers and other personnel of CTO that it provides
to us through our Manager. In particular, we rely on the services of John P. Albright, President and Chief Executive Officer
of our company and CTO and a member of the board of directors of our company and CTO; Philip R. Mays, Senior Vice
President, Chief Financial Officer and Treasurer of our company and CTO; Steven R. Greathouse, Senior Vice President
and Chief Investment Officer of our company and CTO; Daniel E. Smith, Senior Vice President, General Counsel and
Corporate Secretary of our company and CTO; and Lisa M. Vorakoun, Senior Vice President and Chief Accounting Officer
of our company and CTO. In addition to these executive officers, we also rely on other personnel of CTO that are provided
to us through our Manager. We cannot guarantee that all, or any particular one of these executive officers and other
personnel of CTO provided to us through our Manager, will remain affiliated with CTO, our Manager and us. We do not
separately maintain key person life insurance on any person. Failure by CTO to retain any of its executive officers and
other personnel provided to us through our Manager and to hire and retain additional highly skilled managerial, operational
and marketing personnel could have a material adverse effect on our ability to achieve our investment growth objectives
and could result in us incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our
internal control over financial reporting.
We pay substantial fees and expenses to our Manager. These payments increase the risk that you will not earn a
profit on your investment.
Pursuant to the Management Agreement, we pay significant fees to our Manager. Those fees include a base
management fee and an incentive fee, if earned. We will also reimburse our Manager for certain expenses pursuant to the
Management Agreement. These payments increase the risk that you will not earn a profit on your investment.
The base management fee payable to our Manager pursuant to the Management Agreement is payable regardless
of the performance of our portfolio, which may reduce our Manager’s incentive to devote the time and effort to seeking
profitable investment opportunities for us.
We pay our Manager a base management fee pursuant to the Management Agreement, which may be substantial,
based on our “total equity” (as defined in the Management Agreement) regardless of the performance of our portfolio of
properties. Our Manager’s entitlement to non-performance-based compensation might reduce its incentive to seek
profitable investment opportunities for us, which could result in a lower performance of our portfolio and materially
adversely affect us.
The incentive fee payable to our Manager pursuant to the Management Agreement may cause our Manager to
select investments in more risky assets to increase its incentive compensation.
Our Manager has the ability to earn incentive fees based on our total stockholder return exceeding an 8% cumulative
annual hurdle rate, which may create an incentive for our Manager to invest in properties with a purchase price reflecting
a higher potential yield, that may be riskier or more speculative, or sell an investment prematurely for a gain, in an effort
to increase our short-term gains and thereby increase our stock price and the incentive fees to which it is entitled. If our
interests and those of our Manager are not aligned, the execution of our business plan and our results of operations could
be adversely affected, which could materially and adversely affect the market price of our common stock and our ability
to make distributions to our stockholders.
There are conflicts of interest in our relationships with our Manager, which could result in outcomes that are not
in our best interests.
We are subject to conflicts of interest arising out of our relationships with our Manager. Pursuant to the Management
Agreement, our Manager is obligated to supply us with our management team. However, our Manager is not obligated to
dedicate any specific personnel exclusively to us, nor are the CTO personnel provided to us by our Manager obligated to
dedicate any specific portion of their time to the management of our business. Additionally, our Manager is a wholly
owned subsidiary of CTO. All of our executive officers are executive officers and employees of CTO and one of our
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executive officers (John P. Albright) is also a member of the board of directors of our company and the board of directors
of CTO. As a result, our Manager and the CTO personnel it provides to us, including our executive officers, may have
conflicts between their duties to us and their duties to CTO.
In addition to our initial portfolio, we have in the past acquired and may in the future acquire or sell properties that
would potentially fit the investment criteria for CTO or its affiliates. Similarly, CTO or its affiliates may acquire or sell
properties that would potentially fit our investment criteria. Although such acquisitions or dispositions could present
conflicts of interest, we nonetheless may pursue and consummate such transactions. Additionally, we have in the past and
may in the future engage in transactions directly with CTO, our Manager or their affiliates. If we acquire a property from
CTO or one of its affiliates or sell a property to CTO or one of its affiliates, the purchase price we pay to CTO or one of
its affiliates or the purchase price paid to us by CTO or one of its affiliates may be higher or lower, respectively, than the
purchase price that would have been paid to or by us if the transaction were the result of arm’s length negotiations with an
unaffiliated third party.
In deciding whether to issue additional debt or equity securities, we will rely in part on recommendations made by
our Manager. While such decisions are subject to the approval of the Board, our Manager is entitled to be paid a base
management fee that is based on our “total equity” (as defined in the Management Agreement). As a result, our Manager
may have an incentive to recommend that we issue additional equity securities at dilutive prices. If we issue additional
equity securities at dilutive prices, the market price of our common stock may be adversely affected, and you could lose
some or all of your investment in our common stock.
All of our executive officers are executive officers and employees of CTO. These individuals and other CTO personnel
provided to us through our Manager devote as much time to us as our Manager deems appropriate. However, our executive
officers and other CTO personnel provided to us through our Manager may have conflicts in allocating their time and
services between us, on the one hand, and CTO and its affiliates, on the other. During a period of prolonged economic
weakness or another economic downturn affecting the real estate industry or at other times when we need focused support
and assistance from our Manager and the CTO executive officers and other personnel provided to us through our Manager,
we may not receive the necessary support and assistance we require or that we would otherwise receive if we were self-
managed.
Our Manager’s failure to identify and acquire properties that meet our investment criteria or perform its
responsibilities under the Management Agreement could materially and adversely affect our business and our ability
to make distributions to our stockholders.
Our ability to achieve our objectives depends on, among other things, our Manager’s ability to identify, acquire and
lease properties that meet our investment criteria. Accomplishing our objectives is largely a function of our Manager’s
structuring of our investment process, our access to financing on acceptable terms and general market conditions. Our
stockholders will not have input into our investment decisions. All of these factors increase the uncertainty, and thus the
risk, of investing in our common stock. The CTO executive officers and other CTO personnel provided to us through our
Manager have substantial responsibilities under the Management Agreement. In order to implement certain strategies,
CTO, our Manager or their affiliates may need to hire, train, supervise and manage new employees successfully. Any
failure by CTO or our Manager to manage our future growth effectively could have a material adverse effect on us, our
ability to maintain our qualification as a REIT and our ability to make distributions to our stockholders.
Our Manager’s liability is limited under the Management Agreement, and we have agreed to indemnify our
Manager against certain liabilities. As a result, we could experience unfavorable operating results or incur losses for
which our Manager would not be liable.
Pursuant to the Management Agreement, our Manager will not assume any responsibility other than to render the
services called for thereunder and will not be responsible for any action of the Board in following or declining to follow
its directives. Our Manager maintains a contractual, as opposed to a fiduciary relationship, with us. Under the terms of the
Management Agreement, our Manager, its officers, members and personnel, any person controlling or controlled by our
Manager and any person providing sub-advisory services to our Manager will not be liable to us, any subsidiary of ours,
our directors, our stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance
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with and pursuant to the Management Agreement, except those resulting from acts constituting gross negligence, willful
misconduct, bad faith or reckless disregard of our Manager’s duties under the Management Agreement.
In addition, we have agreed to indemnify our Manager and each of its officers, directors, members, managers and
employees from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably
incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf
pursuant to authority granted by the Management Agreement, except where attributable to gross negligence, willful
misconduct, bad faith or reckless disregard of such person’s duties under the Management Agreement. As a result, we
could experience unfavorable operating results or incur losses for which our Manager would not be liable.
Termination of the Management Agreement could be difficult and costly, including as a result of payment of
termination fees to our Manager, and may cause us to be unable to execute our business plan, which could materially
and adversely affect us.
If we fail to renew the Management Agreement, or terminate the agreement, other than for a termination for cause,
we are obligated to pay our Manager a termination fee equal to three times the sum of (i) the average annual base
management fee earned by our Manager during the 24-month period immediately preceding the most recently completed
calendar quarter prior to the termination date and (ii) the average annual incentive fee earned by our Manager during the
two most recently completed measurement periods (as defined in the Management Agreement) prior to the termination
date. Such a payment would likely be a substantial one-time charge that could render unattractive, or not economically
feasible, the termination of our Manager, even if it performed poorly. In addition, any termination of the Management
Agreement would end our Manager’s obligation to provide us with our executive officers and personnel upon whom we
rely for the operation of our business and would also terminate our rights under the ROFO Agreement with CTO, as
discussed further herein. As a result of termination of the ROFO Agreement, we would face increased competition from
CTO and its affiliates, as well as others, for the acquisition of properties that meet our investment criteria, and our right to
acquire certain properties from CTO and its affiliates would be terminated. As a result, the termination of the Management
Agreement could materially and adversely affect us.
If our Manager ceases to be our manager pursuant to the Management Agreement, counterparties to our
agreements may cease doing business with us.
If our Manager ceases to be our manager, it could constitute an event of default or early termination event under
financing and other agreements we may enter into in the future, upon which our counterparties may have the right to
terminate their agreements with us. If our Manager ceases to be our manager for any reason, including upon the non-
renewal of the Management Agreement, our business and our ability to make distributions to our stockholders may be
materially adversely affected.
The Management Agreement with our Manager and the ROFO Agreement with CTO were not negotiated on an
arm’s-length basis and may not be as favorable to us as if they had been negotiated with unaffiliated third parties.
The Management Agreement with our Manager and the ROFO Agreement with CTO were negotiated between related
parties and before our independent directors were elected, and their terms, including the fees payable to our Manager, may
not be as favorable to us as if they had been negotiated with unaffiliated third parties. The terms of these agreements may
not reflect our long-term best interests and may be overly favorable to CTO, our Manager and their affiliates (other than
us and our subsidiaries). Further, we may choose not to enforce, or to enforce less vigorously, our rights under the
Management Agreement and the ROFO Agreement because of our desire to maintain our ongoing relationships with our
Manager and CTO.
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Risks Related to Our Financing Activities
Our growth depends on external sources of capital, including debt financings, that are outside of our control and
may not be available to us on commercially reasonable terms or at all.
In order to maintain our qualification as a REIT under the Code, we are required, among other things, to distribute
annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and
excluding any net capital gain. In addition, we are subject to income tax at the U.S. federal corporate income tax rate to
the extent that we distribute less than 100% of our net taxable income. Because of these distribution requirements, we may
not have sufficient liquidity from our operating cash flows to fund future capital needs, including any acquisition financing.
Consequently, we may rely on third-party sources, including lenders, to fund our capital needs. We may not be able to
obtain debt financing on favorable terms or at all. Any additional debt we incur will increase our leverage and likelihood
of default. Our access to third-party sources of capital depends, in part, on:
•
general market conditions;
•
the market’s perception of our growth potential;
•
our current debt levels;
•
our current and expected future earnings;
•
our cash flow and cash distributions; and
•
the market price per share of our common stock.
If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when
strategic opportunities exist, meet the capital and operating needs of our existing properties, satisfy our debt service
obligations or make the cash distributions to our stockholders necessary to maintain our qualification as a REIT, which
would materially and adversely affect us.
Our organizational documents have no limitation on the amount of additional indebtedness that we may incur in
the future. As a result, we may become highly leveraged in the future, which could materially and adversely affect us.
We have entered into certain debt agreements and, in the future, we may incur additional indebtedness to finance
future acquisitions and development, redevelopment and renovation projects and for general corporate purposes. There are
no restrictions in our charter or bylaws that limit the amount or percentage of indebtedness that we may incur nor restrict
the form in which our indebtedness will be incurred (including recourse or non-recourse debt or cross-collateralized debt).
A substantial level of indebtedness in the future could have adverse consequences for our business and otherwise
materially and adversely affect us because it could, among other things:
•
require us to dedicate a substantial portion of our cash flow from operations to make principal and interest
payments on our indebtedness, thereby reducing our cash flow available to fund working capital, capital
expenditures and other general corporate purposes, including to pay dividends on our common stock as currently
contemplated or necessary to satisfy the requirements for qualification as a REIT;
•
increase our vulnerability to general adverse economic and industry conditions and limit our flexibility in
planning for, or reacting to, changes in our business and our industry;
•
limit our ability to borrow additional funds or refinance indebtedness on favorable terms or at all to expand our
business or ease liquidity constraints; and
•
place us at a competitive disadvantage relative to competitors that have less indebtedness.
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The agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing our operational
flexibility and creating risks associated with default and noncompliance.
The agreements governing the Credit Facility, the 2026 Term Loan, the 2027 Term Loan and any other indebtedness
that we may incur in the future contain or may contain covenants that place restrictions on us and our subsidiaries. These
covenants may restrict, among other activities, our and our subsidiaries’ ability to:
•
merge, consolidate or transfer all or substantially all of our or our subsidiaries’ assets;
•
sell, transfer, pledge or encumber our stock or the ownership interests of our subsidiaries;
•
incur additional debt or issue preferred stock;
•
make certain investments;
•
make certain expenditures, including capital expenditures;
•
pay dividends on or repurchase our capital stock; and
•
enter into certain transactions with affiliates.
These covenants could impair our ability to grow our business, take advantage of attractive business opportunities or
successfully compete. Our ability to comply with financial and other covenants may be affected by events beyond our
control, including prevailing economic, financial and industry conditions. A breach of any of these covenants or covenants
under any other agreements governing our indebtedness could result in an event of default. Any cross-default provisions
in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our
other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, our lenders could
elect to declare all outstanding debt under such agreements to be immediately due and payable. If we were unable to repay
or refinance the accelerated debt, our lenders could proceed against any assets pledged to secure that debt, including
foreclosing on or requiring the sale of any properties securing that debt, and the proceeds from the sale of these properties
may not be sufficient to repay such debt in full.
Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our
investment in any property subject to mortgage debt.
Future borrowings may be secured by mortgages on our properties. Incurring mortgage and other secured debt
obligations increases our risk of losses because defaults on secured indebtedness may result in foreclosure actions initiated
by lenders and ultimately our loss of the properties securing any loans for which we are in default. If we are in default
under a cross-defaulted mortgage loan, we could lose multiple properties to foreclosure. For U.S. federal income tax
purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the
outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage
exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash
proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. As we execute
our business plan, we may assume or incur new mortgage indebtedness on our properties. Any default under any mortgage
debt obligation we incur may increase the risk of our default on our other indebtedness, including indebtedness under our
Credit Facility, the 2026 Term Loan and the 2027 Term Loan, which could materially and adversely affect us.
Increases in interest rates have and will likely continue to increase our interest costs on our variable rate debt and
could adversely impact our ability to refinance existing debt or sell assets.
Current and future borrowings under our Credit Facility, the 2026 Term Loan and the 2027 Term Loan will bear
interest at variable rates. Recent increases in interest rates have increased our interest payments and reduced our cash flow
available for other corporate purposes, and we expect this trend to continue in the near term. In addition, rising interest
rates could limit our ability to refinance debt when it matures and increase interest costs on any debt that is refinanced.
Further, an increase in interest rates could increase the cost of financing, thereby decreasing the amount third parties are
willing to pay for our properties, which would limit our ability to dispose of properties when necessary or desired.
In addition, we may enter into hedging arrangements in the future. Our hedging arrangements may include interest
rate swaps, caps, floors and other interest rate hedging contracts. Our hedging arrangements could reduce, but may not
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eliminate, the impact of rising interest rates, and they could expose us to the risk that other parties to our hedging
arrangements will not perform or that the agreements relating to our hedges may not be enforceable.
Risks Related to Our Organization and Structure
We are a holding company with no direct operations, and we rely on funds received from the Operating Partnership
to pay our obligations and make distributions to our stockholders.
We are a holding company and conduct substantially all of our operations through the Operating Partnership. We do
not have, apart from an interest in the Operating Partnership, any independent operations. As a result, we rely on
distributions from the Operating Partnership to make any distributions we declare on shares of our common stock. We
also rely on distributions from the Operating Partnership to meet our obligations, including any tax liability on taxable
income allocated to us from the Operating Partnership. In addition, because we are a holding company, your claims as
stockholders are structurally subordinated to all existing and future creditors and preferred equity holders of the Operating
Partnership and its subsidiaries. Therefore, in the event of a bankruptcy, insolvency, liquidation or reorganization of the
Operating Partnership or its subsidiaries, assets of the Operating Partnership or the applicable subsidiary will be available
to satisfy our claims to us as an equity owner therein only after all of their liabilities and preferred equity have been paid
in full.
As of December 31, 2024, we owned 92.3% of the OP Units issued by the Operating Partnership. However, in
connection with our future acquisition activities or otherwise, we may issue additional OP Units to third parties. Such
issuances would reduce our ownership in the Operating Partnership.
Certain provisions of Maryland law could inhibit changes in control of our company.
Certain “business combination” and “control share acquisition” provisions of the Maryland General Corporation Law,
or the MGCL, may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change
in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to
realize a premium over the then-prevailing market price of our common stock. Pursuant to the MGCL, the Board has by
resolution exempted business combinations between us and any other person. Our bylaws contain a provision exempting
from the control share acquisition statute any and all acquisitions by any person of shares of our stock. However, there can
be no assurance that these exemptions will not be amended or eliminated at any time in the future. Our charter and bylaws
and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that
might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.
Certain provisions in the partnership agreement of the Operating Partnership may delay, defer or prevent
unsolicited acquisitions of us.
Provisions in the partnership agreement of the Operating Partnership may delay, defer or prevent unsolicited
acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals
involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such
proposals, if made, desirable. These provisions include, among others:
•
redemption rights of qualifying parties;
•
transfer restrictions on OP Units;
•
our ability, as general partner, in some cases, to amend the partnership agreement and to cause the Operating
Partnership to issue units with terms that could delay, defer or prevent a merger or other change of control of us
or the Operating Partnership without the consent of the limited partners; and
•
the right of the limited partners to consent to transfers of the general partnership interest and mergers or other
transactions involving us under specified circumstances.
The partnership agreement of the Operating Partnership and Delaware law also contain other provisions that may
delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or
that our stockholders otherwise believe to be in their best interest.
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Our charter contains stock ownership limits, which may delay, defer or prevent a change of control.
In order for us to maintain our qualification as a REIT, no more than 50% in value of our outstanding capital stock
may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year, and at least 100
persons must beneficially own our stock during at least 335 days of a taxable year of 12 months or during a proportionate
portion of a shorter taxable year. “Individuals” for this purpose include natural persons, private foundations, some
employee benefit plans and trusts and some charitable trusts. To assist us in complying with these limitations, among other
purposes, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or number
of shares, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock. These
ownership limitations could have the effect of discouraging a takeover or other transaction in which holders of our common
stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be
otherwise in their best interests.
Our charter’s constructive ownership rules are complex and may cause the outstanding shares owned by a group of
related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the
acquisition of less than these percentages of the outstanding shares by an individual or entity could cause that individual
or entity to own constructively in excess of these percentages of the outstanding shares and thus violate the share ownership
limits. Our charter also provides that any attempt to own or transfer shares of our common stock or preferred stock (if and
when issued) in excess of the stock ownership limits without the consent of the Board or in a manner that would cause us
to be “closely held” under Section 856(h) of the Code (without regard to whether the shares are held during the last half
of a taxable year) will result in the shares being automatically transferred to a trustee for a charitable trust or, if the transfer
to the charitable trust is not automatically effective to prevent a violation of the share ownership limits or the restrictions
on ownership and transfer of our shares, any such transfer of our shares will be null and void.
The Board may change our strategies, policies or procedures without stockholder consent, which may subject us
to different and more significant risks in the future.
Our investment, financing, leverage and distribution policies and our policies with respect to all other activities,
including growth, debt, capitalization and operations, are determined by the Board. These policies may be amended or
revised at any time and from time to time at the discretion of the Board without notice to or a vote of our stockholders.
This could result in us conducting operational matters, making investments or pursuing different business or growth
strategies than those contemplated. Under these circumstances, we may expose ourselves to different and more significant
risks in the future, which could have a material adverse effect on our business and growth. In addition, the Board may
change our policies with respect to conflicts of interest, provided that such changes are consistent with applicable legal
requirements.
We may have assumed unknown liabilities in connection with the Formation Transactions, which, if significant,
could materially and adversely affect us.
As part of the Formation Transactions, we acquired our initial portfolio from CTO, subject to existing liabilities, some
of which may have been unknown at the time of the IPO and may remain unknown. Unknown liabilities might include
claims of tenants, vendors or other persons dealing with such entities prior to the IPO (that had not been asserted or
threatened prior to the IPO), tax liabilities and accrued but unpaid liabilities incurred in the ordinary course of business.
Any unknown or unquantifiable liabilities that we assumed in connection with the Formation Transactions for which we
have no or limited recourse could materially and adversely affect us.
Our rights and the rights of our stockholders to take action against our directors and executive officers are limited,
which could limit your recourse in the event of actions not in your best interest.
Our charter limits the liability of our present and former directors and executive officers to us and our stockholders
for money damages to the maximum extent permitted under Maryland law. Under current Maryland law, our present and
former directors and executive officers will not have any liability to us or our stockholders for money damages other than
liability resulting from (i) actual receipt of an improper benefit or profit in money, property or services or (ii) active and
deliberate dishonesty by the director or executive officer that was established by a final judgment and is material to the
39
cause of action. As a result, we and our stockholders have limited rights against our present and former directors and
executive officers, which could limit your recourse in the event of actions not in your best interest.
Conflicts of interest exist or could arise in the future between the interests of our stockholders and the interests of
holders of Operating Partnership units, which may impede business decisions that could benefit our stockholders.
Conflicts of interest exist or could arise in the future as a result of the relationships between us and our affiliates, on
the one hand, and the Operating Partnership or any partner thereof, on the other. Our directors and executive officers have
duties to our company under applicable Maryland law in connection with their management of our company. At the same
time, PINE GP, as the general partner of the Operating Partnership, has fiduciary duties and obligations to the Operating
Partnership and its limited partners under Delaware law and the partnership agreement of the Operating Partnership in
connection with the management of the Operating Partnership. The fiduciary duties and obligations of the general partner
to the Operating Partnership and its partners may come into conflict with the duties of our directors and executive officers
to our company. The Operating Partnership agreement provides that, in the event of a conflict between the interests of our
stockholders on the one hand, and the limited partners of the Operating Partnership on the other hand, the general partner
will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or the limited partners,
provided however, that so long as we own a controlling interest in the Operating Partnership, any such conflict that the
general partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either our
stockholders or the limited partners of the Operating Partnership are resolved in favor of our stockholders, and the general
partner will not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by the
limited partners in connection with such decisions.
In addition, to the extent permitted by applicable law, the partnership agreement will provide for the indemnification
of the general partner and our officers, directors, employees and any other persons the general partner may designate from
and against any and all claims that relate to the operations of the Operating Partnership as set forth in the partnership
agreement in which any indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is
established that:
•
the act or omission of the indemnitee was material to the matter giving rise to the proceeding and either was
committed in bad faith or was the result of active and deliberate dishonesty;
•
the indemnitee actually received an improper personal benefit in money, property or services; or
•
in the case of any criminal proceeding, the indemnitee had reasonable cause to believe that the act or omission
was unlawful.
Similarly, the general partner of the Operating Partnership and our officers, directors, agents or employees, will not
be liable for monetary damages to the Operating Partnership or the limited partners for losses sustained or liabilities
incurred as a result of errors in judgment or mistakes of fact or law or of any act or omission so long as any such party
acted in good faith.
We could increase or decrease the number of authorized shares of stock, classify and reclassify unissued stock and
issue stock without stockholder approval, which could prevent a change in our control and negatively affect the market
price of our common stock.
The Board, without stockholder approval, has the power under our charter to amend our charter from time to time to
increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that
we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock
and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series
of stock and set the terms of such newly classified or reclassified shares. As a result, we may issue series or classes of
common stock or preferred stock with preferences, distributions, powers and rights, voting or otherwise, that are senior to
the rights of holders of our common stock. Any such issuance could dilute our existing common stockholders’ interests.
Although the Board has no such intention at the present time, it could establish a class or series of preferred stock that
could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve
a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.
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The Operating Partnership has in the past and may in the future issue additional OP Units without the consent of
our stockholders, which could have a dilutive effect on our stockholders.
The Operating Partnership has in the past and may in the future issue additional OP Units to third parties without the
consent of our stockholders, which would reduce our ownership percentage in the Operating Partnership and may have a
dilutive effect on the amount of distributions made to us by the Operating Partnership and, therefore, the amount of
distributions we may make to our stockholders. Any such issuances, or the perception of such issuances, could materially
and adversely affect the market price of our common stock.
We are a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable
to smaller reporting companies will make shares of our common stock less attractive to investors.
We are a “smaller reporting company,” as defined in Regulation S-K under the Securities Act and may benefit from
certain of the scaled disclosures available to smaller reporting companies. We cannot be certain if the reduced disclosure
requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
If some investors find our common stock less attractive as a result, there may be a less active, liquid and/or orderly
trading market for our common stock and the market price and trading volume of our common stock may be more volatile
and decline significantly.
Risks Related to Our Qualification and Operation as a REIT
Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would
substantially reduce funds available for distributions to our stockholders.
We believe that our organization and method of operation have enabled us to meet the requirements for qualification
and taxation as a REIT and we intend to continue to be organized and operate in such a manner. However, we cannot
assure you that we will remain qualified as a REIT. Moreover, our qualification and taxation as a REIT depend upon our
ability to meet on a continuing basis, through actual annual operating results, certain qualification tests set forth in the U.S.
federal income tax laws. Accordingly, no assurance can be given that our actual results of operations for any particular
taxable year will satisfy such requirements.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce
the funds available for distributions to our stockholders because:
•
we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and
would be subject to U.S. federal income tax at regular corporate rates (currently 21%);
•
we could be subject to increased state and local taxes; and
•
unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until
the fifth calendar year after the year in which we failed to qualify as a REIT.
In addition, if we fail to remain qualified as a REIT, we will no longer be required to make distributions. As a result
of all these factors, our failure to remain qualified as a REIT could impair our ability to expand our business and raise
capital, and it would adversely affect our business, financial condition, results of operations or ability to make distributions
to our stockholders and the trading price of our common stock.
Even if we remain qualified as a REIT, we may face other tax liabilities that could reduce our cash flows and
negatively impact our results of operations and financial condition.
Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on
our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a
result of a foreclosure and state or local income, property and transfer taxes. In addition, under partnership audit
procedures, the Operating Partnership and any other partnership that we may form or acquire may be liable at the entity
level for tax imposed under those procedures. Further, any taxable REIT subsidiaries (“TRSs”) that we may form in the
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future will be subject to regular corporate U.S. federal, state and local taxes. Moreover, several provisions of the Code
regarding the arrangements between a REIT and its TRS entities function to ensure that such TRS entities are subject to
an appropriate level of U.S. federal income taxation. Any of these taxes would decrease cash available for distributions to
stockholders, which, in turn, could materially adversely affect our business, financial condition, results of operations or
ability to make distributions to our stockholders and the trading price of our common stock.
Failure to make required distributions would subject us to U.S. federal corporate income tax.
We intend to continue to operate in a manner so as to maintain our qualification as a REIT for U.S. federal income
tax purposes. In order to maintain our qualification as a REIT, we generally are required to distribute at least 90% of our
REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain,
each year to our stockholders. To the extent that we satisfy this distribution requirement but distribute less than 100% of
our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In
addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends we pay in a
calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and, 100% of our
undistributed income (as defined under the excise tax rules from prior years).
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate
otherwise attractive investments.
To maintain our qualification as a REIT for U.S. federal income tax purposes, we must continually satisfy tests
concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we
distribute to our stockholders and the ownership of our stock. In order to meet these tests, we may be required to forego
investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.
In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists
of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities
(other than government securities, securities of TRSs and qualified real estate assets) generally cannot include more than
10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities
of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities,
securities of TRSs and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the
value of our total assets can be represented by the securities of one or more TRSs and no more than 25% of our assets can
be represented by debt of “publicly offered REITs” (i.e., REITs that are required to file annual and periodic reports with
the SEC under the Exchange Act), unless secured by real property or interests in real property. If we fail to comply with
these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the
calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering
adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions
could have the effect of reducing our income and amounts available for distribution to our stockholders.
The relative lack of experience of our Manager in operating under the constraints imposed on us as a REIT may
hinder the achievement of our investment objectives.
The Code imposes numerous constraints on the operations of REITs that do not apply to other investment vehicles.
Our qualification as a REIT depends upon our ability to meet requirements regarding our organization and ownership,
distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code.
Any failure to comply could cause us to fail to satisfy the requirements associated with qualifying for and maintaining
REIT status. Our Manager has relatively limited experience operating under these constraints, which may hinder our ability
to take advantage of attractive investment opportunities and to achieve our investment objectives. As a result, we cannot
assure you that our Manager will be able to operate our business under these constraints. If we fail to qualify as a REIT
for any taxable year, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition,
we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our
REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders
because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends
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paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow
funds or liquidate some investments in order to pay the applicable tax.
Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to
incur tax liabilities.
The REIT provisions of the Code may limit our ability to hedge our liabilities. Any income from a hedging transaction
we enter into to manage risk of interest rate changes, price changes or currency fluctuations with respect to borrowings
made or to be made to acquire or carry real estate assets, if properly identified under applicable Treasury Regulations, does
not constitute “gross income” for purposes of the 75% or 95% gross income tests applicable to REITs. In addition, certain
income from hedging transactions entered into to hedge existing hedging positions after any portion of the hedged
indebtedness or property is extinguished or disposed of will not be included in income for purposes of the 75% and 95%
gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions
will likely be treated as non-qualifying income for purposes of both the 75% and 95% gross income tests. As a result of
these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS.
This could increase the cost of our hedging activities because our TRSs would be subject to tax on gains or expose us to
greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in a TRS
generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS.
Our ability to provide certain services to our tenants may be limited by the REIT rules or may have to be provided
through a TRS.
As a REIT, we generally cannot provide services to our tenants other than those that are customarily provided by
landlords, nor can we derive income from a third party that provides such services. If we forego providing such services
to our tenants, we may be at a disadvantage to competitors that are not subject to the same restrictions. However, we can
provide such non-customary services to tenants or share in the revenue from such services if we do so through a TRS,
though income earned by such TRS will be subject to U.S. federal corporate income tax.
The prohibited transactions tax may limit our ability to dispose of our properties.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are
sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary
course of business. We may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of
real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited
transaction is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning
property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently,
we may choose not to engage in certain sales of our properties or may conduct such sales through any TRS that we may
form, which would be subject to U.S. federal corporate income tax.
We may pay taxable dividends in our common stock and cash, in which case stockholders may sell shares of our
common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.
We may satisfy the 90% distribution test with taxable distributions of our common stock. The IRS has issued Revenue
Procedure 2017-45 authorizing elective cash/stock dividends to be made by “publicly offered REITs.” Pursuant to Revenue
Procedure 2017-45, the IRS will treat the distribution of stock pursuant to an elective cash/stock dividend as a distribution
of property under Section 301 of the Code (i.e., a dividend), as long as at least 20% of the total dividend is available in
cash and certain other parameters detailed in the Revenue Procedure are satisfied.
If we made a taxable dividend payable in cash and common stock, taxable stockholders receiving such dividends will
be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated
earnings and profits, as determined for U.S. federal income tax purposes. As a result, stockholders may be required to pay
income tax with respect to such dividends in excess of the cash dividends received. If a U.S. stockholder sells the common
stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in
income with respect to the dividend, depending on the market price of our common stock at the time of the sale.
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Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with
respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock. If we
made a taxable dividend payable in cash and our common stock and a significant number of our stockholders determine
to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading
price of our common stock. We do not currently intend to pay taxable dividends using both our common stock and cash,
although we may choose to do so in the future.
The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse
consequences to our stockholders.
Our charter provides that the Board may revoke or otherwise terminate our REIT election, without the approval of
our stockholders, if it determines in good faith that it is no longer in our best interest to continue to qualify as a REIT. If
we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no
longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on
our total return to our stockholders.
Any ownership of a TRS we may form in the future will be subject to limitations and our transactions with a TRS
will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted
on arm’s-length terms.
Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRS
entities. A TRS will be subject to applicable U.S. federal, state and local corporate income tax on its taxable income, and
its after tax net income will be available for distribution to us but is not required to be distributed to us. In addition, several
provisions of the Code regarding the arrangements between a REIT and its TRS entities function to ensure that the TRS is
subject to an appropriate level of U.S. federal income taxation. The Code also imposes a 100% excise tax on certain
transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor the
value of our respective investments in any TRS that we may form for the purpose of ensuring compliance with TRS
ownership limitations and will structure our transactions with any TRS on terms that we believe are arm’s length to avoid
incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with
the 20% limitation or to avoid application of the 100% excise tax.
You may be restricted from acquiring or transferring certain amounts of our common stock.
The stock ownership restrictions of the Code for REITs and the 9.8% share ownership limit in our charter may inhibit
market activity in our capital stock and restrict our business combination opportunities.
In order for us to maintain our qualification as a REIT, five or fewer individuals, as defined in the Code, may not own,
beneficially or constructively, more than 50% in value of our issued and outstanding capital stock at any time during the
last half of a taxable year. Attribution rules in the Code determine if any individual or entity beneficially or constructively
owns our shares of capital stock under this requirement. Additionally, at least 100 persons must beneficially own our
shares of capital stock during at least 335 days of each taxable year other than our initial REIT taxable year. To help ensure
that we meet these tests, our charter restricts the acquisition and ownership of shares of our capital stock.
Our charter, with certain exceptions, requires our directors to take such actions as are necessary and desirable to
preserve our qualification as a REIT. Unless exempted by the Board, our charter prohibits any person from beneficially or
constructively owning more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding
shares of any class or series of our shares of capital stock. The Board may not grant an exemption from this restriction to
any person if such exemption would result in our failing to qualify as a REIT. This as well as other restrictions on
transferability and ownership will not apply, however, if the Board determines in good faith that it is no longer in our best
interests to continue to qualify as a REIT.
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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to “qualified dividend income” payable to U.S. stockholders
that are taxed at individual rates is 20% (plus the 3.8% surtax on net investment income, if applicable). Dividends payable
by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. However, for
taxable years beginning before January 1, 2026, ordinary REIT dividends constitute “qualified business income” and thus
a 20% deduction is available to individual taxpayers with respect to such dividends, resulting in a 29.6% maximum U.S.
federal income tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. stockholders.
However, to qualify for this deduction, the stockholder receiving such dividends must hold the dividend-paying REIT
stock for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days
before the stock becomes ex-dividend, and cannot be under an obligation to make related payments with respect to a
position in substantially similar or related property. The more favorable rates applicable to regular corporate qualified
dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less
attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the
value of the shares of REITs, including our common stock.
We may be subject to adverse legislative or regulatory tax changes, in each instance with potentially retroactive
effect, that could reduce the market price of our common stock.
At any time, the U.S. federal income tax laws governing REITs, or the administrative interpretations of those laws
may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative
interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation,
will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect
retroactively. We and our stockholders could be adversely affected by any such change in the U.S. federal income tax
laws, regulations or administrative interpretations which, in turn, could materially adversely affect our ability to make
distributions to our stockholders and the trading price of our common and preferred stock.
If the Operating Partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would
cease to qualify as a REIT and suffer other adverse consequences.
We believe that the Operating Partnership will be treated as a partnership for U.S. federal income tax purposes. As a
partnership, the Operating Partnership will not be subject to U.S. federal income tax on its income. Instead, each of its
partners, including us, will be allocated, and may be required to pay tax with respect to, its share of the Operating
Partnership’s income. We cannot assure you, however, that the IRS will not challenge the status of the Operating
Partnership or any other subsidiary partnership in which we own an interest as a partnership for U.S. federal income tax
purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating the Operating Partnership
or any such other subsidiary partnership as an entity taxable as a corporation for U.S. federal income tax purposes, we
would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would
likely cease to qualify as a REIT. Also, the failure of the Operating Partnership or any subsidiary partnership to qualify as
a partnership could cause such partnership to become subject to U.S. federal and state corporate income tax, which would
reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.
Risks Related to Our Common Stock
The market value of our common stock is subject to various factors that may cause significant fluctuations or
volatility.
As with other publicly traded securities, the market price of our common stock depends on various factors, which may
change from time to time and/or may be unrelated to our financial condition, results of operations or cash flows. These
factors may cause significant fluctuations or volatility in the market price of our common stock. These factors include, but
are likely not limited to, the following:
•
our financial condition and operating performance and the financial condition or performance of other similar
companies;
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•
actual or anticipated differences in our quarterly or annual operating results as compared to expected results;
•
changes in our revenues, Funds From Operations (“FFO”), Adjusted Funds From Operations (“AFFO”), or
earnings estimates or recommendations by securities analysts;
•
publication of research reports about us or the real estate industry generally;
•
increases in market interest rates, which may lead investors to demand a higher distribution yield for shares of
our common stock, and could result in increased interest expense on our debt;
•
adverse market reaction to any increased indebtedness we incur in the future;
•
actual or anticipated changes in our and our tenants’ businesses or prospects, including as a result of the impact
of a global pandemic, such as the COVID-19 Pandemic;
•
the current state of the credit and capital markets, and our ability and the ability of our tenants to obtain financing
on favorable terms;
•
conflicts of interest with CTO and its affiliates, including our Manager;
•
the termination of our Manager or additions and departures of key personnel of our Manager;
•
increased competition in our markets;
•
strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic
investments or changes in business or growth strategies;
•
the passage of legislation or other regulatory developments that adversely affect us or our industry;
•
adverse speculation in the press or investment community;
•
actions by institutional stockholders;
•
the extent of investor interest in our securities;
•
the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity
securities, including securities issued by other real estate-based companies;
•
investor confidence in the stock and bond markets, generally;
•
changes in tax laws;
•
equity issuances by us (including the issuances of OP Units), or common stock resales by our stockholders, or
the perception that such issuances or resales may occur;
•
volume of average daily trading and the amount of our common stock available to be traded;
•
changes in accounting principles;
•
failure to maintain our qualification as a REIT;
•
failure to comply with the rules of the NYSE or maintain the listing of our common stock on the NYSE;
•
terrorist acts, natural or man-made disasters, including global pandemics impacting the United States, or
threatened or actual armed conflicts; and
•
general market and local, regional and national economic conditions, including factors unrelated to our operating
performance and prospects.
No assurance can be given that the market price of our common stock will not fluctuate or decline significantly in the
future or that holders of shares of our common stock will be able to sell their shares when desired on favorable terms, or
at all. From time to time in the past, securities class action litigation has been instituted against companies following
periods of extreme volatility in their stock price. This type of litigation could result in substantial costs and divert our
management’s attention and resources.
There can be no assurance that we will be able to make or maintain cash distributions, and certain agreements
relating to our indebtedness may, under certain circumstances, limit or eliminate our ability to make distributions to
our common stockholders.
We intend to make cash distributions to our stockholders in amounts such that all or substantially all of our taxable
income in each year, subject to adjustments, is distributed. Our ability to continue to make distributions in the future may
be adversely affected by the risk factors described in this Annual Report on Form 10-K. We can give no assurance that we
will be able to make or maintain distributions and certain agreements relating to our indebtedness may, under certain
circumstances, limit or eliminate our ability to make distributions to our common stockholders. We can give no assurance
that rents from our properties will increase, or that future acquisitions of real properties or other investments will increase
our cash available for distributions to stockholders. In addition, any distributions will be authorized at the sole discretion
of the Board, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and
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projected results of operations, FFO, AFFO, liquidity, cash flows and financial condition, the revenue we actually receive
from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other
limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements,
applicable law and such other factors as the Board deems relevant.
If we do not have sufficient cash available for distributions, we may need to fund the shortage out of working capital
or borrow to provide funds for such distributions, which would reduce the amount of proceeds available for real estate
investments and increase our future interest costs. Our inability to make distributions, or to make distributions at expected
levels, could result in a decrease in the per share trading price of our common stock.
The market price of our common stock could be adversely affected by our level of cash distributions.
We believe the market price of the equity securities of a REIT is based primarily upon the market’s perception of the
REIT’s growth potential, its current and potential future cash distributions, whether from operations, sales or refinancing,
and its management and governance structure and is secondarily based upon the real estate market value of the underlying
assets. For that reason, our common stock may trade at prices that are higher or lower than our net asset value per share.
To the extent we retain operating cash flows for investment purposes, working capital reserves or other purposes, these
retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of
our common stock. If we fail to meet the market’s expectations with regard to future operating results and cash
distributions, the market price of our common stock could be adversely affected.
Increases in market interest rates may result in a decline in the market price of our common stock.
One of the factors that we believe influences the market price of our common stock is the distribution yield on the
common stock (as a percentage of the market price of our common stock) relative to market interest rates. Additional
increases in market interest rates, which have increased recently but are still currently at low levels relative to certain
historical rates, may lead prospective purchasers of shares of our common stock to expect a higher distribution yield.
Additionally, higher interest rates have in the past and are expected to continue to increase our borrowing costs and
potentially decrease our cash available for distribution. Thus, higher market interest rates could cause the market price of
our common stock to decline.
Future issuances of debt securities, which would rank senior to shares of our common stock upon our liquidation,
and future issuances of equity securities (including preferred stock and OP Units), which would dilute the holdings of
our then-existing common stockholders and may be senior to shares of our common stock for the purposes of making
distributions, periodically or upon liquidation, may materially and adversely affect the market price of our common
stock.
In the future, we may issue debt or equity securities or incur other borrowings. Upon liquidation, holders of our debt
securities and other loans and shares of our preferred stock will receive a distribution of our available assets before holders
of shares of our common stock. We are not required to offer any debt or equity securities to existing stockholders on a
preemptive basis. Therefore, shares of our common stock that we issue in the future, directly or through convertible or
exchangeable securities (including OP Units), warrants or options, will dilute the holdings of our then-existing common
stockholders and such issuances or the perception of such issuances may reduce the market price of our common stock.
Our preferred stock, if issued, would likely have a preference on distribution payments, periodically or upon liquidation,
which could limit our ability to make distributions to holders of shares of our common stock. Because our decision to issue
debt or equity securities or otherwise incur debt in the future will depend on market conditions and other factors beyond
our control, we cannot predict or estimate the amount, timing, nature or impact of our future capital raising efforts. Thus,
holders of shares of our common stock bear the risk that our future issuances of debt or equity securities or our incurrence
of other borrowings may materially and adversely affect the market price of shares of our common stock and dilute their
ownership in us.
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Sales of substantial amounts of our common stock in the public markets or the perception that they might occur,
could reduce the price of our common stock and may dilute the voting power of our then-existing common stockholders
and such common stockholders’ ownership interest in us.
Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur,
could adversely affect the market price of our common stock and may make it more difficult for our then-existing common
stockholders to sell their shares of common stock at a time and price that such common stockholders deem appropriate.
The shares of our common stock that we have sold in the IPO and subsequent public offerings may be resold
immediately in the public market unless they are held by “affiliates,” as that term is defined in Rule 144 under the Securities
Act. The common stock purchased by CTO in the CTO Private Placement and in the IPO and the shares of common stock
underlying the OP Units issued in the Formation Transactions are “restricted securities” within the meaning of Rule 144
under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption
from registration is available, including the exemptions contained in Rule 144. As a result of the registration rights
agreement that we entered into with CTO, the shares of our common stock purchased by CTO in the CTO Private
Placement may be eligible for future sale without restriction. Sales of a substantial number of such shares, or the perception
that such sales may occur, could cause the market price of our common stock to fall or make it more difficult for our then-
existing common stockholders to sell their common stock at a time and price that such common stockholders deem
appropriate.
In addition, our charter provides that we may issue up to 500,000,000 shares of common stock and 100,000,000 shares
of preferred stock, $0.01 par value per share. Moreover, under Maryland law and as is provided in our charter, a majority
of our entire board of directors will have the power to amend our charter to increase or decrease the aggregate number of
shares of stock or the number of shares of stock of any class or series that we are authorized to issue without stockholder
approval. Future issuances of shares of our common stock or securities convertible or exchangeable into common stock
may dilute the ownership interest of our common stockholders. Because our decision to issue additional equity or
convertible or exchangeable securities in any future offering will depend on market conditions and other factors beyond
our control, we cannot predict or estimate the amount, timing or nature of our future issuances. In addition, we are not
required to offer any such securities to existing stockholders on a preemptive basis. Therefore, it may not be possible for
existing stockholders to participate in such future issuances, which may dilute the existing stockholders’ interests in us.
General Risk Factors
Cybersecurity risks and cyber incidents could adversely affect our business and disrupt operations.
Cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not
limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information,
corrupting data or causing operational disruption. The result of these incidents could include, but are not limited to,
disrupted operations, misstated financial data, liability for stolen assets or information, increased cybersecurity protection
costs, litigation and reputational damage. Should any such cyber incidents or similar events occur, our assets, particularly
cash, could be lost and, as a result, our ability to execute our business and pursue our investment and growth strategy could
be impaired, thereby materially and adversely affecting us.
We may become subject to litigation, which could materially and adversely affect us.
We may become subject to litigation, in connection with our operations, securities offerings and otherwise in the
ordinary course of business. Some of these claims may result in significant defense costs and potentially significant
judgments against us, some of which are not, or cannot be, insured against. We generally intend to vigorously defend
ourselves. However, we cannot be certain of the ultimate outcomes of any claims that may arise in the future and which
are presently not known to us. Resolution of these types of matters against us may result in our having to pay significant
fines, judgments or settlements, which, if uninsured, or if the fines, judgments and settlements exceed insured levels, could
materially and adversely impact our earnings and cash flows, thereby materially and adversely affecting us. Certain
litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which
48
could materially and adversely impact us, expose us to increased risks that would be uninsured and materially and
adversely impact our ability to attract directors and officers.
If we fail to maintain effective disclosure controls and procedures, we may not be able to meet applicable reporting
requirements, which could materially and adversely affect us.
As a publicly traded company, we are subject to the informational requirements of the Exchange Act and are required
to file reports and other information with the SEC. In addition, we are required to maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed in the reports that we file with, or submit
to, the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and
forms. They include controls and procedures designed to ensure that information required to be disclosed in reports filed
with, or submitted to, the SEC is accumulated and communicated to management, including our principal executive and
principal financial officers, to allow timely decisions regarding required disclosure. Effective disclosure controls and
procedures are necessary for us to provide reliable reports, effectively prevent and detect fraud and to operate successfully
as a public company. Designing and implementing effective disclosure controls and procedures is a continuous effort that
requires significant resources and devotion of time. We may discover deficiencies in our disclosure controls and procedures
that may be difficult or time consuming to remediate in a timely manner. Any failure to maintain effective disclosure
controls and procedures or to timely effect any necessary improvements thereto could cause us to fail to meet our reporting
obligations (which could affect the listing of our common stock on the NYSE). Additionally, ineffective disclosure controls
and procedures could also adversely affect our ability to prevent or detect fraud, harm our reputation and cause investors
to lose confidence in our reports filed with, or submitted to, the SEC, which would likely have a negative effect on the
trading price of our common stock.
An epidemic or pandemic (such as the outbreak and worldwide spread of COVID-19), and the measures that
international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to
address it, may precipitate or materially exacerbate one or more of the other risks, and may significantly disrupt our
tenants’ ability to operate their businesses and/or pay rent to us or prevent us from operating our business in the
ordinary course for an extended period.
An epidemic or pandemic could have a material and adverse effect on or cause disruption to our business or financial
condition, results of operations, cash flows and the market value and trading price of our securities due to, among other
factors:
•
A complete or partial closure of, or other operational issues with, our portfolio as a result of government or tenant
action;
•
Declines in or instability of the economy or financial markets may result in a recession or negatively impact
consumer discretionary spending, which could adversely affect retailers and consumers;
•
A reduction of economic activity may severely impact our tenants’ business operations, financial condition,
liquidity and access to capital resources and may cause one or more of our tenants to be unable to meet their
obligations to us in full, or at all, to default on their lease, or to otherwise seek modifications of such obligations;
•
The inability to access debt and equity capital on favorable terms, if at all, or a severe disruption and instability
in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital
necessary to fund business operations, pursue acquisition and development opportunities, refinance existing debt,
reduce our ability to make cash distributions to our stockholders and increase our future interest expense;
•
A general decline in business activity and demand for real estate transactions would adversely affect our ability
to successfully execute our investment strategies or expand our portfolio;
•
A significant reduction in our cash flows could impact our ability to continue paying cash dividends to our
stockholders at expected levels or at all;
•
The financial impact could negatively affect our future compliance with financial and other covenants of our debt
instruments, and the failure to comply with such covenants could result in a default that accelerates the payment
of such debt; and
•
The potential negative impact on the health of on CTO’s employees or members of the Board or CTO’s board of
directors, particularly if a significant number are impacted, or the impact of government actions or restrictions,
49
including stay-at-home orders, restricting access to CTO’s headquarters, could result in a deterioration in our
ability to ensure business continuity during a disruption.
A prolonged continuation of or repeated temporary business closures, reduced capacity at businesses or other social-
distancing practices, and quarantine orders may adversely impact our tenants’ ability to generate sufficient revenues to
meet financial obligations, and could force tenants to default on their leases, or result in the bankruptcy of tenants, which
would diminish the rental revenue we receive under our leases.
Changes in accounting standards may materially and adversely affect us.
From time to time, the FASB and the SEC, who create and interpret appropriate accounting standards, may change
the financial accounting and reporting standards or their interpretation and application of these standards that will govern
the preparation of our financial statements. These changes could materially and adversely affect our reported financial
condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively,
resulting in restating prior period financial statements. Similarly, these changes could materially and adversely affect our
tenant’s reported financial condition or results of operations and affect their preferences regarding leasing real estate.
We are subject to risks related to corporate social responsibility.
Our business faces public scrutiny related to environmental, social and governance (“ESG”) activities. We risk
damage to our reputation if we or affiliates of our Manager fail to act responsibly in a number of areas, such as diversity
and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and
considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the
cost of our operations and relationships with investors, all of which could adversely affect our business and results of
operations. Additionally, new legislative or regulatory initiatives related to ESG could adversely affect our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 1C. CYBERSECURITY
The Company has no employees and is externally managed by our Manager, which is a wholly owned subsidiary of
CTO, a publicly traded diversified REIT. Pursuant to the terms of the Management Agreement, our Manager manages,
operates and administers our day-to-day operations, business and affairs, subject to the direction and supervision of the
Board. The Board recognizes the critical importance of maintaining the trust and confidence of our tenants and business
partners. The Board plays an active role in overseeing management of our risks, and cybersecurity represents an important
component of the Company’s overall approach to risk management and oversight.
As an externally managed company, the Company relies on CTO’s information systems in connection with the
Company’s day-to-day operations. Consequently, the Company also relies on the processes for assessing, identifying, and
managing material risks from cybersecurity threats undertaken by CTO. All of the Company’s executive officers are
executive officers and employees of CTO, and one of the Company’s officers (John P. Albright) is also a member of
CTO’s board of directors.
CTO’s cybersecurity processes and practices are integrated into CTO’s risk management and oversight program. In
general, CTO seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on
preserving the confidentiality, security and availability of the information that CTO collects and stores by identifying,
preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
CTO utilizes a third-party managed IT service provider (the “MSP”) to provide comprehensive cybersecurity services for
the Company, including threat detection and response, vulnerability assessment and monitoring, security incident response
and recovery, and cybersecurity education and awareness. The Company has adopted a written information security
incident response plan, which, as discussed below, is overseen by the Audit Committee of the Board (the “Audit
Committee”).
50
Risk Management and Strategy
The Company’s cybersecurity program is focused on the following key areas:
•
Governance: As discussed in more detail under “Item 1C. Cybersecurity—Governance,” the Board’s oversight
of cybersecurity risk management is supported by the Audit Committee, which regularly interacts with the
Company’s management team.
•
Collaborative Approach: CTO has implemented a comprehensive, cross-functional approach to identifying,
preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures
that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public
disclosure and reporting of such incidents can be made by management, the Audit Committee, and the Board in
a timely manner.
•
Technical Safeguards: CTO and the MSP deploy technical safeguards that are designed to protect information
systems from cybersecurity threats, including firewalls, intrusion prevention systems, endpoint detection and
response systems, anti-malware functionality and access controls, which are evaluated and improved through
vulnerability assessments and cybersecurity threat intelligence.
•
Incident Response and Recovery Planning: CTO and the MSP have established a written information security
incident response plan that addresses the response to a cybersecurity incident, which plan is tested and evaluated
on a regular basis.
•
Third-Party Risk Management: CTO and the MSP maintain a comprehensive, risk-based approach to identifying
and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other
external users of CTO’s systems, as well as the systems of third parties that could adversely impact the Company’s
business in the event of a cybersecurity incident affecting those third-party systems.
•
Education and Awareness: CTO, through the MSP, provides regular training for personnel regarding
cybersecurity threats as a means to equip personnel with effective tools to address cybersecurity threats, and to
communicate evolving information security policies, standards, processes and practices.
CTO and the MSP engage in the periodic assessment and testing of CTO’s policies, standards, processes and practices
that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including
audits, assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating
the effectiveness of CTO’s cybersecurity measures and planning. The MSP regularly assesses CTO’s cybersecurity
measures, including information security maturity, and regularly reviews CTO’s information security control environment
and operating effectiveness. The results of such assessments, audits and reviews will be reported to the Audit Committee
and the Board, and CTO will adjust its cybersecurity policies, standards, processes and practices as necessary based on the
information provided by these assessments, audits and reviews.
Governance
The Board, in coordination with the Audit Committee, oversees the Company’s cybersecurity risk management
process. The Audit Committee has adopted a charter that provides that the Audit Committee must review and discuss with
the Company’s management team the Company’s privacy and cybersecurity risk exposures, including:
•
the potential impact of those exposures on the Company’s business, financial results, operations and reputation;
•
the steps management has taken to monitor and mitigate such exposures;
•
the Company’s information governance policies and programs; and
•
major legislative and regulatory developments that could materially impact the Company’s privacy and
cybersecurity risk exposure.
The charter of the Audit Committee also provides that the Audit Committee may receive additional training in
cybersecurity and data privacy matters to enable its oversight of such risks and that the Audit Committee will regularly
51
report to the Board the substance of such reviews and discussions and, as necessary, recommend to the Board such actions
as the Audit Committee deems appropriate.
As noted above, the Company relies on CTO’s information systems and the MSP in connection with the Company’s
day-to-day operations. Consequently, the Company also relies on the processes for assessing, identifying, and managing
material risks from cybersecurity threats undertaken by CTO. All of the Company’s executive officers are executive
officers and employees of CTO, and one of the Company’s officers (John P. Albright) is also a member of CTO’s board
of directors.
CTO’s Senior Vice President, Chief Financial Officer and Treasurer, Senior Vice President, General Counsel and
Corporate Secretary, and Senior Vice President, Chief Accounting Officer work collaboratively with the MSP to
implement a program designed to protect CTO’s information systems from cybersecurity threats and to promptly respond
to any cybersecurity incidents in accordance with written information security incident response plans adopted by CTO
and the Company. These members of CTO’s management team, together with the MSP, monitor the prevention, detection,
mitigation and remediation of cybersecurity threats and incidents and will report such threats and incidents to the Audit
Committee when appropriate.
CTO’s Senior Vice President, Chief Financial Officer and Treasurer, Senior Vice President, General Counsel and
Corporate Secretary, and Senior Vice President, Chief Accounting Officer each hold degrees in their respective fields, and
have approximately 20 years or more of experience managing risks at CTO, the Company and similar companies, including
risks arising from cybersecurity threats.
Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and
are not reasonably likely to affect the Company, including its business strategy, results of operations or financial condition.
ITEM 2. PROPERTIES
Our principal offices are located at 369 N. New York Avenue, Suite 201, Winter Park, Florida 32789. Our telephone
number is (407) 904-3324.
As of December 31, 2024, the Company owns 134 net leased retail buildings located in 35 states (refer to Item 1.
“Business”).
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may be a party to certain legal proceedings, incidental to the normal course of our
business. We are not currently a party to any pending or threatened legal proceedings that we believe could have a material
adverse effect on our business or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER REPURCHASES OF EQUITY SECURITIES
The Company’s common stock trades on the NYSE under the symbol “PINE”.
As of January 29, 2025, there were 144 holders of record of our common stock. This figure does not represent the
actual number of beneficial owners of our common stock because shares of our common stock are frequently held in “street
name” through banks, brokers and others for the benefit of beneficial owners who may vote the shares.
52
We intend to make quarterly distributions to our common stockholders. In particular, in order to maintain our
qualification for taxation as a REIT, we intend to make annual distributions to our stockholders of at least 90% of our
REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain.
However, any future distributions will be at the sole discretion of the Board and will depend upon, among other things,
our actual results of operations and liquidity.
Unregistered Sales of Equity Securities
During the years ended December 31, 2024 and December 31, 2022, there were no unregistered sales of equity
securities, which were not previously reported. On November 10, 2023, we issued 479,640 shares of our common stock
to holders OP Units upon the redemption of such OP Units pursuant to the partnership agreement of the Operating
Partnership. The issuance of such shares was exempt from registration under the Securities Act, pursuant to the exemption
contemplated by Section 4(a)(2) thereof for transactions not involving a public offering. The OP Units were redeemed for
an equal number of shares of our common stock. 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.
Issuer Purchases of Equity Securities
None.
ITEM 6. [Reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
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 the 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.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and
related notes included elsewhere in this report.
Overview
Alpine Income Property Trust, Inc. is a Maryland corporation that conducts its operations so as to qualify as a REIT
for U.S. federal income tax purposes. Substantially all of our operations are conducted through our Operating Partnership.
We seek to acquire, own and operate primarily freestanding, commercial retail real estate properties located in the
United States primarily leased pursuant to long-term net leases. We target tenants in industries that we believe are favorably
53
impacted by macroeconomic trends that support consumer spending, stable and growing employment, and positive
consumer sentiment, as well as tenants in industries that have demonstrated resistance to the impact of the e-commerce
retail sector or who use a physical presence as a component of their omnichannel strategy. We also seek to invest in
properties that are net leased to tenants that we believe have attractive credit characteristics, stable operating histories,
healthy rent coverage levels, are well-located within their respective markets and/or have rents at-or-below market rent
levels. Furthermore, we believe that the size of our company allows us, for at least the near term, to focus our investment
activities on the acquisition of single properties or smaller portfolios of properties that represent a transaction size that
most of our publicly-traded net lease REIT peers will not pursue on a consistent basis.
The Company operates in two primary business segments: income properties and commercial loans and investments.
The Company has no employees and is externally managed by our Manager, a Delaware limited liability company
and a wholly owned subsidiary of CTO. CTO is a Maryland corporation that is a publicly traded diversified REIT and the
sole member of our Manager. See Note 19, “Related Party Management Company” in the Notes to the Financial Statements
for further discussion of the Company’s related party transactions with CTO.
Our strategy for investing in income-producing properties is focused on factors including, but not limited to, long-
term real estate fundamentals, including those markets experiencing significant economic growth. We employ a
methodology for evaluating targeted investments in income-producing properties which includes an evaluation of: (i) the
attributes of the real estate (e.g., location, market demographics, comparable properties in the market, etc.); (ii) an
evaluation of the existing tenant(s) (e.g., credit-worthiness, property level sales, tenant rent levels compared to the market,
etc.); (iii) other market-specific conditions (e.g., tenant industry, job and population growth in the market, local economy,
etc.); and (iv) considerations relating to the Company’s business and strategy (e.g., strategic fit of the asset type, property
management needs, alignment with the Company’s structure, etc.).
During the year ended December 31, 2024, the Company acquired 12 properties for a combined purchase price of
$103.6 million, of which the Tampa Properties totaling $31.4 million are accounted for as a financing arrangement. During
the year ended December 31, 2024, the Company sold 15 properties for an aggregate sales price of $62.0 million,
generating aggregate gains on sale of $3.4 million.
As of December 31, 2024, we owned 134 properties with an aggregate gross leasable area of 3.9 million square feet,
located in 35 states, with a weighted average remaining lease term of 8.7 years. Our portfolio was 98% occupied as of
December 31, 2024.
We may also acquire or originate commercial loans and investments associated with commercial real estate located
in the United States. Our investments in commercial loans are generally secured by real estate or the borrower’s pledge of
its ownership interest in an entity that owns real estate. During the year ended December 31, 2024, the Company invested
in three commercial loans with a total funding commitment of $31.1 million. Also during the year ended December 31,
2024, the Company acquired the Tampa Properties for $31.4 million through a sale-leaseback transaction that includes a
tenant repurchase option. Due to the existence of the tenant repurchase option, and pursuant to FASB ASC Topic 842,
Leases, GAAP requires that the $31.4 million investment be accounted for as a financing arrangement, and accordingly
the related assets and corresponding revenue are included in the Company’s commercial loans and investments in the
Company’s consolidated balance sheets and consolidated statement of operations. However, as the Tampa Properties
constitute real estate assets for both legal and tax purposes, we have included them in the property portfolio when
describing our property portfolio and for purposes of providing statistics related thereto. Also during the year ended
December 31, 2024, the Company sold a $13.6 million A-1 participation interest in the Company’s initial $23.4 million
portfolio loan. As of December 31, 2024, the Company’s commercial loan investments portfolio included five construction
loans, one mortgage note, and three properties acquired pursuant to a sale-leaseback transaction whereby the tenant has a
future repurchase right, with a total carrying value of $89.6 million.
54
Historical Financial Information
The following table summarizes our selected historical financial information for each of the last three fiscal years (in
thousands, except per share and dividend data). The selected financial information has been derived from our audited
consolidated financial statements.
Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52,227 $
45,644 $
45,191
Net Income From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14,015 $
13,142 $
43,482
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,254 $
3,266 $
33,955
Less: Net Income Attributable to Noncontrolling Interest . . . . . . . . . . . .
(188)
(349)
(4,235)
Net Income Attributable to Alpine Income Property Trust, Inc. . . . . . . . . . $
2,066 $
2,917 $
29,720
Net Income Per Share Attributable to Alpine Income Property Trust, Inc.
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.15 $
0.21 $
2.48
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.14 $
0.19 $
2.17
Dividends Declared and Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.110 $
1.100 $
1.090
Balance Sheet Data (in thousands):
As of December 31,
2024
2023
Total Real Estate, at Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
489,867
$
478,307
Real Estate—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
444,017
$
443,593
Assets Held For Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,254
$
4,410
Commercial Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
89,629
$
35,080
Cash and Cash Equivalents and Restricted Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7,951
$
13,731
Intangible Lease Assets—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
43,925
$
49,292
Straight-Line Rent Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,485
$
1,409
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
15,734
$
17,045
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
604,995
$
564,560
Accounts Payable, Accrued Expenses, and Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,445
$
5,736
Prepaid Rent and Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,412
$
2,627
Intangible Lease Liabilities—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
4,774
$
4,907
Obligation Under Participation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
11,403
$
—
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
301,466
$
275,677
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
328,500
$
288,947
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
276,495
$
275,613
55
Non-GAAP Financial Measures
Our reported results are presented in accordance with GAAP. We also disclose FFO and AFFO, both of which are
non-GAAP financial measures. We believe these two non-GAAP financial measures are useful to investors because they
are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.
FFO and AFFO do not represent cash generated from operating activities and are not necessarily indicative of cash
available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance
measure or cash flows from operations as reported on our statement of cash flows as a liquidity measure and should be
considered in addition to, and not in lieu of, GAAP financial measures.
We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as GAAP net income or loss adjusted to exclude real
estate related depreciation and amortization, as well as extraordinary items (as defined by GAAP) such as net gain or loss
from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and
impairments associated with the implementation of current expected credit losses on commercial loans and investments at
the time of origination, including the pro rata share of such adjustments of unconsolidated subsidiaries. To derive AFFO,
we further modify the NAREIT computation of FFO to include other adjustments to GAAP net income related to non-
cash revenues and expenses such as loss on extinguishment of debt, amortization of above- and below-market lease related
intangibles, straight-line rental revenue, amortization of deferred financing costs, non-cash compensation, and other non-
cash income or expense. Such items may cause short-term fluctuations in net income but have no impact on operating cash
flows or long-term operating performance. We use AFFO as one measure of our performance when we formulate corporate
goals.
FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance
between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization
and net gains or losses on sales, which are based on historical costs and implicitly assume that the value of real estate
diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is an
additional useful supplemental measure for investors to consider because it will help them to better assess our operating
performance without the distortions created by other non-cash revenues or expenses. FFO and AFFO may not be
comparable to similarly titled measures employed by other companies.
56
Reconciliation of Non-GAAP Measures (in thousands, except share data):
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,254 $
3,266 $
33,955
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,594
25,758
23,564
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,693
3,220
—
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,443)
(9,334)
(33,801)
Funds From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,098 $
22,910 $
23,718
Adjustments:
Loss (Gain) on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . . . .
—
(23)
727
Amortization of Intangible Assets and Liabilities to
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(517)
(417)
(328)
Straight-Line Rent Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(515)
(402)
(935)
COVID-19 Rent Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
45
Non-Cash Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
318
310
Amortization of Deferred Financing Costs to Interest
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
720
710
599
Other Non-Cash Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
152
115
100
Adjusted Funds From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,185 $
23,211 $
24,236
Weighted Average Number of Common Shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,858,257
13,925,362
11,976,001
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,082,111
15,560,524
13,679,495
Other Data (in thousands, except per share data):
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,098 $
22,910 $
23,718
FFO per Diluted Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.73 $
1.47 $
1.73
AFFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,185 $
23,211 $
24,236
AFFO per Diluted Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.74 $
1.49 $
1.77
57
COMPARISON OF THE YEARS ENDED DECEMBER 31, 2024 AND 2023
The following presents the Company’s results of operations for the year ended December 31, 2024, as compared to
the year ended December 31, 2023 (in thousands):
Year Ended
December 31,
2024
December 31,
2023
$
Variance
%
Variance
Revenues:
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46,005 $
44,967 $ 1,038
2.3%
Interest Income from Commercial Loans and Investments . . . . .
5,761
637 5,124
804.4%
Other Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
461
40
421 1052.5%
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,227
45,644 6,583
14.4%
Operating Expenses:
Real Estate Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,793
6,580 1,213
18.4%
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . .
6,575
6,301
274
4.3%
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,693
3,220 (1,527)
(47.4)%
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,594
25,758
(164)
(0.6)%
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,655
41,859
(204)
(0.5)%
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,443
9,334 (5,891)
(63.1)%
Gain on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . .
—
23
(23) (100.0)%
Net Income From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,015
13,142
873
6.6%
Investment and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
289
(42)
(14.5)%
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12,008)
(10,165) (1,843)
(18.1)%
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,254
3,266 (1,012)
(31.0)%
Less: Net Income Attributable to Noncontrolling Interest . . . .
(188)
(349)
161
46.1%
Net Income Attributable to Alpine Income Property Trust, Inc. . . $
2,066 $
2,917 $ (851)
(29.2)%
Lease Income and Real Estate Expenses
Revenue from our income properties during the years ended December 31, 2024 and 2023 totaled $46.0 million and
$45.0 million, respectively. The increase in revenues is reflective of the Company’s volume of acquisitions, offset by
dispositions, as well as certain one-time reduced revenues related to tenant credit loss and bankruptcy. The direct costs of
revenues for our income properties totaled $7.8 million and $6.6 million during the years ended December 31, 2024 and
2023, respectively. The $1.2 million increase in the direct cost of revenues is reflective of a portion of portfolio expenses
being non-recoverable pursuant to tenant leases.
Commercial Loans and Investments
Interest income from commercial loans and investments totaled $5.8 million and $0.6 million for the years ended
December 31, 2024 and 2023, respectively. The increase in income is attributable to the expanded portfolio of commercial
loans and investments, which as December 31, 2024, was comprised of five construction loans, one mortgage note, and
three properties acquired pursuant to a sale-leaseback transaction whereby the tenant has a future repurchase right. As of
December 31, 2023, the Company’s portfolio of commercial loans and investments was comprised of two construction
loans and one mortgage note.
Other Revenue
Other revenue totaled $0.5 million and less than $0.1 million for the years ended December 31, 2024 and 2023,
respectively. The revenue is attributable to fees earned from a revenue sharing agreement the Company entered into with
CTO as further described in Note 19, “Related Party Management Company” in the Notes to the Financial Statements.
The increase is attributable to the year ended December 31, 2024 being the first full year the revenue sharing agreement
was in effect.
58
General and Administrative Expenses
The following table represents the Company’s general and administrative expenses for the year ended December 31,
2024 as compared to the year ended December 31, 2023 (in thousands):
December 31,
2024
December 31,
2023
$ Variance
%
Variance
Management Fee to Manager . . . . . . . . . . . . . . . . . . . . . . . $
4,241 $
4,356 $
(115)
(2.6)%
Director Stock Compensation Expense . . . . . . . . . . . . . . .
304
318
(14)
(4.4)%
Director & Officer Insurance Expense . . . . . . . . . . . . . . .
218
247
(29)
(11.7)%
Additional General and Administrative Expense . . . . . . .
1,812
1,380
432
31.3%
Total General and Administrative Expenses . . . . . . . . . . . $
6,575
$
6,301 $
274
4.3%
General and administrative expenses totaled $6.6 million and $6.3 million during the years ended December 31, 2024
and 2023, respectively. The $0.3 million increase is primarily attributable to a $0.2 million increase in corporate legal and
consulting fees and a $0.1 million increase in state tax expenses, partially offset by a $0.1 million decrease in management
fee expense due to a decrease in the weighted average of the Company’s equity base.
Provision for Impairment
During the year ended December 31, 2024, the Company recorded a $1.7 million impairment charge of which $0.6
million represents the current expected credit losses (“CECL”) reserve related to our commercial loans and investments
and $1.1 million represents the provision for losses related to our income properties as further described in Note 7,
“Provision for Impairment” in the Notes to the Financial Statements. During the year ended December 31, 2023, the
Company recorded a $3.2 million impairment charge of which $0.3 million represents the CECL reserve related to our
commercial loans and investments and $2.9 million represents the provision for losses related to our income properties as
further described in Note 7, “Provision for Impairment” in the Notes to the Financial Statements.
Depreciation and Amortization
Depreciation and amortization expense totaled $25.6 million and $25.8 million during the years ended December 31,
2024 and 2023, respectively. The $0.2 million decrease in the depreciation and amortization expense is reflective of the
Company’s change in portfolio as well as the timing of acquisitions versus dispositions.
Gain on Disposition of Assets
During the year ended December 31, 2024, the Company sold 15 properties for an aggregate sales price of $62.0
million, generating aggregate gains on sale of $3.4 million. During the year ended December 31, 2023, the Company sold
24 properties for an aggregate sales price of $108.3 million, generating aggregate gains on sale of $9.3 million.
Investment and Other Income
Investment and other income totaled $0.2 million and $0.3 million during the years ended December 31, 2024 and
2023, respectively. The decrease is attributable to lower interest rates on bank deposits.
Interest Expense
Interest expense totaled $12.0 million and $10.2 million during the years ended December 31, 2024 and 2023,
respectively. The $1.8 million increase in interest expense is attributable to the higher average outstanding debt balance
for increased interest expense of $1.2 million as well as $0.6 million of interest expense resulting from the sale of
participation interest in the Company’s $23.4 million Mortgage Note as defined and further described in Note 4,
“Commercial Loans and Investments” in the Notes to the Financial Statements. The overall increase in the Company’s
long-term debt was primarily utilized to fund the acquisition of properties and commercial loans and investments during
2024.
59
Net Income
Net income totaled $2.3 million and $3.3 million during the years ended December 31, 2024 and 2023, respectively.
The decrease in net income is attributable to the factors described above, most significantly to the $5.9 million decrease
in gain on disposition of assets during the year ended December 31, 2024. The decreased gain on disposition of assets is
the result of reduced disposition activity during the year ended December 31, 2024 as compared to 2023.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The following presents the Company’s results of operations for the year ended December 31, 2023, as compared to
the year ended December 31, 2022 (in thousands):
Year Ended
December 31,
2023
December 31,
2022
$
Variance
%
Variance
Revenues:
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44,967 $
45,191 $
(224)
(0.5)%
Interest Income from Commercial Loans and Investments . . . . .
637
—
637 100.0%
Other Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
—
40 100.0%
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,644
45,191
453
1.0%
Operating Expenses:
Real Estate Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,580
5,435
1,145
21.1%
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . .
6,301
5,784
517
8.9%
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,220
—
3,220 100.0%
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,758
23,564
2,194
9.3%
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,859
34,783
7,076
20.3%
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,334
33,801 (24,467)
(72.4)%
Gain (Loss) on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . .
23
(727)
750 103.2%
Net Income From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,142
43,482 (30,340)
(69.8)%
Investment and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
289
12
277 2308.3%
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,165)
(9,539)
(626)
(6.6)%
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,266
33,955 (30,689)
(90.4)%
Less: Net Income Attributable to Noncontrolling Interest . . . .
(349)
(4,235)
3,886
91.8%
Net Income Attributable to Alpine Income Property Trust, Inc. . . $
2,917 $
29,720 $ (26,803)
(90.2)%
Lease Income and Real Estate Expenses
Revenue from our income properties during the years ended December 31, 2023 and 2022 totaled $45.0 million and
$45.2 million, respectively. The decrease in revenues is reflective of the Company’s volume of dispositions, offset by
acquisitions, as well as certain one-time reduced revenues related to tenant credit loss and bankruptcy. The direct costs of
revenues for our income properties totaled $6.6 million and $5.4 million during the years ended December 31, 2023 and
2022, respectively. The $1.1 million increase in the direct cost of revenues is reflective of a portion of portfolio expenses
being non-recoverable pursuant to tenant leases, as well as certain non-recoverable expenses related to transaction costs
and legal fees associated with the seven assets leased to one tenant that filed for bankruptcy protection during the year
ended December 31, 2023.
Commercial Loans and Investments
Interest income from commercial loans and investments totaled $0.6 million for the year ended December 31, 2023.
The income is attributable to three loans originated by the Company during the year ended December 31, 2023. There
were no commercial loans and investments generating interest income during the year ended December 31, 2022.
60
Other Revenue
Other revenue totaled less than $0.1 million for the year ended December 31, 2023. The revenue is attributable to fees
earned from a revenue sharing agreement the Company entered into with CTO as further described in Note 19, “Related
Party Management Company” in the Notes to the Financial Statements. There were no revenue sharing agreements
generating income during the year ended December 31, 2022.
General and Administrative Expenses
The following table represents the Company’s general and administrative expenses for the year ended December 31,
2023 as compared to the year ended December 31, 2022 (in thousands):
December 31,
2023
December 31,
2022
$ Variance
%
Variance
Management Fee to Manager . . . . . . . . . . . . . . . . . . . . . . . $
4,356 $
3,828 $
528
13.8%
Director Stock Compensation Expense . . . . . . . . . . . . . . .
318
310
8
2.6%
Director & Officer Insurance Expense . . . . . . . . . . . . . . .
247
366
(119)
(32.5)%
Additional General and Administrative Expense . . . . . . .
1,380
1,280
100
7.8%
Total General and Administrative Expenses . . . . . . . . . . . $
6,301
$
5,784 $
517
8.9%
General and administrative expenses totaled $6.3 million and $5.8 million during the years ended December 31, 2023
and 2022, respectively. The $0.5 million increase is primarily attributable to growth in the Company’s equity base, which
led to an increase in management fee expense of $0.5 million.
Provision for Impairment
During the year ended December 31, 2023, the Company recorded a $3.2 million impairment charge of which $0.3
million represents the current expected credit losses (“CECL”) reserve related to our commercial loans and investments
and $2.9 million represents the provision for losses related to our income properties as further described in Note 7,
“Provision for Impairment” in the Notes to the Financial Statements. There were no impairment charges on the Company’s
income property portfolio during the year ended December 31, 2022.
Depreciation and Amortization
Depreciation and amortization expense totaled $25.8 million and $23.5 million during the years ended December 31,
2023 and 2022, respectively. The $2.3 million increase in the depreciation and amortization expense is reflective of the
Company’s change in portfolio as well as the timing of acquisitions versus dispositions. Several ground lease assets were
disposed of during the earlier part of 2023 which were re-invested into more depreciable assets on a relative basis.
Gain on Disposition of Assets
During the year ended December 31, 2023, the Company sold 24 properties for an aggregate sales price of $108.3
million, generating aggregate gains on sale of $9.3 million. During the year ended December 31, 2022, the Company sold
16 properties for an aggregate sales price of $154.6 million, generating aggregate gains on sale of $33.8 million.
Gain (Loss) on Extinguishment of Debt
During the year ended December 31, 2022, the Company recorded a $0.7 million loss on the extinguishment of debt
attributable to the write off of unamortized loan costs in connection with the CMBS Loan defeasance and the termination
of the Prior Revolving Credit Facility, as defined in Note 13, “Long-Term Debt” in the Notes to the Financial Statements.
61
Investment and Other Income
Investment and other income totaled $0.3 million and less than $0.1 million during the years ended December 31,
2023 and 2022, respectively. The increase is attributable to higher interest rates on bank deposits.
Interest Expense
Interest expense totaled $10.1 million and $9.5 million during the years ended December 31, 2023 and 2022,
respectively. The $0.6 million increase in interest expense is attributable to the higher average interest rates during the
year ended December 31, 2023 as compared to the year ended December 31, 2022. The overall increase in the Company’s
long-term debt was primarily utilized to fund the acquisition of properties and commercial loans and investments during
2023 and 2022.
Net Income
Net income totaled $3.3 million and $34.0 million during the years ended December 31, 2023 and 2022, respectively.
The decrease in net income is attributable to the factors described above, most significantly to the $24.5 million decrease
in gain on disposition of assets during the year ended December 31, 2023. The decreased gain on disposition of assets is
the result of reduced disposition activity during the year ended December 31, 2023 compared to 2022.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents and Restricted Cash. Cash totaled $8.0 million at December 31, 2024, including restricted
cash of $6.4 million. See Note 2 “Summary of Significant Accounting Policies” under the heading Restricted Cash in the
Notes to the Financial Statements for the Company’s disclosure related to its restricted cash balance at December 31, 2024.
Our net cash provided by our operating activities totaled $25.6 million during each of the years ended December 31,
2024 and 2023.
Our net cash used in investing activities totaled $57.8 million for the year ended December 31, 2024, compared to net
cash used in investing activities of $13.6 million for the year ended December 31, 2023, an increase in cash outflows of
$44.2 million. The increase in net cash used in investing activities of $44.2 million is primarily related to a net $36.2
million increase in acquisitions versus dispositions during the year ended December 31, 2024, in addition to a net $8.0
million increase related to investments in the Company’s commercial loans and investment portfolio.
Our net cash provided by financing activities totaled $26.4 million for the year ended December 31, 2024, compared
to net cash used in financing activities of $11.4 million for the year ended December 31, 2023, for an increase in cash
inflows from financing activities of $37.8 million. The increase of $37.8 million is primarily related to a $17.3 million
increase in net proceeds from long-term debt during the year ended December 31, 2024 as well as $6.5 million more
proceeds received from sales of common stock under the Company’s “at-the-market” equity offering programs and $13.8
million less cash used to repurchase the Company’s common stock during the year ended December 31, 2024.
Long-Term Debt. At December 31, 2024, the commitment level under the Credit Facility was $250.0 million and the
Company had an outstanding balance of $102.0 million and $89.5 million available capacity. See Note 13, “Long-Term
Debt” in the Notes to the Financial Statements for the Company’s disclosure related to its long-term debt balance at
December 31, 2024.
Acquisitions and Investments. As noted previously, the Company acquired 12 properties during the year ended
December 31, 2024, for an aggregate purchase price of $103.6 million, as further described in Note 3 “Property Portfolio”
in the Notes to the Financial Statements. Acquisitions during the year ended December 31, 2024 include the Tampa
Properties purchased for $31.4 million through a sale-leaseback transaction that includes a tenant repurchase option. Due
to the existence of the tenant repurchase option, and pursuant to FASB ASC Topic 842, Leases, GAAP requires that the
$31.4 million investment be accounted for as a financing arrangement, and accordingly the related assets and
corresponding revenue are included in the Company’s commercial loans and investments in the Company’s consolidated
62
balance sheets and consolidated statement of operations. However, as the Tampa Properties constitute real estate assets
for both legal and tax purposes, we have included them in the property portfolio when describing our property portfolio
and for purposes of providing statistics related thereto. The Company also invested in three commercial loans during the
year ended December 31, 2024, with a total funding commitment of $31.1 million. As of December 31, 2024, the
Company’s commercial loan investments portfolio included five construction loans, one mortgage note, and three
properties acquired pursuant to a sale-leaseback transaction whereby the tenant has a future repurchase right, with a total
carrying value of $89.6 million. See Note 4, “Commercial Loans and Investments” in the Notes to the Financial Statements
for additional disclosures related to the Company’s commercial loans and investments as of December 31, 2024.
Dispositions. During the year ended December 31, 2024, the Company sold 15 properties for a total sales price of
$62.0 million, generating aggregate gains on sale of $3.4 million, as further described in Note 3 “Property Portfolio” in
the Notes to the Financial Statements. Also during the year ended December 31, 2024, the Company sold a $13.6 million
A-1 participation interest in the Company’s initial $23.4 million portfolio loan. See Note 4, “Commercial Loans and
Investments” in the Notes to the Financial Statements for additional disclosures related to the Company’s commercial
loans and investments as of December 31, 2024.
Capital Expenditures. As of December 31, 2024, the Company had no commitments related to capital expenditures
for the maintenance of fixed assets, such as land, buildings, and equipment. Pursuant to a certain lease agreement executed
during the year ended December 31, 2024, the Company is committed to funding $5.0 million in tenant improvements.
The Company is committed to fund five construction loans as described in Note 4, “Commercial Loans and
Investments” in the Notes to the Financial Statements. The unfunded portion of the construction loans totaled $7.4 million
as of December 31, 2024.
The Company is contractually obligated under its various long-term debt agreements. In the aggregate, the Company
is obligated under such agreements to repay $302.0 million on a long-term basis, to be repaid in excess of one year, with
no payments due within one year.
We believe we will have sufficient liquidity to fund our operations, capital requirements, maintenance, and debt
service requirements over the next twelve months and into the foreseeable future, with cash on hand, cash flow from our
operations, proceeds from the completion of the sales of assets utilizing the reverse like-kind 1031 exchange structure,
$90.4 million of availability under the 2022 ATM Program, and $89.5 million of available capacity on the existing $250.0
million Credit Facility, as of December 31, 2024.
The Board and management consistently review the allocation of capital with the goal of providing the best long-term
return for our stockholders. These reviews consider various alternatives, including increasing or decreasing regular
dividends, repurchasing the Company’s securities, and retaining funds for reinvestment. Annually, the Board reviews our
business plan and corporate strategies, and makes adjustments as circumstances warrant. Management’s focus is to
continue our strategy of investing in net leased properties and commercial loans and investments by utilizing the capital
we raise and available borrowing capacity from the Credit Facility to increase our portfolio of income-producing properties
and commercial loan and investments portfolio, providing stabilized cash flows with strong risk-adjusted returns primarily
in larger metropolitan areas and growth markets.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates include those estimates made in accordance with GAAP that involve a significant level
of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial
condition or results of operations. Our most significant estimate is as follows:
Purchase Accounting for Acquisitions of Real Estate Subject to a Lease. As required by GAAP, the fair value of the
real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant
improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market
leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. In
allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-
63
market in-place lease values are recorded as other assets or liabilities based on the present value. The assumptions
underlying the allocation of relative fair values are based on market information including, but not limited to: (i) the
estimate of replacement cost of improvements under the cost approach, (ii) the estimate of land values based on comparable
sales under the sales comparison approach, and (iii) the estimate of future benefits determined by either a reasonable rate
of return over a single year’s net cash flow, or a forecast of net cash flows projected over a reasonable investment horizon
under the income capitalization approach. The underlying assumptions are subject to uncertainty and thus any changes to
the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have
an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation
and amortization as a result of the fair value allocation. The acquisitions of real estate subject to this estimate totaled 9
properties for a combined purchase price of $72.2 million for the year ended December 31, 2024 and 14 properties for a
combined purchase price of $82.9 million for the year ended December 31, 2023.
See Note 2, “Summary of Significant Accounting Policies” in the Notes to the Financial Statements for further
discussion of the Company’s accounting estimates and policies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934. As a result,
pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s Consolidated Financial Statements appear beginning on page F-1 of this report. See Item 15 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with our accountants on accounting and financial disclosures.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, an evaluation, as required by rules 13(a)-15 and 15(d)-15 of the
Securities Exchange Act of 1934 (the “Exchange Act”) was carried out under the supervision and with the participation of
the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the
effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the
Exchange Act). Based on that evaluation, the CEO and CFO have concluded that the design and operation of the
Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in SEC rules and forms, and to provide reasonable assurance that information required
to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management,
including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP. Our internal control over financial reporting includes policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made
64
only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect
on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Under the supervision and with the participation of our management, including our CEO and our CFO, we evaluated
the effectiveness of our internal control over financial reporting using the criteria set forth in the 2013 Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on our assessment and those criteria, our management concluded that our internal control over financial reporting
was effective as of December 31, 2024.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or
15d-15(f) of the Exchange Act) during the period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
On February 6, 2025, the Company entered into indemnification agreements with each of Philip R. Mays, the
Company’s Senior Vice President, Chief Financial Officer, and Treasurer, and Lisa M. Vorakoun, the Company’s Senior
Vice President and Chief Accounting Officer. These agreements provide, in general, that the Company will indemnify the
applicable executive officer to the fullest extent permitted by law in connection with their service to the Company or on
the Company’s behalf. Copies of the indemnification agreements are attached hereto as Exhibits 10.24 and 10.25 and
incorporated herein by reference
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required to be set forth herein will be included in the Company’s definitive proxy statement for its
2025 annual stockholders’ meeting to be filed with the SEC within 120 days after the end of the registrant’s fiscal year
ended December 31, 2024 (the “Proxy Statement”), which sections are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
We are externally managed by our Manager and as such the Company does not incur compensation costs affiliated
with our executive officers. Any additional information required to be set forth herein will be included in the Proxy
Statement, which sections are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required to be set forth herein will be included in the Proxy Statement, which sections are
incorporated herein by reference.
65
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required to be set forth herein will be included in the Proxy Statement, which sections are
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required to be set forth herein will be included in the Proxy Statement, which section is incorporated
herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1. FINANCIAL STATEMENTS
The following financial statements are filed as part of this report:
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) . . . . . . . . . . . . . . . . . . . . . . . .
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022 . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022 . . . . . .
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 . . . . . . . . . . . . . .
F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
2. FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because of the absence of conditions under which they are required, materiality, or because the
required information is given in the financial statements or notes thereof.
66
3. EXHIBITS
EXHIBIT INDEX
Exhibit
Number
Description
3.1
Articles of Amendment and Restatement of Alpine Income Property Trust, Inc. (incorporated by
reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 3, 2019).
3.2
Third Amended and Restated Bylaws of Alpine Income Property Trust, Inc. (incorporated by reference
to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 3, 2023).
4.1
Description of the Registrant’s Securities (incorporated by reference to Exhibit 4.1 to the Company’s
Annual Report on Form 10-K filed on February 9, 2023).
4.2
Specimen Common Stock Certificate of Alpine Income Property Trust, Inc. (incorporated by reference
to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-11/A (File No. 333-234304) filed
with the Commission on October 29, 2019).
10.1
Stock Purchase Agreement, dated November 21, 2019, between Alpine Income Property Trust, Inc.
and Consolidated-Tomoka Land Co. (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on December 3, 2019).
10.2
Registration Rights Agreement, dated November 26, 2019, between Alpine Income Property
Trust, Inc. and Consolidated-Tomoka Land Co. (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on December 3, 2019).
10.3
Amended and Restated Agreement of Limited Partnership, dated November 26, 2019, among Alpine
Income Property GP, LLC, Alpine Income Property Trust, Inc., Consolidated-Tomoka Land Co. and
Indigo Group Ltd. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K filed on December 3, 2019).
10.4
Tax Protection Agreement, dated November 26, 2019, among Alpine Income Property Trust, Inc.,
Alpine Income Property OP, LP, Consolidated-Tomoka Land Co. and Indigo Group Ltd. (incorporated
by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 3,
2019).
10.5
Management Agreement, dated November 26, 2019, among Alpine Income Property Trust, Inc.,
Alpine Income Property OP, LP and Alpine Income Property Manager, LLC (incorporated by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on December 3, 2019).*
10.6
Exclusivity and Right of First Offer Agreement, dated November 26, 2019, between Consolidated-
Tomoka Land Co. and Alpine Income Property Trust, Inc. (incorporated by reference to Exhibit 10.6
to the Company’s Current Report on Form 8-K filed on December 3, 2019).
10.7
Indemnification Agreement, dated November 21, 2019, between Alpine Income Property Trust, Inc.
and John P. Albright (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on
Form 8-K filed on December 3, 2019).*
10.8
Indemnification Agreement, dated November 21, 2019, between Alpine Income Property Trust, Inc.
and Steven R. Greathouse (incorporated by reference to Exhibit 10.10 to the Company’s Current
Report on Form 8-K filed on December 3, 2019).*
10.9
Indemnification Agreement, dated November 21, 2019, between Alpine Income Property Trust, Inc.
and Daniel E. Smith (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on
Form 8-K filed on December 3, 2019).*
10.10
Indemnification Agreement, dated November 21, 2019, between Alpine Income Property Trust, Inc.
and M. Carson Good (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on
Form 8-K filed on December 3, 2019).*
67
10.11
Indemnification Agreement, dated November 21, 2019, between Alpine Income Property Trust, Inc.
and Andrew C. Richardson (incorporated by reference to Exhibit 10.14 to the Company’s Current
Report on Form 8-K filed on December 3, 2019).*
10.12
Indemnification Agreement, dated February 10, 2021, between Alpine Income Property Trust, Inc. and
Rachel E. Wein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on February 11, 2021).*
10.13
Alpine Income Property Trust, Inc. 2019 Individual Equity Incentive Plan (incorporated by reference
to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 (File No. 333-235256) filed on
November 25, 2019).*
10.14
Alpine Income Property Trust, Inc. 2019 Manager Equity Incentive Plan (incorporated by reference to
Exhibit 10.17 to the Company’s Current Report on Form 8-K filed on December 3, 2019).*
10.15
Form of Non-Employee Director Restricted Stock Award Agreement under the Alpine Income
Property Trust, Inc. 2019 Individual Equity Incentive Plan (incorporated by reference to Exhibit 10.11
to the Registrant’s Registration Statement on Form S-11/A (File No. 333-234304) filed with the
Commission on November 7, 2019).*
10.16
Credit Agreement, dated as of May 21, 2021, among Alpine Income Property, OP, LP, Alpine Income
Property Trust, Inc., the other Guarantors from time to time parties thereto, Truist Bank, N.A., Bank
of Montreal, Raymond James Bank, N.A. and Stifel Bank (incorporated by reference to Exhibit 10.2
to the Company’s Current Report on Form 8-K filed on May 25, 2021)
10.17
Amendment, Increase and Joinder to Credit Agreement, dated as of April 14, 2022, among Alpine
Income Property, OP, LP, Alpine Income Property Trust, Inc., the other Guarantors from time to time
parties thereto, Truist Bank, N.A., and certain other lenders named therein (incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 18, 2022).
10.18
Amended and Restated Credit Agreement, dated as of September 30, 2022, among Alpine Income
Property, OP, LP, Alpine Income Property Trust, Inc., the other Guarantors from time to time parties
thereto, KeyBank National Association, and certain other lenders named therein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 6, 2022).
10.19
Second Amendment to the 2026 Term Loan Agreement, dated as of October 5, 2022, among Alpine
Income Property, OP, LP, Alpine Income Property Trust, Inc., the other Guarantors from time to time
parties thereto, Truist Bank, N.A., and certain other lenders named therein (incorporated by reference
to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on October 20, 2022).
10.20
Amendment No. 1 to Management Agreement dated July 18, 2024 (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 19, 2024).
10.21
Indemnification Agreement, dated November 8, 2024, between Alpine Income Property Trust, Inc.
and Brenna A. Wadleigh (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8 K filed on November 13, 2024).*
10.22
First Amendment to the Amended and Restated Credit Agreement, dated as of December 20, 2024,
among Alpine Income Property, OP, LP, Alpine Income Property Trust, Inc., the other Guarantors
from time to time parties thereto, KeyBank National Association, and certain other lenders named
therein. †
10.23
Third Amendment to the 2026 Term Loan Agreement, dated as of December 20, 2024, among Alpine
Income Property, OP, LP, Alpine Income Property Trust, Inc., the other Guarantors from time to time
parties thereto, Truist Bank, N.A., and certain other lenders named therein. †
10.24
Indemnification Agreement, dated February 6, 2025, between Alpine Income Property Trust, Inc. and
Philip R. Mays. †*
10.25
Indemnification Agreement, dated February 6, 2025, between Alpine Income Property Trust, Inc. and
Lisa M. Vorakoun. †*
68
19.1
Insider Trading Policy. †
21.1
List of Subsidiaries of the Registrant. †
23.1
Consent of Grant Thornton LLP. †
31.1
Certificate of John P. Albright, President and Chief Executive Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. †
31.2
Certificate of Philip R. Mays, Senior Vice President, Chief Financial Officer and Treasurer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. †
32.1
Certificate of John P. Albright, President and Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††
32.2
Certificate of Philip R. Mays, Senior Vice President, Chief Financial Officer and Treasurer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††
97.1
Policy Relating to Recovery of Erroneously Awarded Compensation (incorporated by reference to
Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed on February 8, 2024). *
Exhibit 101.INS Inline XBRL Instance Document
Exhibit 101.SCH Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF Inline XBRL Taxonomy Definition Linkbase Document
Exhibit 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
† Filed Herewith
†† Furnished Herewith
* Management Contract or Compensatory Plan or Arrangement
69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALPINE INCOME PROPERTY TRUST, INC.
Date: February 6, 2025
By:
/S/ JOHN P. ALBRIGHT
John P. Albright
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
February 6, 2025
President and Chief Executive Officer (Principal Executive
Officer), and Director
/S/ JOHN P. ALBRIGHT
John P. Albright
February 6, 2025
Senior Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
/S/ PHILIP R. MAYS
Philip R. Mays
February 6, 2025
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
/S/ LISA M. VORAKOUN
Lisa M. Vorakoun
February 6, 2025
Chairman of the Board, Director
/S/ ANDREW C. RICHARDSON
Andrew C. Richardson
February 6, 2025
Director
/S/ M. CARSON GOOD
M. Carson Good
February 6, 2025
Director
/S/ BRENNA A. WADLEIGH
Brenna A. Wadleigh
February 6, 2025
Director
/S/ RACHEL E. WEIN
Rachel E. Wein
(This page has been left blank intentionally.)
F-1
ALPINE INCOME PROPERTY TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022 . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022 . . . . . .
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 . . . . . . . . . . . . . .
F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
F-2
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Alpine Income Property Trust, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Alpine Income Property Trust, Inc. (a Maryland
corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of
operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in
the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair value of real estate acquired with in-place leases
As described further in note 3 to the consolidated financial statements, during the year ended December 31, 2024, the
Company acquired nine properties subject to purchase accounting for acquisitions subject to a lease, for a combined
purchase price of $72.2 million, or a total cost of $72.7 million including capitalized acquisition costs. As further described
F-3
in note 2 to the consolidated financial statements, the fair value of the real estate acquired with in-place leases is allocated
to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and
liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of
leasing costs, based in each case on their relative fair values. We identified the evaluation of the fair value of real estate
acquired with in-place leases as a critical audit matter.
The principal consideration for our determination that the evaluation of the fair value of real estate acquired with in-
place leases is a critical audit matter is that auditing the estimates of fair values of the acquired tangible assets and identified
intangible assets and liabilities is complex due to the significant assumptions being sensitive to changes, including discount
rates, terminal rates, and market rent rates that can be impacted by expectations about future market or economic
conditions.
Our audit procedures related to the evaluation of the fair value of real estate acquired with in-place leases included
the following, among others.
•
We evaluated the design of the key controls related to the Company’s process to account for real estate
acquisitions with in-place leases, including those addressing the development of the significant assumptions,
including discount rates, terminal rates and market rates.
•
We involved internal valuation professionals who assisted in comparing the discount rates, terminal rates, and
market rental rates to independently developed ranges.
/s/ Grant Thornton LLP
We have served as the Company’s auditor since 2019.
Orlando, Florida
February 6, 2025
F-4
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As of
December 31,
2024
December 31,
2023
ASSETS
Real Estate:
Land, at Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
147,912
$
149,314
Building and Improvements, at Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
341,955
328,993
Total Real Estate, at Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
489,867
478,307
Less, Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(45,850)
(34,714)
Real Estate—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
444,017
443,593
Assets Held for Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,254
4,410
Commercial Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,629
35,080
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,578
4,019
Restricted Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,373
9,712
Intangible Lease Assets—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,925
49,292
Straight-Line Rent Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,485
1,409
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,734
17,045
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
604,995
$
564,560
LIABILITIES AND EQUITY
Liabilities:
Accounts Payable, Accrued Expenses, and Other Liabilities . . . . . . . . . . . . . . . . . . . .
$
8,445
$
5,736
Prepaid Rent and Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,412
2,627
Intangible Lease Liabilities—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,774
4,907
Obligation Under Participation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,403
—
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
301,466
275,677
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
328,500
288,947
Commitments and Contingencies—See Note 20
Equity:
Preferred Stock, $0.01 par value per share, 100 million shares authorized, no
shares issued and outstanding as of December 31, 2024 and December 31, 2023 . . . .
—
—
Common Stock, $0.01 par value per share, 500 million shares authorized,
14,691,982 shares issued and outstanding as of December 31, 2024 and
13,659,207 shares issued and outstanding as of December 31, 2023 . . . . . . . . . . . . . .
147
137
Additional Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261,831
243,690
Dividends in Excess of Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(15,722)
(2,359)
Accumulated Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,771
9,275
Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
253,027
250,743
Noncontrolling Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,468
24,870
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276,495
275,613
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
604,995
$
564,560
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Revenues:
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46,005 $
44,967 $
45,191
Interest Income from Commercial Loans and Investments . . . . . . .
5,761
637
—
Other Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
461
40
—
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,227
45,644
45,191
Operating Expenses:
Real Estate Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,793
6,580
5,435
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . .
6,575
6,301
5,784
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,693
3,220
—
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,594
25,758
23,564
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,655
41,859
34,783
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,443
9,334
33,801
Gain (Loss) on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . .
—
23
(727)
Net Income From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,015
13,142
43,482
Investment and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
289
12
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12,008)
(10,165)
(9,539)
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,254
3,266
33,955
Less: Net Income Attributable to Noncontrolling Interest . . . . . .
(188)
(349)
(4,235)
Net Income Attributable to Alpine Income Property Trust, Inc. . . . . $
2,066 $
2,917 $
29,720
Per Common Share Data:
Net Income Attributable to Alpine Income Property Trust, Inc.
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.15 $
0.21 $
2.48
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.14 $
0.19 $
2.17
Weighted Average Number of Common Shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,858,257 13,925,362 11,976,001
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,082,111 15,560,524 13,679,495
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,254 $
3,266 $
33,955
Other Comprehensive Income (Loss)
Cash Flow Hedging Derivative - Interest Rate Swaps . . . . . . . . . . .
(2,736)
(3,778)
12,679
Total Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . .
(2,736)
(3,778)
12,679
Total Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(482)
(512)
46,634
Less: Comprehensive (Income) Loss Attributable to
Noncontrolling Interest
Net Income Attributable to Noncontrolling Interest . . . . . . . . . . . .
(188)
(349)
(4,235)
Other Comprehensive (Income) Loss Attributable to
Noncontrolling Interest (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
232
(1,548)
—
Comprehensive (Income) Loss Attributable to Noncontrolling
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
(1,897)
(4,235)
Comprehensive Income (Loss) Attributable to Alpine Income
Property Trust, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(438) $
(2,409) $
42,399
(1)
For the year ended December 31, 2023, the $1.5 million of other comprehensive income attributable to the noncontrolling interest includes
approximately $1.8 million of other comprehensive income which represents the cumulative amount that should have been attributed to the
noncontrolling interest through December 31, 2022.
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share data)
Common
Stock at
Par
Additional
Paid-in
Capital
Retained
Earnings
(Dividends
in Excess
of Net
Income)
Accumulated
Other
Comprehensive
Income
Stockholders’
Equity
Noncontrolling
Interest
Total
Equity
Balance January 1, 2022 . . . $
114 $ 200,906 $ (6,419) $
1,922 $
196,523 $
31,379 $ 227,902
Net Income . . . . . . . . . . . . .
—
—
29,720
—
29,720
4,235 33,955
Stock Issuance to
Directors . . . . . . . . . . . . . . .
—
310
—
—
310
—
310
Stock Issuance, Net of
Equity Issuance Costs . . . . .
20
35,625
—
—
35,645
— 35,645
Cash Dividend ($1.090
per share) . . . . . . . . . . . . . . .
—
— (13,259)
—
(13,259)
(1,857) (15,116)
Other Comprehensive
Income . . . . . . . . . . . . . . . . .
—
—
—
12,679
12,679
— 12,679
Balance December 31,
2022 . . . . . . . . . . . . . . . . . . .
134 236,841
10,042
14,601
261,618
33,757 295,375
Net Income . . . . . . . . . . . . .
—
—
2,917
—
2,917
349
3,266
Operating Partnership
Unit Redemption . . . . . . . . .
5
9,036
—
—
9,041
(9,041)
—
Stock Repurchase . . . . . . . .
(9) (14,607)
—
—
(14,616)
— (14,616)
Stock Issuance to
Directors . . . . . . . . . . . . . . .
—
303
—
—
303
—
303
Stock Issuance, Net of
Equity Issuance Costs . . . . .
7
12,117
—
—
12,124
— 12,124
Cash Dividend ($1.100
per share) . . . . . . . . . . . . . . .
—
— (15,318)
—
(15,318)
(1,743) (17,061)
Other Comprehensive
Income (Loss) . . . . . . . . . . .
—
—
—
(5,326)
(5,326)
1,548
(3,778)
Balance December 31,
2023 . . . . . . . . . . . . . . . . . . .
137 243,690
(2,359)
9,275
250,743
24,870 275,613
Net Income . . . . . . . . . . . . .
—
—
2,066
—
2,066
188
2,254
Stock Repurchase . . . . . . . .
(1)
(774)
—
—
(775)
—
(775)
Stock Issuance to
Directors . . . . . . . . . . . . . . .
—
317
—
—
317
—
317
Stock Issuance, Net of
Equity Issuance Costs . . . . .
11
18,598
—
—
18,609
— 18,609
Cash Dividend ($1.110
per share) . . . . . . . . . . . . . . .
—
— (15,429)
—
(15,429)
(1,358) (16,787)
Other Comprehensive
Loss . . . . . . . . . . . . . . . . . . .
—
—
—
(2,504)
(2,504)
(232)
(2,736)
Balance December 31,
2024 . . . . . . . . . . . . . . . . . . . $
147 $ 261,831 $ (15,722) $
6,771 $
253,027 $
23,468 $ 276,495
The accompanying notes are an integral part of these consolidated financial statements.
F-8
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Cash Flow From Operating Activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,254 $
3,266 $
33,955
Adjustments to Reconcile Net Income to Net Cash Provided By Operating
Activities:
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,594
25,758
23,564
Amortization of Intangible Lease Assets and Liabilities to Lease Income . . . . . .
(517)
(417)
(328)
Amortization of Deferred Financing Costs to Interest Expense . . . . . . . . . . . . .
720
710
599
Accretion of Commercial Loans and Investments Origination Fees . . . . . . . . . .
(179)
(18)
—
Non-Cash Portion of Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
727
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,443)
(9,334)
(33,801)
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,693
3,220
—
Non-Cash Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
318
310
Decrease (Increase) in Assets:
Straight-Line Rent Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(515)
(402)
(935)
COVID-19 Rent Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
45
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(973)
186
552
Increase (Decrease) in Liabilities:
Accounts Payable, Accrued Expenses, and Other Liabilities . . . . . . . . . . . . . . .
939
670
217
Prepaid Rent and Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(212)
1,687
(253)
Net Cash Provided By Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . .
25,608
25,644
24,652
Cash Flow From Investing Activities:
Acquisition of Real Estate, Including Capitalized Expenditures . . . . . . . . . . . . .
(74,524)
(84,465)
(189,148)
Proceeds from Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,199
106,303
150,370
Acquisition of Commercial Loans and Investments . . . . . . . . . . . . . . . . . . . . . .
(57,851)
(35,419)
—
Principal Payments Received on Commercial Loans and Investments . . . . . . . .
2,930
—
—
Proceeds from Sale of Participation Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,632
—
—
Payments on Participation Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,230)
—
—
Net Cash Used In Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(57,844)
(13,581)
(38,778)
Cash Flow from Financing Activities:
Proceeds from Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
122,400
31,750
277,000
Payments on Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(96,900)
(23,500)
(277,750)
Cash Paid for Loan Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(91)
(73)
(2,106)
Repurchase of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(775)
(14,616)
—
Proceeds From Stock Issuance, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,609
12,124
35,645
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16,787)
(17,061)
(15,116)
Net Cash Provided By (Used In) Financing Activities . . . . . . . . . . . . . . . . .
26,456
(11,376)
17,673
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . .
(5,780)
687
3,547
Cash and Cash Equivalents and Restricted Cash, Beginning of Period . . . . . . . . .
13,731
13,044
9,497
Cash and Cash Equivalents and Restricted Cash, End of Period . . . . . . . . . . . . . . $
7,951 $
13,731 $
13,044
Reconciliation of Cash to the Consolidated Balance Sheets:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,578 $
4,019 $
9,018
Restricted Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,373
9,712
4,026
Total Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,951 $
13,731 $
13,044
The accompanying notes are an integral part of these consolidated financial statements.
F-9
ALPINE INCOME PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
11,969 $
9,245 $
7,753
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Unrealized Gain (Loss) on Cash Flow Hedge . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(2,736) $
(3,778) $
12,679
Operating Partnership Unit Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,041
—
Right-of-Use Assets and Operating Lease Liability—See Note 9 . . . . . . . . . . . .
1,987
—
1,831
The accompanying notes are an integral part of these consolidated financial statements.
F-10
ALPINE INCOME PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022
NOTE 1. BUSINESS AND ORGANIZATION
BUSINESS
Alpine Income Property Trust, Inc. (the “Company” or “PINE”) is a real estate investment trust (“REIT”) that owns
and operates a high-quality portfolio of commercial net lease properties. The terms “us,” “we,” “our,” and “the Company”
as used in this report refer to Alpine Income Property Trust, Inc. together with our consolidated subsidiaries.
Our portfolio consists of 134 net leased properties located in 35 states. The properties in our portfolio are primarily
subject to long-term, net leases, which generally require the tenant to pay directly or reimburse us for property operating
expenses such as real estate taxes, insurance, assessments and other governmental fees, utilities, repairs and maintenance
and certain capital expenditures. The Company may also acquire or originate commercial loans and investments. Our
investments in commercial loans are generally secured by real estate or the borrower’s pledge of its ownership interest in
an entity that owns real estate. As more fully described in Note 4, “Commercial Loans and Investments,” the three Tampa
Properties (defined in Note 4 below), which were purchased during the year ended December 31, 2024 through a sale-
leaseback transaction that includes a tenant repurchase option are, for GAAP purposes, accounted for as a financing
arrangement. However, as the Tampa Properties constitute real estate assets for both legal and tax purposes, we include
the Tampa Properties in the property portfolio when describing our property portfolio and for purposes of providing
statistics related thereto.
The Company operates in two primary business segments: income properties and commercial loans and investments.
The Company has no employees and is externally managed by Alpine Income Property Manager, LLC, a Delaware
limited liability company and a wholly owned subsidiary of CTO Realty Growth, Inc. (our “Manager”). CTO Realty
Growth, Inc. (NYSE: CTO) is a Maryland corporation that is a publicly traded REIT and the sole member of our Manager
(“CTO”). All of our executive officers also serve as executive officers of CTO, and one of our executive officers and
directors, John P. Albright, also serves as an executive officer and director of CTO.
ORGANIZATION
The Company is a Maryland corporation that was formed on August 19, 2019. On November 26, 2019, the Company
closed its initial public offering (“IPO”). 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, 2024, we have a total ownership interest in the
Operating Partnership of 92.3%, with CTO holding, directly and indirectly, an 7.7% 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”) oversees our business and affairs.
The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the “Code”). To qualify as a REIT, the Company must meet certain organizational and
operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable
income, determined without regard to the dividends paid deduction and excluding net capital gain, to its stockholders
(which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles).
As a REIT, the Company is generally not subject to U.S. federal corporate income tax to the extent of its distributions to
stockholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal
F-11
income tax on its taxable income at regular corporate rates and generally will not be permitted to qualify for treatment as
a REIT for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service
grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the
Company’s net income and net cash available for distribution to stockholders. Even if the Company qualifies for taxation
as a REIT, the Company may be subject to state and local taxes on its income and property and federal income and excise
taxes on its undistributed income.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and other
entities in which we have a controlling interest. All significant inter-company balances and transactions have been
eliminated in the consolidated financial statements.
SEGMENT REPORTING
Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 280, Segment
Reporting, establishes standards related to the manner in which enterprises report operating segment information. The
Company operates in two primary business segments including income properties and commercial loans and investments,
as further discussed within Note 21, “Business Segment Data”. The Company has no other reportable segments. The
Company’s chief executive officer, who is the Company’s chief operating decision maker (“CODM”), reviews financial
information on a disaggregated basis for purposes of allocating and evaluating financial performance.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period
presented. Actual results could differ from those estimates.
Among other factors, fluctuating market conditions that can exist in the national real estate markets and the volatility
and uncertainty in the financial and credit markets make it possible that the estimates and assumptions, most notably those
related to PINE’s investment in properties, could change materially due to continued volatility in the real estate and
financial markets, or as a result of a significant dislocation in those markets.
REAL ESTATE
The Company’s real estate assets are primarily comprised of the properties in its portfolio, and are stated at cost, less
accumulated depreciation and amortization. Such properties are depreciated on a straight-line basis over their estimated
useful lives. Renewals and betterments are capitalized to the applicable property accounts. The cost of maintenance and
repairs is expensed as incurred. The cost of property retired or otherwise disposed of, and the related accumulated
depreciation or amortization, are removed from the accounts, and any resulting gain or loss is recorded in the statement of
operations. The amount of depreciation of real estate, exclusive of amortization related to intangible assets, recognized for
the years ended December 31, 2024, 2023, and 2022, was $16.9 million, $16.8 million, and $14.8 million, respectively.
LONG-LIVED ASSETS
The Company follows FASB ASC Topic 360-10, Property, Plant, and Equipment in conducting its impairment
analyses. The Company reviews the recoverability of long-lived assets, primarily real estate and real estate held for sale,
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Examples of situations considered to be triggering events include: a substantial decline in operating cash
flows during the period, a current or projected loss from operations, a property not fully leased or leased at rates that are
less than current market rates, and any other quantitative or qualitative events deemed significant by management. Long-
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lived assets are evaluated for impairment by using an undiscounted cash flow approach, which considers future estimated
capital expenditures. Impairment of long-lived assets is measured at fair value less cost to sell.
PURCHASE ACCOUNTING FOR ACQUISITIONS OF REAL ESTATE SUBJECT TO A LEASE
Investments in real estate are carried at cost less accumulated depreciation and impairment losses, if any. The cost of
investments in real estate reflects their purchase price or development cost. We evaluate each acquisition transaction to
determine whether the acquired asset meets the definition of a business. Under Accounting Standards Update (“ASU”)
2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, an acquisition does not qualify as a
business when there is no substantive process acquired or substantially all of the fair value is concentrated in a single
identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the
form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.
Transaction costs related to acquisitions that are asset acquisitions are capitalized as part of the cost basis of the acquired
assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred.
Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the
asset. Costs of repairs and maintenance are expensed as incurred.
In accordance with FASB guidance, the fair value of the real estate acquired with in-place leases is allocated to the
acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and
liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of
leasing costs, based in each case on their relative fair values. In allocating the fair value of the identified intangible assets
and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets
or liabilities based on the present value. The capitalized above-market lease values are amortized as a reduction of rental
income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an
increase to rental income over the initial term unless management believes the lease includes bargain renewal options that
are likely to be exercised, in which case the Company includes such renewal periods in the amortization period utilized.
The Company considers both qualitative and quantitative factors in considering if a lease contains a bargain renewal option
and the likelihood of a tenant exercising such option. The value of in-place leases and leasing costs are amortized to
expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its
stated expiration, all unamortized amounts relating to that lease would be written off.
ASSETS HELD FOR SALE
Investments in real estate which are determined to be “held for sale” pursuant to FASB Topic 360-10, Property, Plant,
and Equipment are reported separately on the consolidated balance sheets at the lesser of carrying value or fair value, less
costs to sell. Real estate investments classified as held for sale are not depreciated.
SALES OF REAL ESTATE
When properties are disposed of, the related cost basis of the real estate, intangible lease assets, and intangible lease
liabilities, net of accumulated depreciation and/or amortization, and any accrued straight-line rental income balance for
the underlying operating leases are removed, and gains or losses from the dispositions are reflected in net income within
gains on dispositions of assets. In accordance with the FASB guidance, gains or losses on sales of real estate are generally
recognized using the full accrual method.
PROPERTY LEASE REVENUE
The rental arrangements associated with the Company’s property portfolio are classified as operating leases. The
Company recognizes lease income on these properties on a straight-line basis over the term of the lease. Accordingly,
contractual lease payment increases are recognized evenly over the term of the lease. The periodic difference between
lease income recognized under this method and contractual lease payment terms (i.e., straight-line rent) is recorded as a
deferred operating lease receivable and is included in straight-line rent adjustment on the accompanying consolidated
balance sheets. The Company’s leases provide for reimbursement from tenants for variable lease payments including
common area maintenance, insurance, real estate taxes and other operating expenses. A portion of our variable lease
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payment revenue is estimated each period and is recognized as rental income in the period the recoverable costs are
incurred and accrued.
The collectability of tenant receivables and straight-line rent adjustments is determined based on, among other things,
the aging of the tenant receivable, management’s evaluation of credit risk associated with the tenant and industry of the
tenant, and a review of specifically identified accounts using judgment. As of December 31, 2024 and 2023, the
Company’s allowance for doubtful accounts totaled $0.3 million and $0.4 million, respectively.
COMMERCIAL LOANS AND INVESTMENTS
Investments in commercial loans and investments held for investment are recorded at historical cost, net of unaccreted
origination costs and current expected credit losses (“CECL”) reserve.
Pursuant to ASC 326, Financial Instruments - Credit Losses, the Company measures and records a provision for
CECL each time a new investment is made or a loan is repaid, as well as if changes to estimates occur during a quarterly
measurement period. We are unable to use historical data to estimate expected credit losses as we have incurred no losses
to date. Management utilizes a loss-rate method and considers macroeconomic factors to estimate its CECL allowance,
which is calculated based on the amortized cost basis of the commercial loans.
Sales of participations in commercial loans and investments are evaluated for achievement of the characteristics of
participating interest pursuant to ASC 860, Transfers and Servicing. If the sale of a participation has all of the
characteristics of a participating interest, it achieves sale accounting, and the commercial loan or investment is presented
net of the participating interest. If the sale of a participation does not have all of the characteristics of a participating
interest, it does not achieve sale accounting and is treated as a secured borrowing. As of December 31, 2024, the
Company’s participation in commercial loans and investments purchased by a third-party did not achieve sale accounting
and has been presented as an Obligation under Participation Agreement within the liabilities portion of the Company’s
consolidated balance sheet.
RECOGNITION OF INTEREST INCOME FROM COMMERCIAL LOANS AND INVESTMENTS
Interest income on commercial loans and investments includes interest payments made by the borrower and the
accretion of loan origination fees, offset by the amortization of loan costs, if any. Interest payments are accrued based on
the actual coupon rate and the outstanding principal balance and purchase discounts and loan origination fees are accreted
into income using the effective yield method, adjusted for prepayments.
OPERATING LAND LEASE EXPENSE
The Company is the lessee under operating land leases for certain of its properties, which leases are classified as
operating leases pursuant to FASB ASC Topic 842, Leases. The corresponding lease expense is recognized on a straight-
line basis over the term of the lease and is included in real estate expenses in the accompanying consolidated statements
of operations.
SALES TAX
Sales tax collected on lease payments is recognized as a liability in the accompanying consolidated balance sheets
when collected. The liability is reduced at the time payment is remitted to the applicable taxing authority.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, bank demand accounts, and money market accounts having original
maturities of 90 days or less. The Company’s bank balances as of December 31, 2024 and 2023 include certain amounts
over the Federal Deposit Insurance Corporation limits. The carrying value of cash and cash equivalents is reported at Level
1 in the fair value hierarchy, which represents valuation based upon quoted prices in active markets for identical assets or
liabilities.
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RESTRICTED CASH
Restricted cash totaled $6.4 million at December 31, 2024, of which $4.0 million is being held in an escrow account
to be reinvested through the like-kind exchange structure into other income properties and $2.4 million is being held in
interest, real estate tax, and/ or insurance reserve accounts related to the Company’s commercial loans and investments.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY
The Company accounts for its cash flow hedging derivatives in accordance with FASB ASC Topic 815-20,
Derivatives and Hedging. Depending upon the hedge’s value at each balance sheet date, the derivatives are included in
either other assets or accounts payable, accrued expenses, and other liabilities on the accompanying consolidated balance
sheet at its fair value. On the date each interest rate swap was entered into, the Company designated the derivatives as a
hedge of the variability of cash flows to be paid related to the recognized long-term debt liabilities.
The Company documented the relationship between the hedging instruments and the hedged item, as well as its risk-
management objective and strategy for undertaking the hedge transactions. At the hedges’ inception, the Company
assessed whether the derivatives that are used in hedging the transactions are highly effective in offsetting changes in cash
flows of the hedged items and will continue to do so on a quarterly basis.
Changes in fair value of the hedging instruments that are highly effective and designated and qualified as cash-flow
hedges are recorded in other comprehensive income and loss, until earnings are affected by the variability in cash flows
of the designated hedged items (see Note 14, “Interest Rate Swaps”).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company’s financial assets and liabilities including cash and cash equivalents, restricted
cash, accounts receivable included in other assets, accounts payable, and accrued expenses and other liabilities at
December 31, 2024 and 2023, approximate fair value because of the short maturity of these instruments. The carrying
value of the Credit Facility, hereinafter defined, approximates current market rates for revolving credit arrangements with
similar risks and maturities. The Company estimates the fair value of its commercial loans and investments and term loans
based on incremental borrowing rates for similar types of borrowing arrangements with the same remaining maturity and
on the discounted estimated future cash payments to be made for other debt. The discount rate used to calculate the fair
value of debt approximates current lending rates for loans and assumes the debt is outstanding through maturity. Since
such amounts are estimates that are based on limited available market information for similar transactions, which is a Level
2 non-recurring measurement, there can be no assurance that the disclosed value of any financial instrument could be
realized by immediate settlement of the instrument.
FAIR VALUE MEASUREMENTS
The Company’s estimates of fair value of financial and non-financial assets and liabilities is based on the framework
established by GAAP. The framework specifies a hierarchy of valuation inputs which was established to increase
consistency, clarity and comparability in fair value measurements and related disclosures. GAAP describes a fair value
hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable
and one that is considered unobservable. The following describes the three levels:
•
Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities.
•
Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such
as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the assets or
liabilities.
•
Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not
observable in the market. These unobservable assumptions reflect estimates of assumptions that market
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participants would use in pricing the asset or liability. Valuation techniques include option pricing models,
discounted cash flow models, and similar techniques.
EARNINGS PER COMMON SHARE
Basic earnings per common share is computed by dividing net income attributable to the Company for the period by
the weighted average number of shares outstanding for the period. Diluted earnings per common share is based on the
assumption that the OP Units issued are redeemed for shares of our common stock on a one-for-one basis.
INCOME TAXES
The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under the Code. We believe the
Company has been organized and has operated in such a manner as to qualify for taxation as a REIT under the U.S. federal
income tax laws. The Company intends to continue to operate in such a manner. As a REIT, the Company will be subject
to U.S. federal and state income taxation at corporate rates on its net taxable income; the Company, however, may claim
a deduction for the amount of dividends paid to its stockholders. Amounts distributed as dividends by the Company will
be subject to taxation at the stockholder level only. While the Company must distribute at least 90% of its REIT taxable
income, determined without regard to the dividends paid deduction and excluding any net capital gain, to qualify as a
REIT, the Company intends to distribute all of its net taxable income. The Company is allowed certain other non-cash
deductions or adjustments, such as depreciation expense, when computing its REIT taxable income and distribution
requirement. These deductions permit the Company to reduce its dividend payout requirement under U.S. federal income
tax laws. Certain states may impose minimum franchise taxes. The Company may form one or more taxable REIT
subsidiaries (“TRSs”), which will be subject to applicable U.S. federal, state and local corporate income tax on their taxable
income. For the periods presented, the Company did not have any TRSs that would be subject to taxation.
CONCENTRATION OF CREDIT RISK
Certain individual tenants in the Company’s portfolio of properties accounted for more than 10% of lease income
from the Company’s income properties during the years ended December 31, 2024 and 2023. No individual tenant
accounted for more than 10% of lease income from the Company’s income properties during the year ended December 31,
2022.
For each of the years ended December 31, 2024 and 2023, Walgreens represented 11% of lease income from the
Company’s income properties.
As of December 31, 2024, 11% of the Company’s income property portfolio, based on square footage, was located in
each of the states of New Jersey and Michigan. As of December 31, 2023, 13%, 11%, and 11% of the Company’s income
property portfolio, based on square footage, was located in the states of Texas, New Jersey, and Michigan, respectively.
RECLASSIFICATIONS
Certain items in the prior period’s consolidated balance sheet have been reclassified to conform to the presentation
for the year ended December 31, 2024. Specifically, tax, insurance, and capital expenditure reserve accounts related to the
Company’s commercial loans and investments were previously included within prepaid rent and deferred revenue and are
now included within accounts payable, accrued expenses, and other liabilities on the accompanying consolidated balance
sheets. There was no impact to retained earnings as a result of the reclassifications.
RECENTLY ISSUED ACCOUNTING STANDARDS ADOPTED
Segment Reporting. In November 2023, the FASB issued ASU 2023-07 which enhances segment disclosure
requirements for entities required to report segment information in accordance with FASB ASC 280, Segment Reporting.
The update focuses on improving disclosures regarding segment expenses by requiring that public entities (i) disclose
significant segment expenses that are regularly provided to the CODM and included within each reported measure of
segment profit or loss, (ii) include all annual disclosures about a reportable segment’s profits or loss and assets in interim
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periods, (iii) disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure
of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (iv) disclose the
composition of other segment items by reportable segment that are not included in significant expenses. The update is
effective for fiscal years beginning after December 31, 2023 and interim periods within years beginning after
December 31, 2024. The guidance was effective for the Company beginning on January 1, 2024 and the adoption of this
standard had no material impact on the Company’s consolidated financial statements or related disclosures.
NOTE 3. PROPERTY PORTFOLIO
As of December 31, 2024, the Company’s property portfolio consisted of 134 properties with total square footage of
3.9 million.
Leasing revenue consists of long-term rental revenue from net leased commercial properties, which is recognized as
earned, using the straight-line method over the life of each lease. Lease payments below include straight-line base rental
revenue as well as the non-cash accretion of above and below market lease amortization. The variable lease payments are
comprised of percentage rent payments and reimbursements from tenants for common area maintenance, insurance, real
estate taxes, and other operating expenses.
The components of leasing revenue are as follows (in thousands):
Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Lease Income
Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
39,570
$
40,141
$
40,190
Variable Lease Payments . . . . . . . . . . . . . . . . . . . .
6,435
4,826
5,001
Total Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46,005
$
44,967
$
45,191
Minimum Future Rental Receipts. Minimum future rental receipts under non-cancelable operating leases, excluding
percentage rent and other lease payments that are not fixed and determinable, having remaining terms in excess of one
year subsequent to December 31, 2024, are summarized as follows (in thousands). Certain of our operating leases have
options to extend, which option periods are not included within minimum future rental receipts.
Year Ending December 31,
Amounts
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
40,018
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,589
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,221
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,456
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,602
2030 and Thereafter (Cumulative) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,745
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
266,631
2024 Activity. During the year ended December 31, 2024, the Company acquired 12 properties for a combined purchase
price of $103.6 million, or a total cost of $104.1 million including capitalized acquisition costs. Of the total acquisitions,
nine acquired properties for a combined purchase price of $72.2 million, or total cost of $72.7 million were subject to
purchase accounting for acquisitions subject to a lease, of which $23.5 million was allocated to land, $42.7 million was
allocated to buildings and improvements, $8.0 million was allocated to intangible assets pertaining to the in-place lease
value, leasing fees, and above market lease value, and $1.5 million was allocated to intangible liabilities for the below
market lease value. The weighted average amortization period for the intangible assets and liabilities was 7.6 years at
acquisition. The remaining $31.4 million of acquisition costs is attributable to the three Tampa Properties (defined in Note
4 below), which were purchased during the year ended December 31, 2024 through a sale-leaseback transaction that includes
a tenant repurchase option. Due to the existence of the tenant repurchase option, and pursuant to FASB ASC Topic
842, Leases, GAAP requires that the $31.4 million investment be accounted for as a financing arrangement, and accordingly
the related assets and corresponding revenue are included in the Company’s commercial loans and investments
F-17
in the accompanying consolidated balance sheets and consolidated statement of operations. However, as the Tampa
Properties constitute real estate assets for both legal and tax purposes, we include the Tampa Properties in the property
portfolio when describing our property portfolio and for purposes of providing statistics related thereto.
During the year ended December 31, 2024, the Company sold 15 properties for an aggregate sales price of $62.0
million, generating aggregate gains on sale of $3.4 million.
2023 Activity. During the year ended December 31, 2023, the Company acquired 14 properties for a combined
purchase price of $82.9 million, or a total cost of $84.2 million including capitalized acquisition costs. Of the total
acquisition cost, $21.5 million was allocated to land, $55.2 million was allocated to buildings and improvements, $8.4
million was allocated to intangible assets pertaining to the in-place lease value, leasing fees, and above market lease value,
and $0.9 million was allocated to intangible liabilities for the below market lease value. The weighted average amortization
period for the intangible assets and liabilities was 9.6 years at acquisition.
During the year ended December 31, 2023, the Company sold 24 properties for an aggregate sales price of $108.3
million, generating aggregate gains on sale of $9.3 million.
2022 Activity. During the year ended December 31, 2022, the Company acquired 51 properties for a combined
purchase price of $187.4 million, or a total cost of $189.0 million including capitalized acquisition costs. The properties
are located in 21 states, leased to 18 different tenants, and had a weighted average remaining lease term of 8.7 years at the
time of acquisition. Of the total acquisition cost, $44.5 million was allocated to land, $123.0 million was allocated to
buildings and improvements, $23.7 million was allocated to intangible assets pertaining to the in-place lease value, leasing
fees, and above market lease value, and $2.2 million was allocated to intangible liabilities for the below market lease value.
The weighted average amortization period for the intangible assets and liabilities was 8.9 years at acquisition.
During the year ended December 31, 2022, the Company sold 16 properties for an aggregate sales price of $154.6
million, generating aggregate gains on sale of $33.8 million.
NOTE 4. COMMERCIAL LOANS AND INVESTMENTS
2024 Activity. On January 30, 2024, the Company originated a construction loan secured by the property and
improvements to be constructed thereon for six retail outparcels in Lawrenceville, Georgia for $7.2 million. The
construction loan matures on January 30, 2026, bears a fixed interest rate of 11.25% and requires interest-only payments
prior to maturity. Funding of the loan will occur as the borrower completes the underlying construction. As of
December 31, 2024, the Company has disbursed $6.6 million to the borrower, leaving a remaining commitment of $0.6
million.
On May 31, 2024, the Company sold a $13.6 million A-1 participation interest (the “Loan Participation Sale”) in its
$23.4 million Mortgage Note (hereinafter defined) originated in 2023. The senior participation of $13.6 million is entitled
to an 8.0% yield on its respective portion of the outstanding principal balance and has priority preference with respect to
all principal and interest payments of the Mortgage Note. After adjusting for the Loan Participation Sale, the Company’s
remaining investment in the Mortgage Note is $9.7 million. This sale did not achieve sale accounting pursuant to ASC
860, Transfers and Servicing, and accordingly, is treated as a secured borrowing. See Note 12, “Obligation Under
Participation Agreement” for further information.
On June 14, 2024, the Company originated a construction loan secured by the property and improvements to be
constructed thereon for a 6-acre land development project anchored by Wawa and McDonalds in Mount Carmel, Ohio for
$6.1 million. The construction loan matures on September 14, 2025, bears a fixed interest rate of 11.50% and requires
interest-only payments prior to maturity. Funding of the loan will occur as the borrower completes the underlying
construction. As of December 31, 2024, the Company has disbursed $5.2 million to the borrower, leaving a remaining
commitment of $0.9 million.
On August 1, 2024, the Company acquired three single-tenant income properties (the “Tampa Properties”) in the
greater Tampa Bay, Florida area for a combined purchase price of $31.4 million. The Tampa Properties consist of three
restaurants, leased to a subsidiary of Beachside Hospitality Group, located in Bradenton Beach, Florida, Longboat Key,
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Florida, and Anna Maria, Florida. The acquisition was structured as a sale-leaseback transaction whereby the Company
entered into three new 30-year lease agreements which include annual base rent escalations and a repurchase right by the
tenant upon completion of the fifth lease year, i.e., on August 1, 2029. Pursuant to FASB ASC Topic 842, Leases, the
future repurchase rights present in the lease agreements preclude the transaction from being accounted for as a real estate
acquisition. Accordingly, for GAAP purposes, the acquisition of the Tampa Properties is accounted for as a financing
arrangement, and the related assets and corresponding revenue are included in the Company’s commercial loans and
investments on its consolidated balance sheets and consolidated statements of operations. The Company has imputed
interest on the 30-year leases which is recognized as interest income from commercial loans and investments on the
accompanying consolidated statement of operations.
On September 18, 2024, the Company originated a construction loan secured by the property and improvements to be
constructed thereon for an 11-acre land development project anchored by Publix in Charlotte, North Carolina for $17.8
million. The construction loan matures on September 18, 2025 and had an original fixed interest rate of 10.25% that was
reduced to 9.50% upon the borrower’s satisfaction of certain conditions outlined in the loan agreement. The loan requires
interest-only payments prior to maturity. Funding of the loan will occur as the borrower completes the underlying
construction. As of December 31, 2024, the Company has disbursed $14.6 million to the borrower, leaving a remaining
commitment of $3.2 million.
2023 Activity. On July 25, 2023, the Company originated a construction loan secured by the property and
improvements to be constructed thereon for a 33-acre Wawa-anchored land development project in Greenwood, Indiana
for $7.8 million. The construction loan matures on July 25, 2025, bears a fixed interest rate of 8.50% that increased to
9.25% on July 25, 2024, and requires interest-only payments prior to maturity. Funding of the loan will occur as the
borrower completes the underlying construction. As of December 31, 2024, the Company has disbursed $7.1 million to
the borrower, leaving a remaining commitment of $0.7 million.
On October 30, 2023, the Company originated a construction loan secured by the property and improvements to be
constructed thereon for a 5-acre land development project anchored by Wawa and McDonalds in Antioch, Tennessee for
$6.8 million with the same borrower as the construction loan secured by the 33-acre Wawa-anchored land development
project in Greenwood, Indiana. The construction loan matures on October 30, 2025, bears a fixed interest rate of 11.00%
that decreased to 9.50% on October 30, 2024, and requires interest-only payments prior to maturity. Funding of the loan
will occur as the borrower completes the underlying construction. As of December 31, 2024, the Company has disbursed
$4.7 million to the borrower, leaving a remaining commitment of $2.1 million.
On November 15, 2023, the Company originated a $24.0 million first mortgage secured by a portfolio of 41 assets
and related improvements (the “Mortgage Note”). The Mortgage Note matures on November 15, 2026, has two one-year
extension options, bears a fixed interest rate of 8.75% at the time of acquisition that increases by 0.25% annually during
the initial term, and requires interest-only payments prior to maturity. During the year ended December 31, 2024, the
Company received $2.9 million in principal repayments from the borrower.
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The Company’s commercial loans and investments were comprised of the following at December 31, 2024 (in
thousands):
Description
Date of
Investment Maturity Date
Original
Face
Amount
Current
Face
Amount
Carrying
Value Coupon Rate
Construction Loan – Wawa Land
Development – Greenwood, IN . . . . . . . . . . .
July 2023
July 2025
$
7,800 $
7,149 $
7,138
9.25%
Construction Loan – Wawa Land
Development – Antioch, TN . . . . . . . . . . . . .
October 2023
October 2025
6,825
4,694
4,673
9.50%
Mortgage Note – Portfolio . . . . . . . . . . . . . . . November 2023
November 2026
24,000
21,140
21,066
9.00%
Construction Loan – Retail Outparcels –
Lawrenceville, GA . . . . . . . . . . . . . . . . . . . . .
January 2024
January 2026
7,200
6,618
6,569
11.25%
Construction Loan – Wawa Land
Development – Mount Carmel, OH . . . . . . . .
June 2024
September 2025
6,127
5,196
5,162
11.50%
Sale-Leaseback - Bradenton Beach, FL . . . . .
August 2024
August 2029 (1)
9,608
9,586
9,586
8.30%
Sale-Leaseback - Anna Maria, FL . . . . . . . . .
August 2024
August 2029 (1)
16,408
16,371
16,371
8.30%
Sale-Leaseback - Long Boat Key, FL . . . . . . .
August 2024
August 2029 (1)
5,408
5,396
5,396
8.30%
Construction Loan – Publix Land
Development – Charlotte, NC . . . . . . . . . . . . September 2024 September 2025
17,760
14,640
14,576
9.50%
$ 101,136 $
90,790 $ 90,537
CECL Reserve . . . . . . . . . . . . . . . . . . . . . . . .
(908)
Total Commercial Loans and Investments . . .
$ 89,629
(1)
The maturity date reflects the date the tenant’s repurchase right first becomes exercisable pursuant to the lease agreement.
The Company’s commercial loans and investments were comprised of the following at December 31, 2023 (in
thousands):
Description
Date of
Investment Maturity Date
Original
Face
Amount
Current
Face
Amount
Carrying
Value Coupon Rate
Construction Loan – Wawa Land
Development – Greenwood, IN . . . . . . . . . .
July 2023
July 2025
$
7,800 $
7,014 $
6,984
8.50%
Construction Loan – Wawa Land
Development – Antioch, TN . . . . . . . . . . . .
October 2023
October 2025
6,825
4,615
4,568
11.00%
Mortgage Note – Portfolio . . . . . . . . . . . . . . November 2023 November 2026
24,000
24,000
23,885
8.75%
$
38,625 $
35,629 $ 35,437
CECL Reserve . . . . . . . . . . . . . . . . . . . . . . .
(357)
Total Commercial Loans and Investments . .
$ 35,080
The carrying value of the commercial loans and investments at December 31, 2024 and 2023 consisted of the
following (in thousands):
As of
December 31, 2024 December 31, 2023
Current Face Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
90,790 $
35,629
Unaccreted Origination Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(253)
(192)
CECL Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(908)
(357)
Total Commercial Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . $
89,629 $
35,080
F-20
NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying value and estimated fair value of the Company’s financial instruments not
carried at fair value on the consolidated balance sheets as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
December 31, 2023
Carrying Value
Estimated
Fair Value Carrying Value
Estimated
Fair Value
Cash and Cash Equivalents - Level 1 . . . . $
1,578 $
1,578 $
4,019 $
4,019
Restricted Cash - Level 1 . . . . . . . . . . . . . $
6,373 $
6,373 $
9,712 $
9,712
Commercial Loans and Investments -
Level 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
89,629 $
98,830 $
35,080 $
36,288
Obligation Under Participation
Agreement - Level 2 . . . . . . . . . . . . . . . . . $
11,403 $
11,558 $
— $
—
Long-Term Debt - Level 2 . . . . . . . . . . . . $
301,466 $
294,808 $
275,677 $
258,613
The estimated fair values are not necessarily indicative of the amount the Company could realize on disposition of the
financial instruments. The use of different market assumptions or estimation methodologies could have a material effect
on the estimated fair value amounts.
The following tables present the fair value of assets (liabilities) measured on a recurring basis by Level as of
December 31, 2024 and 2023 (in thousands). See Note 14, “Interest Rate Swaps” for further disclosure related to the
Company’s interest rate swaps.
Fair Value at Reporting Date Using
Fair Value
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
December 31, 2024
2026 Term Loan Interest Rate Swap (1) . . . . . . $
2,811 $
— $
2,811 $
—
2027 Term Loan Interest Rate Swap (2) . . . . . . $
4,090 $
— $
4,090 $
—
Credit Facility Interest Rate Swap (3) . . . . . . . . $
1,186 $
— $
1,186 $
—
December 31, 2023
2026 Term Loan Interest Rate Swap . . . . . . . . $
4,314 $
— $
4,314 $
—
2027 Term Loan Interest Rate Swap . . . . . . . . $
5,793 $
— $
5,793 $
—
Credit Facility Interest Rate Swap . . . . . . . . . . $
716 $
— $
716 $
—
(1)
As of December 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of 2.05%
plus 0.10% and the applicable spread on the $100 million 2026 Term Loan (hereinafter defined) balance. See Note 14, “Interest Rate Swaps” for
further disclosure related to the Company’s interest rate swaps.
(2)
As of December 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of 2.05%
plus 0.10% and the applicable spread on the $100 million 2027 Term Loan (hereinafter defined) balance. See Note 14, “Interest Rate Swaps” for
further disclosure related to the Company’s interest rate swaps.
(3)
As of December 31, 2024, the Company utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of 3.21% plus 0.10% and the
applicable spread on $50 million of the outstanding balance on the Credit Facility (hereinafter defined). See Note 14, “Interest Rate Swaps” for
further disclosure related to the Company’s interest rate swaps.
F-21
NOTE 6. INTANGIBLE ASSETS AND LIABILITIES
Intangible assets and liabilities consist of the value of above market and below market leases, the value of in-place
leases, and the value of leasing costs, based in each case on their fair values. Intangible assets and liabilities consisted of
the following as of December 31, 2024 and 2023 (in thousands):
As of
December 31, 2024 December 31, 2023
Intangible Lease Assets:
Value of In-Place Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
48,768 $
48,267
Value of Above Market In-Place Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,142
2,942
Value of Intangible Leasing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,091
18,865
Sub-total Intangible Lease Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70,001
70,074
Accumulated Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(26,076)
(20,782)
Sub-total Intangible Lease Assets—Net . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,925
49,292
Intangible Lease Liabilities:
Value of Below Market In-Place Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,986)
(6,770)
Sub-total Intangible Lease Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,986)
(6,770)
Accumulated Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,212
1,863
Sub-total Intangible Lease Liabilities—Net . . . . . . . . . . . . . . . . . . . . . . . .
(4,774)
(4,907)
Total Intangible Assets and Liabilities—Net . . . . . . . . . . . . . . . . . . . . . . . . . $
39,151 $
44,385
The following table reflects the net amortization of intangible assets and liabilities during the years ended
December 31, 2024, 2023, and 2022 (in thousands):
Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Amortization Expense . . . . . . . . . . . . . . . . . . . . . . . . . $
8,727 $
8,936 $
8,801
Accretion to Properties Revenue . . . . . . . . . . . . . . . .
(517)
(417)
(328)
Net Amortization of Intangible Assets and
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,210 $
8,519 $
8,473
The estimated future amortization expense (income) related to net intangible assets and liabilities is as follows (in
thousands):
Year Ending December 31,
Future Amortization
Expense
Future Accretion to
Property Revenue
Net Future
Amortization of
Intangible Assets and
Liabilities
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8,341 $
(670) $
7,671
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,032
(679)
7,353
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,742
(701)
6,041
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,185
(491)
4,694
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,413
(343)
4,070
2030 and Thereafter . . . . . . . . . . . . . . . . . . .
9,864
(542)
9,322
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
42,577 $
(3,426) $
39,151
As of December 31, 2024, the weighted average amortization period of both the total intangible assets and liabilities
was 8.6 years.
NOTE 7. PROVISION FOR IMPAIRMENT
Income Properties. The Company assesses the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of long-lived assets
F-22
required to be assessed for impairment is determined on a non-recurring basis using Level 3 inputs in the fair value
hierarchy. These Level 3 inputs may include, but are not limited to, letters of intent on specific properties, executed
purchase and sale agreements on specific properties, third person valuations, discounted cash flow models, and other
model-based techniques.
During the year ended December 31, 2024, the Company recorded a $1.1 million impairment charge representing the
provision for losses related to certain convenience store properties within the Company’s income properties segment,
which are classified as held for sale. The impairment charge of $1.1 million is equal to the estimated sales prices for these
assets pursuant to letters of intent for sale executed during the year ended December 31, 2024, less the book value of the
assets, less estimated costs to sell. Our estimated costs to sell include certain property improvements, which are estimated
at $0.6 million.
During the year ended December 31, 2023, the Company recorded a $2.9 million impairment charge representing the
provision for losses related to seven convenience store properties within our income properties segment. These seven
convenience store properties were leased to one tenant that filed for bankruptcy protection during the three months ended
March 31, 2023. The seven leases underlying these seven convenience store properties were rejected as a part of the
bankruptcy proceedings during August of 2023. The impairment charge of $2.9 million is equal to the estimated sales
prices for these seven convenience store properties (as set forth in executed letters of intent at the time the impairment was
estimated), less the book value of the assets as of December 31, 2023, less estimated costs to sell.
There were no impairment charges on the Company’s income property portfolio during the year ended December 31,
2022.
Commercial Loans and Investments. The Company evaluates the collectability of its commercial loans and
investments on a quarterly basis or whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company accounts for provisions for expected credit losses in accordance with ASC
Topic 326, Measurement of Credit Losses on Financial Instruments. Changes in the Company’s allowance for credit losses
are presented within change in provision for impairment in the accompanying consolidated statements of operations.
During the years ended December 31, 2024 and 2023, the Company recorded impairment charges of $0.6 million and
$0.3 million, respectively, representing the provision for credit losses related to our commercial loans and investments.
The impairment charges were driven by the initial estimated CECL allowance based on our investment activity during the
years ended December 31, 2024 and 2023, respectively. We are unable to use historical data to estimate expected credit
losses as we have incurred no losses to date. Management utilizes a loss-rate method and considers macroeconomic factors
to estimate its CECL allowance, which is calculated based on the amortized cost basis of the commercial loans.
NOTE 8. OTHER ASSETS
Other assets consisted of the following (in thousands):
As of
December 31, 2024 December 31, 2023
Tenant Receivables—Net of Allowance for Doubtful Accounts (1) . . . . . . . . $
1,517 $
809
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,042
838
Deposits on Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
60
Prepaid Expenses, Deposits, and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,042
1,757
Deferred Financing Costs—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
850
1,190
Interest Rate Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,087
10,957
Operating Leases - Right-of-Use Asset (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,196
1,434
Total Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,734 $
17,045
(1)
Includes $0.3 and $0.4 million allowance for doubtful accounts as of December 31, 2024 and 2023, respectively.
(2)
See Note 9, “Operating Land Leases” for further disclosure related to the Company’s right-of-use asset balance as of December 31, 2024.
F-23
NOTE 9. OPERATING LAND LEASES
The Company is the lessee under operating land leases for certain of its properties. FASB ASC Topic 842, Leases,
requires a lessee to recognize right-of-use assets and lease liabilities that arise from leases, whether qualifying as an
operating or finance lease. As of December 31, 2024 and 2023, the Company’s right-of-use assets totaled $3.2 million and
$1.4 million, respectively, and the corresponding lease liabilities totaled $3.2 million and $1.5 million, respectively, which
balances are reflected within other assets and accounts payable, accrued expenses, and other liabilities, respectively, on
the consolidated balance sheets. The right-of-use assets and lease liabilities are measured based on the present value of the
lease payments utilizing discount rates estimated to be equal to that which the Company would pay to borrow on a
collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment.
The Company’s operating land leases do not include variable lease payments and generally provide renewal options,
at the Company’s election, to extend the terms of the respective leases. Renewal option periods are included in the
calculation of the right-of-use assets and corresponding lease liabilities when it is reasonably certain that the Company, as
lessee, will exercise the option to extend the lease.
Amortization of right-of-use assets for operating land leases is recognized on a straight-line basis over the term of the
lease and is included within real estate expenses in the consolidated statements of operations. Amortization totaled $0.2
million, $0.3 million, and $0.1 million during the years ended December 31, 2024, 2023 and 2022, respectively.
The following table reflects a summary of operating land leases, under which the Company is the lessee, for the years
ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Operating Cash Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
200 $
257 $
197
Weighted Average Remaining Lease Term . . . . . . . . . . . . . . . . . . . . .
22.3
7.1
7.9
Weighted Average Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.2 %
2.0 %
2.0
Minimum future lease payments under non-cancelable operating land leases, having remaining terms in excess of one
year subsequent to December 31, 2024, are summarized as follows (in thousands):
Year Ending December 31,
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
300
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
311
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
320
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
320
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
320
2030 and Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,109
Total Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,680
Imputed Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,450)
Operating Leases – Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,230
F-24
NOTE 10. ASSETS HELD FOR SALE
Assets held for sale consisted of the following (in thousands).
As of
December 31, 2024 December 31, 2023
Real Estate—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,068
$
6,374
Intangible Lease Assets—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
409
749
Intangible Lease Liabilities—Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(39)
(39)
Straight-Line Rent Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
173
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
17
Assets Prior to Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,528
$
7,274
Less Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,274)
(2,864)
Total Assets Held for Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,254
$
4,410
NOTE 11. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER LIABILITIES
Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):
As of
December 31, 2024 December 31, 2023
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
40 $
30
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,308
2,449
Tenant Security Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140
78
Due to CTO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,126
1,052
Interest Rate Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
134
Loan Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
601
539
Operating Leases - Liability (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,230
1,454
Total Accounts Payable, Accrued Expenses, and Other Liabilities . . . . . . . . $
8,445 $
5,736
(1)
See Note 9, “Operating Land Leases” for further disclosure related to the Company’s operating land lease liability balance as of December 31,
2024 and 2023.
NOTE 12. OBLIGATION UNDER PARTICIPATION AGREEMENT
As discussed in Note 2, “Summary of Significant Accounting Policies,” the Company follows the guidance in FASB
Topic ASC 860, Transfers and Servicing when accounting for participation in commercial loans and investments. ASC
860 states, if the sale of a participation does not have all of the characteristics of a participating interest, it does not achieve
sale accounting and is treated as a secured borrowing and accordingly, the original commercial loan investment remains
on the Company’s consolidated balance sheets and the proceeds are recorded as an obligation under participation
agreement. On May 31, 2024, the Company received $13.6 million from the Loan Participation Sale. As of December 31,
2024, the Company’s obligation under participation agreement had a carrying value of $11.4 million, and the carrying
value of the loan that is associated with this obligation under participation agreement was $11.3 million, net of a CECL
reserve of $0.1 million. The interest rate on the obligation under participation agreement was 8.0% as of December 31,
2024. As of December 31, 2023, there were no such obligations under participation agreements.
F-25
NOTE 13. LONG-TERM DEBT
As of December 31, 2024, the Company’s outstanding indebtedness, at face value, was as follows (in thousands):
Face Value Debt
(in thousands)
Stated Interest
Rate
Wtd. Avg.
Rate as of
December 31,
2024
Maturity Date
Credit Facility (1) . . . . . . . . . . . . . . . . . . . .
$
102,000
SOFR + 0.10% +
[1.25% - 2.20%]
5.31%
January 2027
2026 Term Loan (2) . . . . . . . . . . . . . . . . . .
100,000
SOFR + 0.10% +
[1.35% - 1.95%]
3.50%
May 2026
2027 Term Loan (3) . . . . . . . . . . . . . . . . . .
100,000
SOFR + 0.10% +
[1.25% - 1.90%]
3.45%
January 2027
Total Debt/Weighted-Average Rate . . . . .
$
302,000
4.10%
(1)
As of December 31, 2024, the Company utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of 3.21% plus 0.10% and the
applicable spread on $50 million of the outstanding balance on the Credit Facility (hereinafter defined). See Note 14, “Interest Rate Swaps” for
further disclosure related to the Company’s interest rate swaps.
(2)
As of December 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of 2.05%
plus 0.10% and the applicable spread on the $100 million 2026 Term Loan (hereinafter defined) balance. See Note 14, “Interest Rate Swaps” for
further disclosure related to the Company’s interest rate swaps.
(3)
As of December 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of 2.05%
plus 0.10% and the applicable spread on the $100 million 2027 Term Loan (hereinafter defined) balance. See Note 14, “Interest Rate Swaps” for
further disclosure related to the Company’s interest rate swaps.
Credit Facility. On September 30, 2022, the Company and the Operating Partnership entered into a credit agreement
(the “2022 Amended and Restated Credit Agreement”) with KeyBank National Association, as administrative agent, and
certain other lenders named therein, which amended and restated the 2027 Term Loan Credit Agreement (hereinafter
defined) to include, among other things:
•
the origination of a new senior unsecured revolving credit facility in the amount of $250 million (the “Credit
Facility”) which matures on January 31, 2027, with the option to extend for one year;
•
an accordion option that allows the Company to request additional revolving loan commitments and additional
term loan commitments, provided the aggregate amount of revolving loan commitments and term loan
commitments shall not exceed $750 million;
•
the amendment of certain financial covenants; and
•
the addition of a sustainability-linked pricing component pursuant to which the Company will receive interest
rate reductions up to 0.025% based on performance against sustainability performance targets.
Pursuant to the 2022 Amended and Restated Credit Agreement, the indebtedness outstanding under the Credit Facility
accrues at a rate ranging from SOFR plus 0.10% plus 125 basis points to SOFR plus 0.10% plus 220 basis points, based
on the total balance outstanding under the Credit Facility as a percentage of the total asset value of the Company, as defined
in the 2022 Amended and Restated Credit Agreement. The Company may utilize daily simple SOFR or term SOFR, at its
election. The Credit Facility also accrues a fee of 15 or 25 basis points for any unused portion of the borrowing capacity
based on whether the unused portion is greater or less than 50% of the total borrowing capacity.
The Company is subject to customary restrictive covenants under the 2022 Amended and Restated Credit Agreement
and the 2026 Term Loan Credit Agreement (hereinafter defined), as amended, collectively referred to herein as the “Credit
Agreements”, including, but not limited to, limitations on the Company’s ability to: (a) incur indebtedness; (b) make
certain investments; (c) incur certain liens; (d) engage in certain affiliate transactions; and (e) engage in certain major
transactions such as mergers. The Credit Agreements also contain financial covenants covering the Company, including
but not limited to, tangible net worth and fixed charge coverage ratios.
At December 31, 2024, the commitment level under the Credit Facility was $250.0 million and the Company had an
outstanding balance of $102.0 million and $89.5 million available capacity.
F-26
Prior Credit Facility. On September 30, 2022, in connection with the Company’s entry into the 2022 Amended and
Restated Credit Agreement, the Company repaid all obligations outstanding under the Credit Agreement, dated as of
November 26, 2019, as amended, among the Company, the Bank of Montreal, as administrative agent, and certain other
lenders party thereto (the “Prior Revolving Credit Facility”), and the Prior Revolving Credit Facility was terminated and
the obligations thereunder discharged. As a result of the termination of the Prior Revolving Credit Facility, $0.3 million
of unamortized deferred financing costs were written off during the three months ended September 30, 2022 and are
included in the consolidated statements of operations as Loss on Extinguishment of Debt.
2026 Term Loan. On May 21, 2021, the Operating Partnership, the Company and certain subsidiaries of the Company
entered into a credit agreement (the “2026 Term Loan Credit Agreement”) with Truist Bank, N.A. as administrative agent,
and certain other lenders named therein, for a term loan (the “2026 Term Loan”) in an aggregate principal amount of $60.0
million with a maturity of five years. On April 14, 2022, the Company entered into the Amendment, Increase and Joinder
to the 2026 Term Loan Credit Agreement (the “2026 Term Loan Amendment”), which increased the term loan
commitment under the 2026 Term Loan by $40 million to an aggregate of $100 million. The 2026 Term Loan Amendment
also effectuated the transition of the underlying variable interest rate from LIBOR to SOFR.
On October 5, 2022, the Company entered into an amendment which, among other things, amends certain financial
covenants and adds a sustainability-linked pricing component consistent with what is contained in the 2022 Amended and
Restated Credit Agreement (the “2026 Term Loan Second Amendment”), effective September 30, 2022.
2027 Term Loan. On September 30, 2021, the Operating Partnership, the Company and certain subsidiaries of the
Company entered into a credit agreement (the “2027 Term Loan Credit Agreement”) with KeyBank National Association
as administrative agent, and certain other lenders named therein, for a term loan (the “2027 Term Loan”) in an aggregate
principal amount of $80.0 million (the “Term Commitment”) maturing in January 2027. On April 14, 2022, the Company
entered into the Amendment, Increase and Joinder to the 2027 Term Loan Credit Agreement (the “2027 Term Loan
Amendment”), which increased the Term Commitment by $20 million to an aggregate of $100 million. The 2027 Term
Loan Amendment also effectuated the transition of the underlying variable interest rate from LIBOR to SOFR.
On September 30, 2022, the Company entered into the 2022 Amended and Restated Credit Agreement which amended
and restated the 2027 Term Loan Credit Agreement to include the origination of a new revolving credit facility in the
amount of $250.0 million as previously described. The 2022 Amended and Restated Credit Agreement includes an
accordion option that allows the Company to request additional revolving loan commitments and additional term loan
commitments not to exceed $750.0 million in the aggregate.
Mortgage Notes Payable. On June 30, 2021, in connection with the acquisition of six net lease properties from CTO
(the “CMBS Portfolio”), the Company assumed an existing $30.0 million secured mortgage, which bears interest at a fixed
rate of 4.33% (the “CMBS Loan”). On December 1, 2022, the Company completed the defeasance of the CMBS Loan,
unencumbering the CMBS Portfolio. The Company sold four of the six properties subsequent to the defeasance, during
the year ended December 31, 2022. Additionally, on June 30, 2021, in connection with the acquisition of two net lease
properties from an unrelated third party, the Company assumed mortgage notes totaling an aggregate of $1.6 million,
which balance was repaid on July 1, 2021.
Long-term debt as of December 31, 2024 and 2023 consisted of the following (in thousands):
December 31, 2024
December 31, 2023
Total
Due Within
One Year
Total
Due Within
One Year
Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 102,000 $
— $
76,500 $
—
2026 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,000
—
100,000
—
2027 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,000
—
100,000
—
Financing Costs, net of Accumulated Amortization . . . . . . . .
(534)
—
(823)
—
Total Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 301,466 $
— $ 275,677 $
—
F-27
Payments applicable to reduction of principal amounts as of December 31, 2024 will be required as follows (in
thousands):
Year Ending December 31,
Amount
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,000
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
202,000
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2030 and Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total Long-Term Debt - Face Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
302,000
The carrying value of long-term debt as of December 31, 2024 consisted of the following (in thousands):
Total
Current Face Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
302,000
Financing Costs, net of Accumulated Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(534)
Total Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
301,466
In addition to the $0.5 million of financing costs, net of accumulated amortization included in the table above, as of
December 31, 2024, the Company also had financing costs, net of accumulated amortization related to the Credit Facility
of $0.9 million which is included in other assets on the consolidated balance sheets. These costs are amortized on a straight-
line basis over the term of the Credit Facility and are included in interest expense in the Company’s accompanying
consolidated statements of operations.
The following table reflects a summary of interest expense incurred and paid during the years ended December 31,
2024, 2023, and 2022 (in thousands):
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
10,664 $
9,455 $
8,940
Interest Expense from Obligation Under Participation Agreement . . . . .
624
—
—
Amortization of Deferred Financing Costs to Interest Expense . . . . . . . .
720
710
599
Total Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,008 $
10,165 $
9,539
Total Interest Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11,969 $
9,245 $
7,753
The Company was in compliance with all of its debt covenants as of December 31, 2024.
NOTE 14. INTEREST RATE SWAPS
The Company has entered into interest rate swap agreements to hedge against changes in future cash flows resulting
from fluctuating interest rates related to the below noted borrowings. The interest rate agreements were 100% effective
during the years ended December 31, 2024, 2023, and 2022. Accordingly, the changes in fair value on the interest rate
swaps have been classified in accumulated other comprehensive income (loss). The fair value of the interest rate swap
agreements are included in other assets and accrued and other liabilities, respectively, on the consolidated balance sheets.
F-28
Information related to the Company’s interest rate swap agreements are noted below (in thousands):
Hedged Item
Effective
Date
Maturity
Date
Rate
Amount
Fair Value as of
December 31,
2024
2026 Term Loan (1) . . . . . . . . . . . . . . . .
5/21/2021 5/21/2026
2.05% + 0.10% +
applicable spread
$ 100,000
$
2,811
2027 Term Loan (2) . . . . . . . . . . . . . . . . 11/29/2024 1/31/2027
1.61%+ 0.10% +
applicable spread
$
80,000
$
4,023
2027 Term Loan (3) . . . . . . . . . . . . . . . .
9/30/2022 1/31/2027
3.84%+ 0.10% +
applicable spread
$
20,000
$
67
Credit Facility (4) . . . . . . . . . . . . . . . . . .
3/1/2023
3/1/2028
3.21%+ 0.10%+
applicable spread
$
50,000
$
1,186
(1)
As of December 31, 2024, the Company has utilized interest rate swaps to fix SOFR and achieve a weighted average fixed interest rate of 2.05%
plus 0.10% and the applicable spread on the $100 million 2026 Term Loan balance. The weighted average fixed interest rate of 2.05%, is comprised
of: (i) rate swaps on $60.0 million of the 2026 Term Loan balance effective May 21, 2021, as amended on April 14, 2022 in connection with the
2026 Term Loan Amendment, to fix SOFR (prior to April 14, 2022, the swap was to fix LIBOR), and (ii) a rate swap on $40.0 million of the 2026
Term Loan Balance effective September 30, 2022, to fix SOFR.
(2)
As of December 31, 2024, the Company has utilized an interest rate swap to fix SOFR and achieve a weighted average fixed interest rate of 1.61%
plus 0.10% and the applicable spread on $80.0 million of the $100 million 2027 Term Loan balance.
(3)
As of December 31, 2024, the Company has utilized an interest rate swap to fix SOFR and achieve a weighted average fixed interest rate of 3.84%
plus 0.10% and the applicable spread on $20.0 million of the $100 million 2027 Term Loan balance.
(4)
As of December 31, 2024, the Company has utilized an interest rate swap to fix SOFR and achieve a fixed interest rate of 3.21% plus 0.10% and
the applicable spread on $50 million of the outstanding balance on the Credit Facility.
The use of interest rate swap agreements carries risks, including the risk that the counterparties to these agreements
are not able to perform. To mitigate this risk, the Company enters into interest rate swap agreements with counterparties
with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other
financial relationships. The Company does not currently anticipate that any of the counterparties to the Company’s interest
rate swap agreements will fail to meet their obligations. As of December 31, 2024 and 2023, there were no events of
default related to the Company’s interest rate swap agreements.
NOTE 15. EQUITY
SHELF REGISTRATION
On December 1, 2020, the Company filed a shelf registration statement on Form S-3, relating to the registration and
potential issuance of its common stock, preferred stock, warrants, rights, and units with a maximum aggregate offering
price of up to $350.0 million (the “2020 Registration Statement”). The Securities and Exchange Commission declared the
2020 Registration Statement effective on December 11, 2020.
On September 27, 2023, the Company filed a shelf registration statement on Form S-3, relating to the registration and
potential issuance of common stock, preferred stock, debt securities, warrants, rights, and units with a maximum aggregate
offering price of up to $350.0 million (the “2023 Registration Statement”). The 2020 Registration Statement was
terminated concurrently with the filing of the 2023 Registration Statement. The Securities and Exchange Commission
declared the 2023 Registration Statement effective on September 29, 2023.
FOLLOW-ON PUBLIC OFFERING
In June 2021, the Company completed a follow-on public offering of 3,220,000 shares of common stock, which
included the full exercise of the underwriters’ option to purchase an additional 420,000 shares of common stock. Upon
closing, the Company issued 3,220,000 shares and received net proceeds of $54.3 million, after deducting the underwriting
discount and expenses.
F-29
ATM PROGRAM
On December 14, 2020, the Company implemented a $100.0 million “at-the-market” equity offering program (the
“2020 ATM Program”) pursuant to which the Company may sell, from time to time, shares of the Company’s common
stock. During the year ended December 31, 2022, the Company sold 446,167 shares under the 2020 ATM Program for
gross proceeds of $8.7 million at a weighted average price of $19.44 per share, generating net proceeds of $8.6 million
after deducting transaction fees totaling $0.1 million. During the year ended December 31, 2021, the Company sold
761,902 shares under the 2020 ATM Program for gross proceeds of $14.0 million at a weighted average price of $18.36
per share, generating net proceeds of $13.8 million after deducting transaction fees totaling $0.2 million. The 2020 ATM
Program was terminated in advance of implementing the 2022 ATM Program, hereinafter defined.
On October 21, 2022, the Company implemented a $150.0 million “at-the-market” equity offering program (the “2022
ATM Program”) pursuant to which the Company may sell, from time to time, shares of the Company’s common stock.
During the year ended December 31, 2024, the Company sold 1,059,271 shares under the 2022 ATM Program for gross
proceeds of $19.1 million at a weighted average price of $18.04 per share, generating net proceeds of $18.8 million after
deducting transaction fees totaling $0.3 million. During the year ended December 31, 2023, the Company sold 665,929
shares under the 2022 ATM Program for gross proceeds of $12.6 million at a weighted average price of $18.96 per share,
generating net proceeds of $12.4 million after deducting transaction fees totaling $0.2 million. During the year ended
December 31, 2022, the Company sold 1,479,241 shares under the 2022 ATM Program for gross proceeds of $27.8 million
at a weighted average price of $18.81 per share, generating net proceeds of $27.4 million after deducting transaction fees
totaling $0.4 million. As of December 31, 2024, we have $90.4 million of availability under the 2022 ATM Program.
In the aggregate, under the 2020 ATM Program and 2022 ATM Program, during the year ended December 31, 2022,
the Company sold 1,925,408 shares for gross proceeds of $36.5 million at a weighted average price of $18.96 per share,
generating net proceeds of $36.0 million after deducting transaction fees totaling $0.5 million.
NONCONTROLLING INTEREST
As of December 31, 2024, CTO holds, directly and indirectly, an 7.7% noncontrolling ownership interest in the
Operating Partnership as a result of 1,223,854 OP Units issued to CTO at the time of the Company’s IPO. On
November 10, 2023, the Company redeemed the 479,640 OP Units held previously held by an unrelated third party. The
479,640 OP Units were redeemed on a one-for-one basis for shares of common stock of the Company.
DIVIDENDS
The Company has elected to be taxed as a REIT for U.S. federal income tax purposes under the Code. To qualify as
a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, determined
without regard to the deduction for dividends paid and excluding net capital gains, and must distribute 100% of its taxable
income (including net capital gains) to eliminate U.S. federal corporate income taxes payable by the Company. Because
taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and
other items), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or
alternatively, may need to make dividend payments in excess of operating cash flows. During the years ended
December 31, 2024, 2023, and 2022, the Company declared and paid cash dividends on its common stock and OP Units
of $1.110 per share, $1.100 per share, and $1.090 per share, respectively.
NOTE 16. COMMON STOCK AND EARNINGS PER SHARE
Basic earnings per common share are computed by dividing net income attributable to the Company for the period by
the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share
are determined based on the assumption of the redemption of OP Units on a one-for-one basis using the treasury stock
method at average market prices for the periods.
F-30
The following is a reconciliation of basic and diluted earnings per common share (in thousands, except share and per
share data):
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Net Income Attributable to Alpine Income Property Trust, Inc. . . . . . . . $
2,066 $
2,917 $
29,720
Weighted Average Number of Common Shares Outstanding . . . . . . . . . 13,858,257 13,925,362 11,976,001
Weighted Average Number of Common Shares Applicable to
OP Units using Treasury Stock Method (1) . . . . . . . . . . . . . . . . . . . . . . . .
1,223,854
1,635,162
1,703,494
Total Shares Applicable to Diluted Earnings per Share . . . . . . . . . . . . . . 15,082,111 15,560,524 13,679,495
Per Common Share Data:
Net Income Attributable to Alpine Income Property Trust, Inc.
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.15 $
0.21 $
2.48
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.14 $
0.19 $
2.17
(1)
Represents shares underlying OP units including (i) 1,223,854 shares underlying OP Units issued to CTO in connection with our IPO and
(ii) 479,640 shares underlying OP Units issued to an unrelated third party in connection with the acquisition of a portfolio of properties during the
year ended December 31, 2021, which OP Units were redeemed on a one-for-one basis for shares of common stock of the Company during the
year ended December 31, 2023 (see Note 15, “Equity”).
NOTE 17. SHARE REPURCHASES
In May 2023, the Board approved a $5.0 million stock repurchase program (the “2023 $5.0 Million Repurchase
Program”). Under the 2023 $5.0 Million Repurchase Program, the Company repurchased 23,889 shares of its common
stock on the open market for a total cost of $0.4 million, or an average price per share of $15.22, during the year ended
December 31, 2023.
In July 2023, the Board approved a $15.0 million stock repurchase program (the “2023 $15.0 Million Repurchase
Program”). The 2023 $15.0 Million Repurchase Program replaced the 2023 $5.0 Million Repurchase Program. Under the
2023 $15.0 Million Repurchase Program, the Company repurchased 875,122 shares of its common stock on the open
market for a total cost of $14.2 million, or an average price per share of $16.26, during the year ended December 31, 2023.
In aggregate, the Company repurchased 899,011 shares of its common stock on the open market for a total cost of
$14.6 million, or an average price per share of $16.23, during the year ended December 31, 2023.
Under the 2023 $15.0 Million Repurchase Program, the Company repurchased 45,768 shares of its common stock on
the open market for a total cost of $0.8 million, or an average price per share of $16.90, during the year ended December 31,
2024, which completed the 2023 $15.0 Million Repurchase Program.
There were no repurchases of the Company’s common stock during the year ended December 31, 2022.
NOTE 18. STOCK-BASED COMPENSATION
In connection with the closing of the IPO, on November 26, 2019, the Company granted restricted shares of common
stock to each of the Company’s initial non-employee directors under the Individual Plan. Each of the initial non-employee
directors received an award of 2,000 restricted shares of common stock on November 26, 2019. The restricted shares
vested in substantially equal installments on each of the first, second, and third anniversaries of the grant date. As of
December 31, 2023, all increments of this award had vested. In addition, the restricted shares are subject to a holding
period beginning on the grant date and ending on the date that the grantee ceases to serve as a member of the Board (the
“Holding Period”). During the Holding Period, the restricted shares may not be sold, pledged or otherwise transferred by
the grantee. Except for the one-time IPO-related grant of these 8,000 restricted shares of common stock, and the shares of
common stock issued quarterly to the non-employee directors in lieu of cash retainer fees (pursuant to the directors’
F-31
election under the Company’s Non-Employee Director Compensation Policy), the Company has not made any grants
under the Equity Incentive Plans. Any future grants under the Equity Incentive Plans will be approved by the compensation
committee of the Board. The 2019 non-employee director share awards had an aggregate grant date fair value of $0.15
million. The Company’s determination of the grant date fair value of the three-year vest restricted stock awards was
calculated by multiplying the number of shares issued by the Company’s stock price at the grant date. Compensation cost
was recognized on a straight-line basis over the vesting period and is included in general and administrative expenses in
the Company’s consolidated statements of operations. The Company recognized stock compensation expense totaling
$0.05 million during the year ended December 31, 2022. There was no stock compensation expense during the years ended
December 31, 2024, and 2023.
A summary of activity for these awards during the years ended December 31, 2024, 2023 and 2022 is presented
below:
Non-Vested Restricted Shares
Shares Wtd. Avg. Fair Value
Non-Vested at January 1, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,668 $
18.80
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,668) $
18.80
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Non-Vested at December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Non-Vested at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
—
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Non-Vested at December 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
—
As of December 31, 2024 and 2023, there was no unrecognized compensation cost related to the three-year vest
restricted shares.
Each non-employee member of the Board has the option to receive his or her annual cash retainer fee in shares of
Company common stock rather than cash. The number of shares issued to the directors making such election is calculated
quarterly by dividing the amount of the quarterly retainer fee payment due to such director by the 20-day trailing average
closing price of the Company’s common stock as of the last business day of the calendar quarter, rounded down to the
nearest whole number of shares. During the year ended December 31, 2024, the expense recognized for the value of the
Company’s common stock received by non-employee directors totaled $0.2 million, or 15,119 shares, of which 5,131
shares were issued on April 1, 2024, 5,168 shares were issued on July 1, 2024, 4,304 shares were issued on October 1,
2024, and 516 shares were issued on January 2, 2025. During the year ended December 31, 2023, the expense recognized
for the value of the Company’s common stock received by non-employee directors totaled $0.3 million, or 19,133 shares,
of which 4,776 shares were issued on April 1, 2023, 4,940 shares were issued on July 3, 2023, 4,748 shares were issued
on October 2, 2023, and 4,669 shares were issued on January 2, 2024. During the year ended December 31, 2022, the
expense recognized for the value of the Company’s common stock received by non-employee directors totaled $0.3
million, or 14,485 shares, of which 3,514 shares were issued on April 1, 2022, 3,689 shares were issued on July 1, 2022,
3,774 shares were issued on October 1, 2022, and 3,508 shares were issued on January 1, 2023.
F-32
Stock compensation expense for the years ended December 31, 2024, 2023, and 2022 is summarized as follows (in
thousands):
Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Stock Compensation Expense – Director Restricted
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
$
— $
46
Stock Compensation Expense – Director Retainers
Paid in Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
318
264
Total Stock Compensation Expense . . . . . . . . . . . . . . . $
247
$
318 $
310
(1)
Director retainers are issued through additional paid in capital in arrears. Therefore, the change in additional paid in capital during the years ended
December 31, 2024, 2023, and 2022 reported on the consolidated statements of stockholders’ equity does not agree to the total non-cash
compensation reported on the consolidated statements of cash flows.
NOTE 19. RELATED PARTY MANAGEMENT COMPANY
We are externally managed by the Manager, a wholly owned subsidiary of CTO. During the year ended December 31,
2024, CTO purchased 29,807 shares of PINE common stock in the open market for $0.4 million, or an average price per
share of $14.97. During the year ended December 31, 2023, CTO purchased 129,271 shares of PINE common stock in the
open market for $2.1 million, or an average price per share of $16.21. During the year ended December 31, 2022, CTO
purchased 155,665 shares of PINE common stock in the open market for $2.7 million, or an average price per share of
$17.57. As of December 31, 2024, CTO owns, in the aggregate, 1,223,854 OP Units and 1,138,621 shares of PINE
common stock, inclusive of (i) 394,737 shares of common stock totaling $7.5 million issued in connection with a private
placement that closed concurrently with the IPO, (ii) 421,053 shares of common stock totaling $8.0 million issued in
connection with the IPO, and (iii) 322,831 shares of common stock totaling $5.4 million purchased by CTO subsequent to
the IPO. The aggregate 1,223,854 OP Units and 1,138,621 shares of PINE common stock held by CTO represent an
investment totaling $39.7 million, or 14.8% of PINE’s outstanding equity, as of December 31, 2024.
Management Agreement
On November 26, 2019, the Operating Partnership and PINE entered into a management agreement with the Manager
(the “Management Agreement”). Pursuant to the terms of the Management Agreement, our Manager manages, operates
and administers our day-to-day operations, business and affairs, subject to the direction and supervision of the Board and
in accordance with the investment guidelines approved and monitored by the Board. We pay our Manager a base
management fee equal to 0.375% per quarter of our “total equity” (as defined in the Management Agreement and based
on a 1.5% annual rate), calculated and payable in cash, quarterly in arrears.
Our Manager has the ability to earn an annual incentive fee based on our total stockholder return exceeding an 8%
cumulative annual hurdle rate (the “Outperformance Amount”) subject to a high-water mark price. We would pay our
Manager an incentive fee with respect to each annual measurement period in the amount of the greater of (i) $0.00 and
(ii) the product of (a) 15% multiplied by (b) the Outperformance Amount multiplied by (c) the weighted average shares.
No incentive fee was due for the year ended December 31, 2024, 2023 or 2022.
On July 18, 2024, the Operating Partnership and PINE entered into an amendment (the “Amendment”) to the
Management Agreement with the Manager. The Amendment extended the expiration date of the initial term of the
Management Agreement from November 26, 2024 to January 31, 2025 and the initial term will automatically renew for
an unlimited number of successive one-year periods thereafter, unless the agreement is not renewed or is terminated in
accordance with its terms.
Our independent directors review our Manager’s performance and the management fees annually and, following the
initial term, the Management Agreement may be terminated annually upon the affirmative vote of two-thirds of our
independent directors or upon a determination by the holders of a majority of the outstanding shares of our common stock,
based upon (i) unsatisfactory performance by the Manager that is materially detrimental to us or (ii) a determination that
F-33
the management fees payable to our Manager are not fair, subject to our Manager’s right to prevent such termination due
to unfair fees by accepting a reduction of management fees agreed to by two-thirds of our independent directors. We may
also terminate the Management Agreement for cause at any time, including during the initial term, without the payment
of any termination fee, with 30 days’ prior written notice from the Board. During the initial term of the Management
Agreement, we may not terminate the Management Agreement except for cause.
We pay directly or reimburse our Manager for certain expenses, if incurred by our Manager. We do not reimburse any
compensation expenses incurred by our Manager or its affiliates. Expense reimbursements to our Manager are made in
cash on a quarterly basis following the end of each quarter. In addition, we pay all of our operating expenses, except those
specifically required to be borne by our Manager pursuant to the Management Agreement.
The Company incurred management fee expenses totaling $4.2 million, $4.3 million, and $3.8 million during the
years ended December 31, 2024, 2023, and 2022, respectively. The Company also paid dividends on the common stock
and OP Units owned by affiliates of the Manager in the amount of $2.6 million, $2.5 million, and $2.3 million, for the
years ended December 31, 2024, 2023, and 2022, respectively.
The following table represents amounts due from the Company to CTO (in thousands):
As of
Description
December 31, 2024 December 31, 2023
Management Fee due to CTO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,098 $
1,062
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
(10)
Total (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,126 $
1,052
(1)
Included in accrued expenses, see Note 11, “Accounts Payable, Accrued Expenses, and Other Liabilities”.
ROFO Agreement
On November 26, 2019, PINE also entered into an Exclusivity and Right of First Offer Agreement with CTO (the
“ROFO Agreement”). During the term of the ROFO Agreement, CTO will not, and will cause each of its affiliates (which
for purposes of the ROFO Agreement will not include our company and our subsidiaries) not to, acquire, directly or
indirectly, a single-tenant, net leased property, unless CTO has notified us of the opportunity and we have affirmatively
rejected the opportunity to acquire the applicable property or properties.
The terms of the ROFO Agreement do not restrict CTO or any of its affiliates from providing financing for a third
party’s acquisition of single-tenant, net leased properties or from developing and owning any single-tenant, net leased
property.
Pursuant to the ROFO Agreement, neither CTO nor any of its affiliates (which for purposes of the ROFO Agreement
does not include our company and our subsidiaries) may sell to any third party any single-tenant, net leased property that
was owned by CTO or any of its affiliates as of the closing date of the IPO or that is developed and owned by CTO or any
of its affiliates after the closing date of the IPO, without first offering us the right to purchase such property.
The term of the ROFO Agreement will continue for so long as the Management Agreement with our Manager is in
effect.
On April 6, 2021, the Company entered into a purchase and sale agreement with a certain subsidiary of CTO for the
purchase of one net lease property for $11.5 million. The acquisition was completed on April 23, 2021.
On April 2, 2021, the Company entered into a purchase and sale agreement with certain subsidiaries of CTO for the
purchase of six net lease properties (“the CMBS Portfolio”). The terms of the purchase and sale agreement, as amended
on April 20, 2021, provided a total purchase price of $44.5 million for the CMBS Portfolio. The acquisition of the CMBS
Portfolio was completed on June 30, 2021.
F-34
On January 5, 2022, the Company entered into a purchase and sale agreement with a certain subsidiary of CTO for
the purchase of one net lease property for $6.9 million. The acquisition was completed on January 7, 2022.
The entry into these purchase and sale agreements, and subsequent completion of the related acquisitions, are a result
of the Company exercising its right to purchase the aforementioned properties under the ROFO Agreement.
Conflicts of Interest
Conflicts of interest may exist or could arise in the future with CTO and its affiliates, including our Manager, the
individuals who serve as our executive officers and executive officers of CTO, any individual who serves as a director of
our company and as a director of CTO and any limited partner of the Operating Partnership. Conflicts may include, without
limitation: conflicts arising from the enforcement of agreements between us and CTO or our Manager; conflicts in the
amount of time that executive officers and employees of CTO, who are provided to us through our Manager, will spend
on our affairs versus CTO’s affairs; and conflicts in future transactions that we may pursue with CTO and its affiliates.
We do not generally expect to enter into joint ventures with CTO, but if we do so, the terms and conditions of our joint
venture investment will be subject to the approval of a majority of disinterested directors of the Board.
In addition, we are subject to conflicts of interest arising out of our relationships with our Manager. Pursuant to the
Management Agreement, our Manager is obligated to supply us with our senior management team. However, our Manager
is not obligated to dedicate any specific CTO personnel exclusively to us, nor are the CTO personnel provided to us by
our Manager obligated to dedicate any specific portion of their time to the management of our business. Additionally, our
Manager is a wholly owned subsidiary of CTO. All of our executive officers are executive officers and employees of CTO
and one of our officers (John P. Albright) is also a member of CTO’s board of directors. As a result, our Manager and the
CTO personnel it provides to us may have conflicts between their duties to us and their duties to, and interests in, CTO.
We may acquire, sell, or finance net leased properties that would potentially fit the investment criteria for our Manager
or its affiliates. Similarly, our Manager or its affiliates may acquire, sell, or finance net leased properties that would
potentially fit our investment criteria. Although such acquisitions or dispositions could present conflicts of interest, we
nonetheless may pursue and consummate such transactions. Additionally, we may engage in transactions directly with our
Manager or its affiliates, including the purchase and sale of all or a portion of a portfolio of assets. If we acquire a net
leased property from CTO or one of its affiliates or sell a net leased property to CTO or one of its affiliates, the purchase
price we pay to CTO or one of its affiliates or the purchase price paid to us by CTO or one of its affiliates may be higher
or lower, respectively, than the purchase price that would have been paid to or by us if the transaction were the result of
arm’s length negotiations with an unaffiliated third party.
In deciding whether to issue additional debt or equity securities, we will rely, in part, on recommendations made by
our Manager. While such decisions are subject to the approval of the Board, our Manager is entitled to be paid a base
management fee that is based on our “total equity” (as defined in the Management Agreement). As a result, our Manager
may have an incentive to recommend that we issue additional equity securities at dilutive prices.
All of our executive officers are executive officers and employees of CTO. These individuals and other CTO personnel
provided to us through our Manager devote as much time to us as our Manager deems appropriate. However, our executive
officers and other CTO personnel provided to us through our Manager may have conflicts in allocating their time and
services between us, on the one hand, and CTO and its affiliates, on the other. During a period of prolonged economic
weakness or another economic downturn affecting the real estate industry or at other times when we need focused support
and assistance from our Manager and the CTO executive officers and other personnel provided to us through our Manager,
we may not receive the necessary support and assistance we require or that we would otherwise receive if we were self-
managed.
Additionally, the ROFO Agreement does contain exceptions to CTO’s exclusivity for opportunities that include only
an incidental interest in single-tenant, net leased properties. Accordingly, the ROFO Agreement will not prevent CTO
from pursuing certain acquisition opportunities that otherwise satisfy our then-current investment criteria.
F-35
Our directors and executive officers have duties to our company under applicable Maryland law in connection with
their management of our company. At the same time, PINE GP has fiduciary duties, as the general partner, to the Operating
Partnership and to the limited partners under Delaware law in connection with the management of the Operating
Partnership. These duties as a general partner to the Operating Partnership and its partners may come into conflict with
the duties of our directors and executive officers to us. Unless otherwise provided for in the relevant partnership agreement,
Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards
under which it owes its limited partners the highest duties of loyalty and care and which generally prohibits such general
partner from taking any action or engaging in any transaction as to which it has a conflict of interest. The partnership
agreement provides that in the event of a conflict between the interests of our stockholders on the one hand and the limited
partners of the Operating Partnership on the other hand, PINE GP will endeavor in good faith to resolve the conflict in a
manner not adverse to either our stockholders or the limited partners; provided, however, that so long as we own a
controlling interest in the Operating Partnership, any such conflict that we, in our sole and absolute discretion, determine
cannot be resolved in a manner not adverse to either our stockholders or the limited partners of the Operating Partnership
shall be resolved in favor of our stockholders, and we shall not be liable for monetary damages for losses sustained,
liabilities incurred or benefits not derived by the limited partners in connection with such decisions.
Revenue Sharing Agreement
On December 4, 2023, CTO entered into an asset management agreement directly with the borrower under the
Mortgage Note (as described in Note 4, “Commercial Loans and Investments”) to manage the portfolio of assets secured
by the Mortgage Note. The Company entered into a revenue sharing agreement with CTO whereby the Company is
expected to receive a share of the asset management fees, disposition management fees, leasing commissions, and other
fees related to CTO’s management and administration of the portfolio (the “Revenue Sharing Agreement”). The
Company’s share of the fees under the Revenue Sharing Agreement will be based on fees earned by CTO associated with
the single tenant properties within the portfolio, which are earned as services are rendered. During the years ended
December 31, 2024 and 2023, the Company recognized $0.5 million and less than $0.1 million of revenue pursuant to the
Revenue Sharing Agreement, which is included in other revenue on the Company’s consolidated statement of operations.
NOTE 20. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
From time to time, the Company may be a party to certain legal proceedings, incidental to the normal course of
business. The Company is not currently a party to any pending or threatened legal proceedings that we believe could have
a material adverse effect on the Company’s business or financial condition.
CONTRACTUAL COMMITMENTS – EXPENDITURES
The Company is committed to fund five construction loans as described in Note 4, “Commercial Loans and
Investments”. The unfunded portion of the construction loans totaled $7.4 million as of December 31, 2024.
Pursuant to a certain lease agreement executed during the year ended December 31, 2024, the Company is committed
to funding $5.0 million in tenant improvements for a property which capital expenditure is expected to be funded within
one year.
NOTE 21. BUSINESS SEGMENT DATA
The Company operates in two primary business segments: income properties and commercial loans and investments.
Our income property operations consist of lease income from income producing properties and our business plan is
focused on investing in additional income-producing properties. Our income property operations accounted for 82% and
89% of our identifiable assets as of December 31, 2024 and 2023, respectively, and 88.1%, 98.5%, and 100% of our
consolidated revenues for the years ended December 31, 2024, 2023, and 2022, respectively. Our commercial loans and
investment operations accounted for 15% and 7% of our identifiable assets as of December 31, 2024 and 2023,
F-36
respectively, and 11.0%, 1.4%, and 0.0% of our consolidated revenues for the years ended December 31, 2024, 2023, and
2022, respectively. As of December 31, 2024, our commercial loans investment portfolio consisted of nine commercial
loan investments.
The Company’s CODM evaluates segment performance based on total revenues less direct costs of revenues when
making decisions about allocating capital to the segments. The Company’s reportable segments are strategic business units
that offer different products. They are managed separately because each segment requires different management
techniques, knowledge, and skill.
Information about the Company’s operations in different segments for the year ended December 31, 2024 is as follows
(in thousands):
For the Year Ended December 31, 2024
Income
Properties
Commercial
Loans and
Investments
Total
Revenues:
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46,005
$
—
$
46,005
Interest Income from Commercial Loans and Investments . . . . . . . . . . . .
—
5,761
5,761
Total Revenues for Reportable Segments . . . . . . . . . . . . . . . . . . . . . . . . .
46,005
5,761
51,766
Reconciliation to Consolidated Revenues
Other Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
461
Total Consolidated Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
52,227
Operating Expenses:
Real Estate Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,793
—
7,793
Total Revenues Less Direct Costs of Revenues . . . . . . . . . . . . . . . . . . . .
38,212
5,761
43,973
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,141
552
1,693
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,594
—
25,594
Total Revenues Less Operating Expenses for Reportable Segments . . . . .
11,477
5,209
16,686
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,443
—
3,443
Net Income From Operations for Reportable Segments . . . . . . . . . . . . . . . .
14,920
5,209
20,129
Reconciliation to Consolidated Net Income
Other Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
461
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,575)
Investment and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12,008)
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,254
F-37
Information about the Company’s operations in different segments for the year ended December 31, 2023 is as follows
(in thousands):
For the Year Ended December 31, 2023
Income
Properties
Commercial
Loans and
Investments
Total
Revenues:
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44,967
$
—
$
44,967
Interest Income from Commercial Loans and Investments . . . . . . . . . . . .
—
637
637
Total Revenues for Reportable Segments . . . . . . . . . . . . . . . . . . . . . . . . .
44,967
637
45,604
Reconciliation to Consolidated Revenues
Other Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
Total Consolidated Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
45,644
Operating Expenses:
Real Estate Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,580
—
6,580
Total Revenues Less Direct Costs of Revenues . . . . . . . . . . . . . . . . . . . .
38,387
637
39,024
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,864
356
3,220
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,758
—
25,758
Total Revenues Less Operating Expenses for Reportable Segments . . . . .
9,765
281
10,046
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,334
—
9,334
Net Income From Operations for Reportable Segments . . . . . . . . . . . . . . . .
19,099
281
19,380
Reconciliation to Consolidated Net Income
Other Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,301)
Gain on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Investment and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
289
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,165)
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,266
F-38
Information about the Company’s operations in different segments for the year ended December 31, 2022 is as follows
(in thousands):
For the Year Ended December 31, 2022
Income
Properties
Commercial
Loans and
Investments
Total
Revenues:
Lease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
45,191
$
—
$
45,191
Interest Income from Commercial Loans and Investments . . . . . . . . . . .
—
—
—
Total Revenues for Reportable Segments . . . . . . . . . . . . . . . . . . . . . . . .
45,191
—
45,191
Reconciliation to Consolidated Revenues
Other Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total Consolidated Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
45,191
Operating Expenses:
Real Estate Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,435
—
5,435
Total Revenues Less Direct Costs of Revenues . . . . . . . . . . . . . . . . . . .
39,756
—
39,756
Provision for Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,564
—
23,564
Total Revenues Less Operating Expenses for Reportable Segments . . . .
16,192
—
16,192
Gain on Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,801
—
33,801
Net Income From Operations for Reportable Segments . . . . . . . . . . . . . . .
49,993
—
49,993
Reconciliation to Consolidated Net Income
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,784)
Loss on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(727)
Investment and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,539)
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
33,955
Capital expenditures of each segment as of December 31, 2024, 2023, and 2022 are as follows (in thousands):
Year Ended
December 31,
2024
December 31,
2023
December 31,
2022
Capital Expenditures:
Income Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
74,524
$
84,465
$
189,148
Commercial Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,851
35,419
—
Total Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
132,375
$
119,884
$
189,148
F-39
Identifiable assets of each segment as of December 31, 2024 and 2023 are as follows (in thousands):
As of
December 31,
2024
December 31,
2023
Identifiable Assets:
Income Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
497,765 $
503,151
Commercial Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,358
37,384
Other Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
—
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,855
24,025
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
604,995 $
564,560
Identifiable assets by segment are those assets that are used in the Company’s operations in each segment. Corporate
and other assets consist primarily of cash and restricted cash as well as the interest rate swaps.
NOTE 22. SUBSEQUENT EVENTS
Subsequent events and transactions were evaluated through February 6, 2025, the date the consolidated financial
statements were issued. There were no reportable subsequent events or transactions.
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PERFORMANCE SUMMARY
Total Shareholder Return For 2024
Diluted Per Share Information:
2024
2023
% Growth
Net Income Attributable to PINE Shareholders
$0.14
$0.19
(26%)
Funds from Operations
$1.73
$1.47
18%
Adjusted Funds from Operations
$1.74
$1.49
17%
Dividends Per Share:
2024
2023
% Growth
Declared and Paid
$1.110
$1.100
1%
As of December 31, 2024
Source: Bloomberg
Note: assumes dividends are reinvested
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Andrew C. Richardson
Chairman of the Board of Alpine Income Property Trust, Inc. and Chief
Executive Officer of RCM Living Holdings LLC
John P. Albright
President and Chief Executive Officer of CTO Realty Growth, Inc. and
Alpine Income Property Trust, Inc.
M. Carson Good
President of Good Capital Group, Member of the Board of Directors
of the Greater Orlando Airport Authority, and Member of the Board of
Governors of the State University System of Florida
John P. Albright
President and Chief Executive Officer
Steven R. Greathouse
Senior Vice President and Chief Investment Officer
Lisa M. Vorakoun
Senior Vice President and Chief Accounting Officer
Philip R. Mays
Senior Vice President, Chief Financial Officer and Treasurer
Daniel E. Smith
Senior Vice President, General Counsel and Corporate Secretary
Counsel
Vinson & Elkins LLP
901 East Byrd Street, Suite 1500
Richmond, VA 23219
Registrar and Stock Transfer Agent
Computershare Trust Company N.A.
150 Royall Street, Suite 100
Canton, MA 02021
Auditors
Grant Thornton LLP
5955 T.G. Lee Boulevard, Suite 200
Orlando, FL 32822
Mailing Address
Alpine Income Property Trust, Inc.
369 N. New York Avenue, Suite 201
Winter Park, FL 32789
CORPORATE INFORMATION
BOARD OF DIRECTORS
EXECUTIVES
INFORMATION
Brenna A. Wadleigh
Chief Executive Officer of N3 Real Estate
Rachel Elias Wein
Founder and Chief Executive Officer of WeinPlus
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NYSE: PINE
alpinereit.com
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