Stock Analysis & Ideas

Alpine Income Property Trust: Juicy Yield for Uncertain Times

Alpine Income Property Trust (PINE) owns and manages a portfolio of quality commercial properties. The trust’s portfolio includes 129 net leased retail and office properties spread across 84 markets in 35 states.

What’s unique about Alpine is that was formed as recently as August of 2019, has no employees, and is externally governed by Alpine Income Property Manager.

Interestingly, CTO Realty Growth (CTO), the publicly traded REIT, owns both the manager and 22.3% of Alpine’s common stock. Therefore, Alpine’s operations are slick while simultaneously backed by a high-quality sponsor whose interests are totally aligned with common shareholders.

During the ongoing volatility in the market, equities have been under significant pressure. In the meantime, Alpine stock price has held its ground amid the company’s numerous qualities.

Alpine’s latest quarter demonstrated the resilience of its property portfolio with results coming in strong, backed by multi-year leases and a diversified, high-quality tenant base. I am bullish on the stock.

Latest Quarter: Unfazed Performance

Alpine’s Q1 results remained unfazed despite the overall volatility in markets. Revenues landed at $10.8 million, an 83.3% increase compared to last year, driven by Alpine’s serial acquisition spree. During Q1, the trust purchased 16 net lease retail properties for $65.5 million, with a juicy weighted average going-in cash cap rate of 6.9%.

Accounting for $294 million in straight-line rent adjustment, adjusted funds from operations rose by a milder but still remarkable 67.6% to $6.4 million. Further, as a result of the issuance of common equity to raise additional funds to partly contribute to its acquisitions, AFFO per share rose by a softer yet robust 9.1% to $0.48.

Following another quarter of better-than-expected results, Alpine’s management raised its outlook for Fiscal 2022, anticipating AFFO/share to land between $1.53 and $1.58, from $1.51 and $1.56 previously. Thus, Alpine is on track to deliver another highly profitable year, with the annualized dividend rate of $1.08 remaining quite secured.

Alpine’s Unique Qualities

Alpine’s performance is set to remain sturdy for years, backed by a special set of unique qualities.

The company enjoys tremendous cash flow visibility supported by multi-year leases, embedded rent hikes that are contractually secured and capable of offsetting inflation, and low-cost financing amid its renowned manager.

At the end of Q1, Alpine’s Weighted-Average Remaining Lease Term was as extended as nine years, while the portfolio was 100% occupied, reflecting these qualities. Alpine was able to borrow $60 million in a five-year term at just 2.16% last year.

Regarding its robust and diversified tenant base, no state and no tenant comprise more than 17% and 12% of Alpine’s total revenues. If that wasn’t enough, a considerable chunk of Alpine’s tenants contains investment-grade firms.

Consequently, I believe that Alpine is well positioned to continue performing resiliently during a potential recession.

Dividend & Valuation

Alpine has managed to accomplish more than 275% accretive portfolio growth since its genesis, which is quite remarkable considering that it also pays a substantial dividend.

Last November, the trust increased its dividend per share by 5.9% to an annualized rate of $1.08. The yield currently stands at 5.65%, which makes Alpine one of the highest-yield REITs.

Considering that the payout ratio stands at just under 70% at the midpoint of the manager’s guidance, combined with the trust’s resilient qualities, income-oriented investors are likely to highly appreciate Alpine’s payouts.

Further, as of its latest report, nearly half of Alpine’s annualized base rent is subject to rent hikes. All points considered, Alpine should be able to continue growing the dividend.

As far as the stock’s valuation goes, Alpine’s current price levels imply a P/AFFO of 12.3. In my view, this is a fair multiple considering the sizable yield, and robust growth prospects backed by Alpine’s property acquisition pipeline.

Wall Street’s Take

Turning to Wall Street, Alpine Income Property Trust has a Moderate Buy consensus rating based on four unanimous Buys assigned in the past three months.

At $22.75, the average Alpine Income Property Trust price target implies 19.6% upside potential.

Takeaway

Alpine Income Property Trust offers investors significant assurance during the current days of increased uncertainty. The company has a truly distinctive collection of favorable characteristics that comprise a high-quality REIT.

Along with its multi-year leases and 100% occupancy, Alpine is set to keep producing cash flows even during a dire economic environment.

Further, the 5.65% yield is one of the most substantial in the sector and offers investors a predictable stream of payouts. Overall, few companies combine Alpine’s qualities.

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