Good day, and thank you for standing by. Welcome to the Alpine third quarter 2026 earnings conference call. Please be advised, today's conference is being recorded. I would now like to turn the conference over to your speaker today, Jenna McKinney. Please go ahead.
Thank you. Joining me in participating on the call this morning are John Albright, President and Chief Executive Officer, Philip Mays, Chief Financial Officer, and other members of the executive team who will be available to answer questions during the call. As a reminder, many of our comments today are considered forward-looking statements under Federal Securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings. You can find our SEC reports, earnings release, and most recent investor presentation, which contain reconciliations of the non-GAAP financial measures we use on our website at www.alpinereit.com.
With that, I will turn the call over to John.
Thank you, Jenna, and good morning, everyone. We are pleased to report another strong quarter. AFFO per diluted share grew 19.6% over the third quarter of last year, and we invested approximately $41 million at a weighted average initial yield of 8.5%. Our investment activity has accelerated meaningfully this year, including our pending $117.3 million industrial portfolio acquisition, which I will discuss in a moment. Our closed and under contract investments year- to- date now exceed $300 million, a company record that surpasses our full year 2025 total of $277 million. As a result of this investment volume, we are raising our full year 2026 AFFO guidance, which Phil will walk through shortly.
Starting with acquisitions, during the quarter, we closed $39.2 million of property acquisitions at a weighted average initial cash cap rate of 8.5%. Key tenants included a Best Buy in McAllen, Texas, a Lowe's in Fairfax, Virginia, a Dick's Sporting Goods in Asheville, North Carolina, which are all investment grade rated and among our top five tenants by ABR. Year- to- date, we've closed on $85.8 million of property acquisitions at a weighted average initial cap rate of 8%. We've continued to target well-located properties we can buy at low basis at attractive initial yield, and we look to selectively recycle lower-yielding properties into new higher yielding opportunities. Subsequent to quarter end, we acquired a Burlington in Chandler, Arizona for $7.9 million.
Earlier this month, announced an agreement to acquire a 13 property industrial portfolio for $117.3 million, or approximately $63 per square foot. The industrial portfolio totals about 1.9 million square feet across 11 states. It is 100% leased to nine tenants on an absolute triple- net basis with annual rent escalations. A weighted average remaining lease term of 10.2 years and no expirations before late 2031. While industrial is not a strategic focus, this portfolio stood out for a few reasons. First, it offers an attractive initial yield. Second, the tenant base is diversified, and the tenants have operated at their sites for an average of 40 years and invested significant capital in them. Third, we believe in-place rents are below market and benefit from annual escalations.
We expect to close in the middle of the fourth quarter, subject to customary closing conditions. The new financing Phil will discuss gives us ample capacity to fund it. At quarter end, our property portfolio consisted of 130 properties totaling 4.8 million square feet across 31 states with 99.6% occupancy and a weighted average lease term of 8.7 years. Annualized straight-line base rent was $53.9 million. Approximately 68% of ABR comes from credit-rated tenants and 56% from investment grade-rated tenants. On our commercial loan portfolio received earlier payment in full on two loans totaling $17.9 million at a weighted average yield of 10.2%.
At quarter end, the portfolio consisted of 11 loans with outstanding face amount of $160.1 million in a weighted average coupon, including PIK interest of 13.4%. The loan book is near our target of approximately 20% of total undepreciated asset value. It complements our property portfolio and increases the overall yield on our investments. As a reminder, the timing of fundings and repayments can cause the relative size of the loan portfolio to vary from quarter- to- quarter. With that, I'll turn the call over to Phil.
Thanks, John. Starting with our results. Third quarter total revenue was $20.5 million, including lease income of $12.8 million and interest income from commercial loan investments of $7.6 million. FFO and AFFO were both $0.55 per diluted share, up approximately 20% from the third quarter of last year. As a reminder, second quarter results included approximately $0.02 per diluted share of non-recurring termination fee income.
This quarter did not include any one-time or non-recurring income. For the nine months ended September 30th, total revenue was $58.9 million, including lease income of $38.1 million and interest income from commercial loan investments of $20.7 million. FFO and AFFO were $1.65 and $1.66 per diluted share, both up approximately 23% from the same period last year. Turning to the balance sheet. During the quarter, we raised $8.2 million of net proceeds through our common and preferred ATM programs. Year- to- date, we have now raised approximately $70 million of net proceeds across both programs. We ended the quarter with net debt to pro forma adjusted EBITDA of 6.5 x. While this is consistent with last quarter, it is more than a full turn lower than the 7.7 x we reported a year ago.
As of quarter end, we had $398.5 million of debt outstanding at a weighted average interest rate of 4.48%, and no debt maturing until 2029. As previously disclosed, we have $100 million of SOFR swaps at 2.05% that mature in January 2027 and will be replaced with swaps fixing SOFR at 3.54%. Notably, subsequent to quarter end, we received bank commitments for a new $100 million four-year term loan and a $75 million increase to our revolving credit facility. We expect this financing to close in late October, and we will use the term loan proceeds to reduce borrowings outstanding on our revolving credit facility. In total, this financing adds $175 million of potential liquidity. Now turning to guidance. As John said, our investment volume has led us to raise guidance.
For full year 2026, we are raising our FFO outlook to $2.19-$2.21 per diluted share, up from $2.10-$2.13. We are raising our AFFO outlook to $2.20-$2.22 per diluted share, up from $2.12-$2.15. At the midpoint, this represents approximately 17% AFFO per share growth over 2025. Our new guidance ranges reflect our increased investment volume assumption of $310 million-$350 million. Further, they reflect the expected timing of investments, dispositions, and financing activity, as well as this quarter's $17.9 million of early loan repayments John discussed, and a $7.4 million loan with a 10.25% yield maturing in the fourth quarter. Finally, based on equity issued this quarter, our quarterly base management fee run rate is now approximately $1.5 million. With that, operator, please open the call to questions.
Thank you. We will pause for a moment while we compile our Q&A roster. Our first question comes from Jay Kornreich with Cantor Fitzgerald. Your line is open.
Hey, thanks. Good morning. I was wondering if you could just give any further details on the industrial portfolio you now seek to acquire, if there's anything further along, what the yield was on it, and more specifically, just in terms of how you anticipate financing it, and if there's any maybe guidelines around what you think pro forma leverage might be.
Hey, Jay, it's John. Thanks for the question. I'll let Phil talk about the financing aspects of it. Because it's under contract and we haven't closed yet, we'll probably save more details for until after it closes. But obviously, we've given a fair amount of detail on our investor deck on it without having it been closed. But we love the portfolio because it is higher yielding. It has a nice WALT of over 10 years. It has annual escalations. It's dispersed in 13 properties, nine tenants, and incredibly low rental rate in per square foot. So it fits all the boxes of things that we like to buy where there's good yield and limited downside and nice upside. But Phil, you want to talk about the financing side?
Yeah. Hey, Jay. So next week, we should close on our new financing that's disclosed in the earnings release. A new term loan, a four-year term loan for $100 million, for which the proceeds will be used to pay down the line. Then we're actually growing the line and hitting the accordion there to increase the line $75 million. So we'll initially take it down on the line. On debt to EBITDA, if you just want to look at that solely by itself, we go from mid-sixes to low sevens, probably 7.3-ish. Then we'll look at, even though we still have some room in our dispo guidance and all to take it back down later.
Okay. Appreciate it. That's helpful. Then maybe just more broadly, the industrial portfolio acquisition, it brings some incremental diversity to the otherwise largely retail portfolio. So just wondering how you're thinking about what the ideal makeup of your portfolio is going forward. Are you targeting more industrial or other asset classes, or was this transaction really just more of a one-off?
For right now, it's basically a one-off, but we had mentioned in our previous earnings calls that we were open to other sectors. So finding that great risk-adjusted yield in sectors. As you know, we already have an industrial property in our portfolio before this acquisition. So I don't see anything else in the window, kind of like what we're looking at. But we're open to it. Okay. All right, I'll hold it there. Thank you.
Thank you. One moment for our next question. Our next question comes from Matthew Erdner with JonesTrading. Your line is open.
Hey, good morning, guys, and thanks for taking the question. I'd like to touch on the loan portfolio a little bit and kind of the plans with that capital as it does start to run off. Do you look to keep that portfolio at or near 20%, or should we expect to see some of that capital kind of redeployed into properties? Then on top of that, I guess towards the end of the quarter, shares started trading down, which could present an attractive repurchase opportunity. So how do you guys kind of balance the three of those?
Yeah, thanks. On the loan book, it is not a hard set as far as an amount that we will have out there. There could be a situation where the loan book pays down, pays off, and we do not replace it to the amount it is now. I will say in this environment, we are seeing interesting opportunities to replace the loans that we have. Nothing right now, but certainly, this is a good environment to get really terrific sponsors, terrific assets, great locations, great basis. I would expect that there will be more opportunities. It could be a situation where it does pay down. Anyway, that is kind of where we are with the loan book.
Got it. Appreciate that. Looking at dispositions, are there any credits that you guys may look to move on to or on from in, call it 2027, as we continue to go forward?
Yeah, we are constantly, you know, pruning the portfolio. Of course, we have some Walgreens left, but their credit gets better, and we are just kind of cash flowing those out until find that 1031 buyer. We have an At Home, as you know, but the At Home is in Charlotte in a terrific location. We had another user that wanted to buy it, and At Home did not want to leave. The locations that we have are really strong. We have one Sportsman's Warehouse where we have someone that wants to buy that. The Party City in Long Island, we are far along on a lease to replace that. We are always pruning, but nothing that
Got it. Thank you, guys.
Our next question comes from RJ Milligan with Raymond James. Your line is open.
Thanks. Good morning, guys. John, maybe you could just give some comments on what you're seeing in terms of maybe a shift in cap rates or if you're seeing the market move at all, just given the higher interest rate environment.
Sure. Clearly, we're saving our capital for really good opportunities where we are getting that higher yield potential. So, we're going to be targeting sort of that eight cap plus or minus. I would say that if people are out in the market right now selling something, that means they want to clear the deck. So, you probably have, in this environment, people that are going to sell, are going to transact, no matter what, versus a market where they're seeing better pricing, and they're taking something out to market. This is the time that gets us excited. So hopefully we'll have some good hunting here.
Thanks for that. Phil, just given the new debts or the new financings and then the swap burn offs, is there any way to quantify what the potential impact is next year as we think about the higher rates and the swap burn off?
Yeah, there are two swaps, RJ, that expire both in January. One is for $100 million at close, and I talked about it in my prepared remarks, at around 200 basis points. It is going to roll. We have a forward swap in place that will replace it that is below market, but higher than the 200 that that swap was at. So that $100 million will roll up about 150 basis points. The only other swap we have burning off is $60 million, and it also matures in January. We do not have a forward to replace it, but it is closer to market. It is maybe 50 that is below market. So that one will not. It is smaller, it is $60 million, and it is closer to market, so that one will have a little sting, but not as much. Those are the two biggest moving parts on our rates for next year.
Okay, great. Thanks, guys.
Thank you.
Our next question comes from Michael Goldsmith with UBS. Your line is open.
Good morning. Thanks a lot for taking my question. Just obviously, big industrial portfolio, yet the implied fourth quarter guidance is similar to the third quarter AFFO per share. Can you kind of bridge the moving pieces from the third quarter to the fourth quarter? Is that like a $0.55, like the right runway to think about just kind of going forward, I guess, building off of that last question?
Yeah. Hey, Michael, it's Phil. In the quarter, as we noted, John noted, we had a couple of loans that paid off. In the fourth quarter, if you look at our loan schedule, there's one for $7 million, $8 million that's also scheduled to pay off. In addition to that, we do have the rate that adjusts down on the large residential loan. The $0.55 in the third quarter, if you kind of adjust for all that, just the loan activity, it probably falls back to, call it, $0.53 or so. With the acquisitions we announced, in particular the industrial portfolio, that will kind of replace it. It looks like, in the middle of our guidance, the run rate's kind of consistent with the third quarter, but there's really moving parts there.
A little less loan, then the acquisition, industrial acquisition, bringing it back to $0.55. Look, it could be higher or lower. It'll just depend on timing of when the acquisitions close versus any dispositions.
Got it. Thanks for that. Leverage ticking up here. Over the last year, you worked to take it down. I guess, just what's the plan to work the leverage down from here? Just how are you thinking about that in this current environment?
Yeah. I will take the first part of it and Phil can follow on. Look, we have some dispo plans and even the industrial portfolio, there may be some properties we want to spin out on that one. It is really, I would say, asset sales. Obviously, if the capital markets are there may be some help there. But we have a fair amount of properties with lower cap rate sort of attributes. So that is sort of the plan.
Yeah. As John said, dispos will be the biggest mover there. But also, we do have some annual bumps in the portfolio where NOI will grow, and recycling, not just straight dispos, could also help earnings grow in addition to dispositions. So we have got a few ways to incrementally move leverage down.
Got it. Thanks so much. Good luck in the fourth quarter.
Thank you.
Our next question comes from Gaurav Mehta with Alliance Global Partners. Your line is open.
Thank you. Good morning. I wanted to ask you on the financing for industrial portfolio. I do not know if I missed it, but can you provide the cost of financing of the term loan? How much was the rate on the term loan?
The new term loan has not closed yet. There is a swap in it. The rate will be a little higher than the other two term loans. But it will generally be fairly consistent with it.
Okay.
Our variable rate debt now is, call it 5%, a little higher, depending on where SOFR sets.
Okay. Second question for commercial loan portfolio. What is the timing of the $75 million unfunded commitments in the portfolio?
They are really, it is spread out over a couple of years. That is just the unfunded piece. Keep in mind that over those two years, there will also be some loans maturing. The net funding will not be $75 million. It will be something less net of the loans maturing. You can see the schedule, you can see the maturity dates on there. We have $8 million paying down in the fourth quarter alone. Repayments will help fund some of the draws actually going out so that we never have to really come out of pocket the $75 million at any moment in time. Those draws are spread out over two years and can be at least partially handled with just loans maturing.
All right. Thank you. That is all I had.
Our next question comes from Alex Fagan with Baird. Your line is open.
Hi. Thank you for taking my question. On the swaps, are you assuming for the $50 million and the $100 million, are you assuming to swap that in the fourth quarter, or will that drag into the first quarter?
For the new $100 million four-year term loan, it is already swapped. We have a forward on it.
Okay.
That rate will be, call it, 4.75-ish on that. We do not really have to do. We already had a forward that we can just move over to that swap. There is no new swap to fix it. It will be fixed at closing. It does not go all the way out to the full turn of it. We will at some point look to do the tail later, but it will be 4.75-ish at close.
Okay. No, that is helpful. You talked in your prepared remarks about the loan maturing as well as the rate being lowered on that residential construction loan. Do you have any visibility in any of your lenders potentially doing any early prepayments or payoffs in the loan book?
There's some, but not a material amount.
Got it. Thank you. That's it for me.
Sure.
Our next question comes from John Massocca with B. Riley Securities. Your line is open.
Good morning, everyone. I know you're not providing kind of 2027 guidance at this point, but how are you thinking about investment volume in the first half of next year, just given taking down a sizable transaction here at the end of the year? I know it's some offsets to it, but you do have some of these loan commitments outstanding. Is it kind of fair, some of your peers have kind of also indicated that you might slow transaction volume at the start of next year just as this capital market situation kind of shakes out? Or is that kind of being too much into things?
Well, since we are basically doing the amount of investment volume this year equal to our market cap, you can probably figure that should be less next year. I do not know how many years we can kind of keep on doing our market cap investment. Look, it is too early, but for sure, if we find opportunities that really fit, we are going to find the capital, and it could be a partner. That is easy. If the capital markets are kind to our stock and our securities, then we will find external capital. There is an incredible amount of that right now in the net lease space. As you guys probably follow it better than we do, every private equity group, mammoth private equity groups, have or are starting net lease groups. There is no shortage of capital.
We look forward to kind of finding those opportunities, and that is our job, is to find the right capital for it.
Okay. Maybe circling back to the industrial acquisition. I know you have not closed it yet, so maybe you are kind of reticent to provide too many details, but when did this kind of come across your desk? As we kind of get more color on pricing, is this kind of pricing in the new interest rate environment, or is this something that kind of was still attractive but maybe kind of sourced prior to the 10-year moving up significantly here in August and September this year?
Yeah, the portfolio sort of happened. It was not a long, drawn-out process. It had been fully marketed, but it was one where the pricing is somewhat reflecting this new environment of higher interest rates. So we feel very comfortable with where the cap rate is relative to where the 10-year is.
Okay. That's it for me. Thank you very much.
Our next question comes from Craig Kucera with Lucid Capital Markets. Your line is open.
Hey, good morning. John, it's obviously a pretty tough housing environment given interest rates. Can you give us an update on how the projects underlying residential land loans are performing? Are they on track relative to budget, and how are you feeling about exposure to residential land loans right now?
Yeah. We feel very good with the ones that we're in because they're second home, third home, fourth home sort of communities. And actually, believe it or not, the fall market is the strongest market. I think what you're seeing on high net worth sort of folks is that owning sort of sticks and bricks isn't a bad thing to have. So we're not worried about kind of where our position in these. It's not like first-time homebuyers or move-ups. This is sort of a lot of discretionary capital.
Got it. So not very interest sensitive, more of a cash pay is what you're saying?
Exactly.
Okay. That's it for me. Thank you.
I'm not showing any further questions at this time, and as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.