Executive Summary / Key Takeaways

• Strategic Barbell Approach: Alpine Income Property Trust (PINE) is executing a differentiated "Barbell investment strategy," balancing acquisitions of stable, investment-grade net lease properties with higher-yielding commercial real estate loans, driving accretive growth and income diversification.
• Robust Financial Performance: The company reported strong Q2 2025 FFO per share growth of 2.3% (4.8% year-to-date), fueled by a significant increase in commercial loan interest income (up 177.6% in Q2 2025) and strategic property acquisitions.
• Disciplined Capital Management: PINE actively manages its capital through opportunistic share repurchases (546,000 shares year-to-date 2025 at an average of $15.07) and maintains a well-covered dividend (current yield close to 8% with a 65% AFFO payout ratio).
• Optimized Portfolio & Outlook: The portfolio boasts 98% occupancy and an extended Weighted Average Lease Term (WALT) of 8.9 years. PINE reaffirmed its 2025 FFO/AFFO guidance of $1.74-$1.77 per diluted share, increasing investment volume targets to $100M-$130M, driven by a robust pipeline of high-yield loan opportunities.
• Proactive Risk Mitigation: Management is actively addressing challenges from vacant properties (Reno theater, former Party City) and tenant bankruptcies (At Home), opting for timely dispositions to redeploy capital and minimize earnings headwinds.

The Barbell Strategy: PINE's Differentiated Path to Growth

Alpine Income Property Trust, Inc. (PINE) operates as a real estate investment trust (REIT) specializing in single-tenant net leased commercial properties across the United States. Since its initial public offering in November 2019, PINE has carved out a distinct niche in the competitive net lease sector, distinguishing itself through an externally managed structure by CTO Realty Growth, Inc. (CTO) and a dynamic "Barbell investment strategy." This approach strategically balances the acquisition of high-quality, long-term leased properties with investment-grade tenants against higher-yielding commercial loans and properties with strong real estate fundamentals, even if tenant credit is lesser. This dual focus aims to deliver superior risk-adjusted returns and a diversified income stream for investors.

PINE's historical journey underscores its adaptive strategy. Following its IPO, the company actively engaged capital markets, raising significant funds through follow-on offerings and at-the-market (ATM) programs. It leveraged its Right of First Offer Agreement with CTO to expand its property portfolio, demonstrating a disciplined yet opportunistic approach to growth. The strategic pivot in 2024 to incorporate commercial loans and investments, exemplified by the Tampa sale-leaseback transactions, marked a significant evolution, broadening its capital deployment avenues and enhancing its yield profile.

PINE's operational differentiation lies not in proprietary technology, but in its strategic agility and disciplined underwriting, which allows it to capitalize on market inefficiencies. While larger peers may leverage advanced AI for property management, PINE's focus on energy-efficient designs in its properties contributes to lower operating costs, a tangible benefit that enhances property-level profitability. This operational efficiency, coupled with its "Barbell strategy," enables PINE to pursue opportunities that larger, more rigid REITs might overlook, particularly in the structured finance market.

Financial Strength and Strategic Capital Deployment

PINE's financial performance in the first half of 2025 reflects the efficacy of its strategic initiatives. The company reported FFO per diluted share growth of 2.3% in Q2 2025 and 4.8% year-to-date, a direct outcome of its active investment program. Total revenues for the six months ended June 30, 2025, reached $29.07 million, up from $24.96 million in the prior-year period.

The Income Properties segment remains the bedrock of PINE's portfolio, contributing approximately 82% of consolidated revenues for the first six months of 2025. Lease income grew to $12.02 million in Q2 2025, a 6.1% increase year-over-year, driven by new acquisitions. The portfolio, comprising 129 properties across 34 states, maintained a robust 98.0% occupancy rate as of June 30, 2025. Notably, the weighted average lease term (WALT) has significantly extended to 8.9 years, up from 6.6 years just a year ago, reflecting a deliberate strategy to enhance long-term cash flow stability.

The Commercial Loans and Investments segment has emerged as a powerful growth engine, demonstrating remarkable expansion. Interest income from this segment surged by 177.6% in Q2 2025 to $2.74 million, and by 166.7% year-to-date to $5.04 million. This segment's contribution to total revenues nearly doubled from 7.6% in 6M 2024 to 17.3% in 6M 2025. As of June 30, 2025, the loan portfolio had a carrying value of $110.9 million, encompassing construction loans, mortgage notes, and sale-leaseback arrangements. Management views this segment as a crucial tool for income diversification and deploying capital at attractive returns, particularly as banks "shrink again" in the structured finance market, creating a "target-rich environment" for PINE to originate high-yielding loans.

PINE's capital management strategy is equally dynamic. The company ended Q2 2025 with $12.1 million in cash and $48 million available on its revolving credit facility, with total potential liquidity expanding to almost $100 million as properties are acquired. Net debt to pro forma adjusted EBITDA stood at 8.1x, a metric management actively monitors and aims to keep reasonable through asset sales and free cash flow. The company's commitment to shareholder returns is evident in its consistent dividend increases, with the quarterly cash dividend raised to $0.285 per share in Q1 2025 and maintained in Q2 2025, offering a compelling yield close to 8% with a healthy 65% AFFO payout ratio. Opportunistic share repurchases, totaling 546,000 shares for $8.8 million year-to-date, further underscore management's belief in the stock's undervaluation.

Competitive Positioning and Market Dynamics

PINE operates within a competitive landscape dominated by larger net lease REITs such as Realty Income (O), National Retail Properties (NNN), Spirit Realty Capital (SRC), and Agree Realty Corporation (ADC). While PINE's estimated market share is smaller (1-2%), its "Barbell investment strategy" provides a distinct competitive edge. Unlike peers that often have similar credit profiles, PINE's diversified approach, including its focus on high-yield commercial loans, allows it to access different segments of the market and achieve higher average yields. For instance, PINE's average investment yield of 9.1% year-to-date 2025 on acquisitions and structured investments compares favorably to the average yields of its more traditional net lease peers.

PINE's portfolio composition also sets it apart. Its top two tenants, DICK's Sporting Goods (DKS) and Lowe's (LOW), both investment-grade rated, represent 20% of its Annual Base Rent (ABR), and over 51% of its ABR is derived from investment-grade tenants. This contrasts with some competitors who may have higher concentrations in specific, potentially riskier, retail subsectors. PINE has proactively reduced its Walgreens (WBA) exposure from its largest tenant to its fifth largest (7% of ABR), with a target to bring it below 5%, demonstrating active portfolio management. The market for Walgreens properties remains "fairly active," with cap rates ranging from high 7s to early 10s or 11s, attracting high net worth buyers who value their prime locations. Similarly, there is interest in At Home (HOME) big box properties due to their low rent payers and potential for redevelopment.

However, PINE's smaller scale does present certain disadvantages. It faces higher acquisition costs per property compared to larger players like NNN and may experience higher operating costs per unit due to less adoption of advanced AI-driven property management tools compared to Realty Income's efficient systems. Despite these, PINE's strategic agility and focus on energy-efficient designs in its properties contribute to lower operating costs, partially offsetting the scale disadvantage. The company's ability to cultivate lending relationships also provides a unique pipeline of high-quality, high-yielding loan opportunities, which are less accessible to traditional property acquirers.

Outlook and Risk Mitigation

PINE reaffirmed its full-year 2025 FFO and AFFO guidance range of $1.74 to $1.77 per diluted share, a testament to management's confidence in its strategy. The company increased its 2025 investment volume guidance by $30 million to a new range of $100 million to $130 million. This increase is primarily driven by the expectation of redeploying proceeds from a recent $25.5 million construction loan repayment (Publix Land Development) into new, accretive loan and property investments later in the year. While this repayment creates a temporary "couple of hundred grand a quarter" drag on AFFO due to the yield differential, management prioritizes long-term value creation.

The company is actively addressing known headwinds. The non-renewal of the Cinemark (CNK) lease in Reno and the Party City (PRTY) bankruptcy (Long Island property) resulted in noncash impairment charges in Q2 2025 and are expected to impact 2025 FFO/AFFO by approximately $0.08 per share. PINE is actively marketing both properties for sale, prioritizing monetization to redeploy capital quickly, rather than incurring interim carrying costs for re-leasing. Despite At Home's bankruptcy filing in June 2025, both of PINE's properties leased to At Home paid July rent and were not on the initial closure list, and management expects continued rent collection. PINE's proactive approach to pruning its portfolio and managing its "watch list" of tenants suggests a resilient operational stance.

Conclusion

Alpine Income Property Trust presents a compelling investment thesis rooted in its distinctive "Barbell investment strategy." By skillfully blending stable, investment-grade net lease acquisitions with high-yield commercial real estate loans, PINE is demonstrating consistent earnings growth and a commitment to shareholder returns through a well-covered, increasing dividend. The company's disciplined capital allocation, including opportunistic share repurchases and proactive portfolio management, positions it to capitalize on market opportunities while mitigating risks from tenant concentrations and vacant properties.

While PINE operates at a smaller scale than some industry giants and may not possess proprietary technological moats in property management, its strategic agility in capital deployment, operational efficiencies from design choices, and ability to source unique loan opportunities provide a strong competitive differentiation. The reaffirmed 2025 guidance and increased investment volume targets underscore management's confidence in executing this strategy. For discerning investors seeking a high-yielding REIT with a clear growth roadmap and a proactive management team, PINE offers an attractive proposition in the evolving net lease landscape.