Alpine Income Property Trust (PINE -1.97%) is a tiny net lease real estate investment trust (REIT) with a still-modest portfolio of properties. Unlike a giant like Realty Income (O -0.55%), which owns over 11,000 properties, Alpine can really dig in and understand the dynamics driving the 128 buildings it owns. Right now, management thinks bond investors, in general, are making some asset allocation shifts that will help Alpine sell more assets than it had originally planned in 2022.
A different scale
Alpine Income Property Trust and Realty Income are both net lease REITs with a retail focus. A net lease REIT owns single-tenant properties for which the tenants are responsible for most of the asset’s operating costs. Over a large enough portfolio, it is a fairly low-risk approach even though any single property is high risk because it contains just one tenant. There’s another similarity here, as well, in that Realty Income just spun off its office assets as a stand-alone company and Alpine sold its last remaining office property so it could be 100% retail.
That’s pretty much where the similarities end, however, given that Realty Income is a $40 billion market cap giant and Alpine is a $240 million market cap pipsqueak. The size of their portfolios, noted above, highlights the difference even more, given that Realty Income’s portfolio is more than 88 times the size of Alpine’s modest collection of properties. In many ways, that means that Realty Income’s portfolio is more robust to adversity, but there are positives in being small, too.
Notably, Alpine is buying and selling properties in smaller numbers and it likely has a much better understanding of each individual asset. Realty Income needs to make big moves to impact its top and bottom lines. Which is why it was so interesting to see Alpine increase its projected asset sales target for 2022 from $40 million-$50 million to $75 million-$100 million. That change is from a small REIT that’s focused on growth, where selling any asset ends up creating a growth headwind.
The word “on the ground”
What’s particularly notable here is that Alpine didn’t increase its acquisition guidance, preferring to just narrow its original range (slightly increasing the bottom end). So it is entirely possible that the REIT doesn’t actually put the proceeds from its expected sales back to work in new investments this year. That would likely be a timing issue, since management has been growing the portfolio aggressively, but it speaks to a market that could best be described as favoring sellers.
CEO John Alright offered up some …….