ALPINE INCOME PROPERTY TRUST, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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 Financial Statements" refer to the Notes to the Consolidated and
Combined 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 and combined financial statements and related notes included elsewhere in this report.

Overview

Alpine Income Property Trust, Inc. is a Maryland corporation that operates in such a way as to qualify as a REIT for we for federal income tax purposes. Virtually all operations are conducted through our Operational partnership.

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.).

Our operating results for the year ended December 31, 2021 were in-line with our
expectations and primarily driven by our investment activity of acquiring net
lease properties at valuations and yields generally consistent with our target
investment parameters.

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During the year ended December 31, 2021, the Company acquired 68 properties for
total acquisition volume of $260.3 million.  During the year ended December 31,
2021, the Company disposed of three properties for an aggregate sales price of
$28.3 million, generating combined gains on sale of $9.7 million.

As of December 31, 2021, we owned 113 properties with an aggregate gross
leasable area of 3.3 million square feet, located in 32 states, with a weighted
average remaining lease term of 7.9 years. Our portfolio was 100% leased as of
December 31, 2021.

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 and combined financial statements.


                                                                                    For the
                                                                                  Period from
                                                                                   November       For the Period
                                         For the Year                             26, 2019 to    from January 1,
                                             Ended          For the Year Ended     December      2019 to November
                                       December 31, 2021    December 31, 2020      31, 2019          25, 2019

                                                            The Company                            Predecessor
Total Revenues                         $          30,128    $           19,248    $     1,394   $           11,837

Net Income (Loss) From Operations      $          15,164    $            2,610    $       (4)   $            3,631

Net Income (Loss)                      $          11,462    $            1,146    $      (45)   $            3,631
Less: Net (Income) Loss
Attributable to Noncontrolling
Interest                                         (1,498)                 (161)              6                    -
Net Income (Loss) Attributable to
Alpine Income Property Trust, Inc.     $           9,964    $              985    $      (39)   $            3,631

Net Income (Loss) Per Share
Attributable to Alpine Income
Property Trust, Inc.
Basic                                  $            1.02    $             0.13    $         -                  N/A
Diluted                                $            0.89    $             0.11    $         -                  N/A

Dividends Declared and Paid            $           1.015    $            0.820    $     0.058                  N/A




























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Balance sheet data (in thousands):



                                                              As of December 31,
                                                               2021        2020
Total Real Estate, at Cost                                  $  444,408   $ 225,889
Real Estate-Net                                             $  428,989   $ 219,339
Cash and Cash Equivalents                                   $    8,851   $   1,894
Intangible Lease Assets-Net                                 $   58,821   $  36,881
Straight-Line Rent Adjustment                               $    1,838   $   2,045
Other Assets                                                $    6,369   $   2,081
Total Assets                                                $  505,514   $ 262,240

Accounts payable, accrued liabilities and other liabilities $2,363 $

1,984

Prepaid Rent and Deferred Revenue                           $    2,033   $ 

1,055

Intangible Lease Liabilities-Net                            $    5,476   $ 
 3,299
Long-Term Debt                                              $  267,740   $ 106,809
Total Liabilities                                           $  277,612   $ 113,147
Total Equity                                                $  227,902   $ 149,093




                          Non-GAAP Financial Measures
Our reported results are presented in accordance with accounting principles
generally accepted in the United States of America ("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
extraordinary items (as defined by GAAP), net gain or loss from sales of
depreciable real estate assets, impairment write-downs associated with
depreciable real estate assets and real estate related depreciation and
amortization, including the pro rata share of such adjustments of unconsolidated
subsidiaries. To derive AFFO, we modify the NAREIT computation of FFO to include
other adjustments to GAAP net income related to non-cash revenues and expenses
such as straight-line rental revenue, amortization of deferred financing costs,
amortization of above- and below-market lease related intangibles, 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.





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Reconciliation of non-GAAP measures (in thousands, except share data):




                                                                                              For the
                                                                        

For the Period Period of

                                    For the Year       For the Year      

from november January 1st,

                                        Ended             Ended           

26, 2019 to 2019 to

                                    December 31,       December 31,       

the 31st of December, November 25,

                                        2021               2020               2019             2019

                                                        The Company                         Predecessor
Net Income (Loss)                  $        11,462   $          1,146   $           (45)   $       3,631
Depreciation and Amortization               15,939              9,949                687           4,859
Gain on Disposition of Assets              (9,675)              (287)                  -               -
Funds From Operations              $        17,726   $         10,808   $            642   $       8,490
Adjustments:
Straight-Line Rent Adjustment                (607)            (1,524)               (68)           (410)
COVID-19 Rent Repayments
(Deferrals), Net                               430              (378)                  -               -
Non-Cash Compensation                          309                268                  4             509
Amortization of Deferred
Financing Costs to Interest
Expense                                        362                188                 16               -
Amortization of Deferred
Expenses to Lease Income                         -                  -                  -             277
Amortization of Intangible
Assets and Liabilities to Lease
Income                                       (257)              (108)                (5)           (234)
Other Non-Cash (Income) Expense               (18)               (22)                  -               -
Recurring Capital Expenditures                (41)               (43)                  -               -
Non-Recurring Acquisition Cost
Charge                                           -                  -                216               -

Adjusted operating funds $17,904 $9,189

         805   $       8,632

Weighted Average Number of
Common Shares:
Basic                                    9,781,066          7,588,349          7,902,737             N/A
Diluted                                 11,246,227          8,812,203          9,126,591             N/A



Other data (in thousands, except data per share):


                                                                              For the         For the
                                                                            Period from     Period from
                                                                            November 26,    January 1,
                                                                              2019 to         2019 to
                                  For the Year Ended   For the Year Ended   December 31,   November 25,
                                  December 31, 2021    December 31, 2020        2019           2019

                                                       The Company                          Predecessor
FFO                               $           17,726   $           10,808   $        642   $       8,490
FFO per Diluted Share             $             1.58   $             1.23   $       0.07             N/A

AFFO                              $           17,904   $            9,189   $        805   $       8,632
AFFO per Diluted Share            $             1.59   $             1.04  
$       0.09             N/A








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COMPARISON OF FINANCIAL YEARS DECEMBER 31, 2021 AND 2020



The following presents the Company's results of operations for the year ended
December 31, 2021, as compared to the year ended December 31, 2020 (in
thousands):




                                            For the Year
                                                Ended         For the Year Ended
                                          December 31, 2021   December 31, 2020     $ Variance    % Variance
Revenues:
Lease Income                              $          30,128   $           19,248   $     10,880        56.5%
Total Revenues                                       30,128               19,248         10,880        56.5%
Operating Expenses:
Real Estate Expenses                                  3,673                2,316          1,357        58.6%
General and Administrative Expenses                   5,027                4,660            367         7.9%
Depreciation and Amortization                        15,939                9,949          5,990        60.2%
Total Operating Expenses                             24,639               16,925          7,714        45.6%
Gain on Disposition of Assets                         9,675                  287          9,388      3271.1%
Net Income From Operations                           15,164               
2,610         12,554       481.0%
Interest Expense                                      3,702                1,464          2,238       152.9%
Net Income                                           11,462                1,146         10,316       900.2%
Less: Net Income Attributable to
Noncontrolling Interest                             (1,498)                (161)        (1,337)     (830.4%)
Net Income Attributable to Alpine
Income Property Trust, Inc.               $           9,964   $            
 985   $      8,979       911.6%



Revenue and direct cost of revenue



Revenue from our property operations during the years ended December 31, 2021
and 2020 totaled $30.1 million and $19.2 million, respectively. The increase in
revenues is reflective of the Company's volume of acquisitions. The direct costs
of revenues for our property operations totaled $3.7 million and $2.3 million
during the years ended December 31, 2021 and 2020, respectively. The increase in
the direct cost of revenues is also attributable to the Company's expanded
property portfolio.



General and administrative expenses



The following table represents the Company's general and administrative expenses
for the year ended December 31, 2021 as compared to the year ended December
31,
2020 (in thousands):




                                                  For the Year        For the Year
                                                      Ended               Ended             $
                                                December 31, 2021   December 31, 2020    Variance    % Variance
Management Fee to Manager                       $           3,182   $           2,554   $      628        24.6%
Director Stock Compensation Expense                           309                 268           41        15.3%
Director & Officer Insurance Expense                          499                 459           40         8.7%
Additional General and Administrative Expense               1,037               1,379        (342)      (24.8)%
Total General and Administrative Expenses       $           5,027   $      
    4,660   $      367         7.9%




General and administrative expenses totaled $5.0 million and $4.7 million during
the years ended December 31, 2021 and 2020, respectively. The $0.4 million
increase is primarily attributable to growth in the Company's equity base, which
led to increased management fee expenses totaling $0.6 million.







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Depreciation and amortization



Depreciation and amortization expense totaled $15.9 million and $9.9 million
during the years ended December 31, 2021 and 2020, respectively. The $6.0
million increase in the depreciation and amortization expense is reflective of
the Company's expanded property portfolio.



Interest Expense



Interest expense totaled $3.7 million and $1.5 million during the years ended
December 31, 2021 and 2020, respectively. The $2.2 million increase in interest
expense is attributable to the higher average outstanding debt balance during
the year ended December 31, 2021 as compared to the same period in 2020. The
overall increase in the Company's long-term debt was primarily utilized to fund
the acquisition of properties during 2021 and 2020.



Net Income (Loss)



Net income (loss) totaled $11.5 million and $1.1 million during the years ended
December 31, 2021 and 2020, respectively. The increase in net income is
attributable to the factors described above in addition to the $9.7 million gain
on disposition of assets during the year ended December 31, 2021, an increase of
$9.4 million from the comparable prior year period.



COMPARISON OF THE YEAR ENDED DECEMBER 31, 2020, THE PERIOD FROM NOVEMBER 26,
2019 TO DECEMBER 31, 2019, AND THE PREDECESSOR PERIOD FROM JANUARY 1, 2019
TO
NOVEMBER 25, 2019



The following presents the Company's results of operations for the year ended
December 31, 2020, as compared to the period from November 26, 2019 to December
31, 2019 and the Predecessor period from January 1, 2019 to November 25, 2019
(in thousands)(1):




                                                                    For the
                                                                  Period from
                                                                 November 26,
                                                                    2019 to      For the Period from
                                            For the Year Ended   December 31,    January 1, 2019 to
                                            December 31, 2020        2019         November 25, 2019

                                                       The Company                   Predecessor
Revenues:
Lease Income                                $           19,248   $       1,394   $            11,837
Total Revenues                                          19,248           1,394                11,837
Operating Expenses:
Real Estate Expenses                                     2,316             372                 1,664
General and Administrative Expenses                      4,660            
339                 1,683
Depreciation and Amortization                            9,949             687                 4,859
Total Operating Expenses                                16,925           1,398                 8,206
Gain on Disposition of Assets                              287               -                     -
Net Income (Loss) From Operations                        2,610            
(4)                 3,631
Interest Expense                                         1,464              41                     -
Net Income (Loss)                                        1,146            (45)                 3,631
Less: Net (Income) Loss Attributable to
Noncontrolling Interest                                  (161)               6                     -
Net Income (Loss) Attributable to Alpine
Income Property Trust, Inc.                 $              985   $        (39)   $             3,631


(1) Results of operations before November 26, 2019 represent the Predecessor

CTO activity. After November 26, 2019when acquiring the

initial portfolio of the CTO, the results of operations are presented on a new

    basis of accounting pursuant to ASC 805-10.




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Revenue and direct cost of revenue

Revenue from our property operations totaled $19.3 million during the year ended
December 31, 2020, $1.4 million during the period from November 26, 2019 to
December 31, 2019 and $11.8 million during the Predecessor period from
January 1, 2019 to November 25, 2019. The increase in revenues is reflective of
the Company's volume of acquisitions. The direct costs of revenues for our
property operations totaled $2.3 million during the year ended December 31,
2020, $0.4 million during the period from November 26, 2019 to December 31,
2019, and $1.7 million during the Predecessor period from January 1, 2019 to
November 25, 2019. The increase in the direct cost of revenues is also
attributable to the Company's expanded property portfolio.

General and administrative expenses



The following table represents the Company's general and administrative expenses
for the year ended December 31, 2020 as compared to the period from November 26,
2019 to December 31, 2019 and the Predecessor period from January 1, 2019 to
November 25, 2019 (in thousands):




                                                                       For the
                                                                     Period from    For the Period
                                                                    November 26,     from January
                                                  For the Year         2019 to        1, 2019 to
                                                      Ended         December 31,     November 25,
                                                December 31, 2020       2019             2019

                                                           The Company               Predecessor
Management Fee to Manager                       $           2,554   $         254   $            -
Director Stock Compensation Expense (1)                       268               4              509
Director & Officer Insurance Expense                          459              44                -
Additional General and Administrative Expense               1,379              37                -
Allocation of Predecessor General and
Administrative Expense                                          -               -            1,174
Total General and Administrative Expenses       $           4,660   $      

339 $1,683

(1) For the Predecessor period presented, the stock-based compensation expense represents

    an allocation from CTO.




General and administrative expenses totaled $4.7 million during the year ended
December 31, 2020, $0.3 million during the period from November 26, 2019 to
December 31, 2019, and $1.7 million during the Predecessor period from
January 1, 2019 to November 25, 2019. Changes in general and administrative
expenses are primarily due to the changes in the nature of such expenses, as the
Predecessor period from January 1, 2019 to November 25, 2019 represents an
allocation of the Predecessor parent company expenses versus actual general and
administrative expenses incurred by the Company. The Predecessor general and
administrative expenses were not indicative of the amount of general and
administrative expenses the Company has incurred on an annual basis subsequent
to the IPO. During the year ended December 31, 2020, general and administrative
expenses were primarily impacted by the recognition of $2.6 million of
management fee expenses, of which costs totaled $0.3 million and zero,
respectively, for the period from November 26, 2019 to December 31, 2019 and for
the Predecessor period from January 1, 2019 to November 25, 2019, in addition to
$0.3 million of costs associated with audit services related to the 2019 annual
audit. The fees associated with our annual audit are recognized as the services
are incurred, which typically occurs ratably throughout the year.

Depreciation and amortization

Depreciation and amortization expense totaled $9.9 million during the year ended
December 31, 2020, $0.7 million  during the period from November 26, 2019 to
December 31, 2019, and $4.9 million during the Predecessor period from
January 1, 2019 to November 25, 2019.  The increase in the depreciation and
amortization expense is reflective of the Company's expanded property portfolio.









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Interest Expense



Interest expense totaled $1.5 million during the year ended December 31, 2020,
less than $0.1 million during the period from November 26, 2019 to December 31,
2019, and zero during the Predecessor period from January 1, 2019 to
November 25, 2019. The increase in interest expense is related to the
outstanding balance on the Company's Credit Facility to fund the acquisition of
29 properties during the year ended December 31, 2020.



Net Income (Loss)



Net income (loss) totaled $1.1 million for the year ended December 31, 2020,
less than $(0.1) million for the period from November 26, 2019 to December 31,
2019, and $3.6 million for the Predecessor period from January 1, 2019 to
November 25, 2019. The decrease in net income for the year ended December 31,
2020, as compared to the period from November 26, 2019 to December 31, 2019 and
the Predecessor period from January 1, 2019 to November 25, 2019 is attributable
to the factors described above.



CASH AND CAPITAL RESOURCES

Cash and Cash Equivalents. Cash totaled $9.5 million at December 31, 2021,
including restricted cash of $0.6 million, of which restricted cash balance is
being held in a capital replacement and leasing commissions reserve account in
connection with our financing of six properties.



Long-term debt. From December 31, 2021the company had $51.0 million available on the credit facility. See note 9, “Long-term debt” of the notes to the consolidated and combined financial statements in section 8 for the information provided by the Company concerning the balance of its long-term debt as at December 31, 2021.

Acquisitions and Investments. As noted previously, the Company acquired 68
properties during the year ended December 31, 2021 for an aggregate purchase
price of $260.3 million, as further described in Note 4 "Property Portfolio" in
the notes to the consolidated and combined financial statements in Item 8.

Dispositions. During the year ended December 31, 2021, the Company disposed of
three properties for a total disposition volume of $28.3 million, generating
aggregate gains of $9.7 million, as further described in Note 4 "Property
Portfolio" in the notes to the consolidated and combined financial statements in
Item 8.


Capital expenditure. From December 31, 2021the Company had no commitments related to capital expenditures.



The Company is contractually obligated under its various long-term debt
agreements. In the aggregate, the Company is obligated under such agreements to
repay $269.0 million on 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 and $51.0 million of available capacity on the existing $150.0
million Credit Facility, based on our current borrowing base of properties,
as
of December 31, 2021.


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 by utilizing
the capital we raised in the IPO and available borrowing capacity from the
Credit Facility to increase our portfolio of income-producing properties,
providing stabilized cash flows with strong risk-adjusted returns primarily in
larger metropolitan areas and growth markets.



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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-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 68 properties for a combined purchase price of $260.3 million for the
year ended December 31, 2021 and 29 properties for a combined purchase price of
$116.6 million for the year ended December 31, 2020.



See Note 3, “Summary of Significant Accounting Policies”, for a more detailed discussion of the Company’s accounting estimates and policies.

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