Consolidated-Tomoka Land Co. disclosed the formation of an independent single-tenant net-lease real estate investment trust, as well as a planned shift in the company's investment strategy and its rebranding as CTO Realty Growth Inc.
The Florida-based publicly traded real estate company said the newly formed Alpine Income Property Trust Inc. filed a registration statement with the SEC with respect to its proposed IPO on the New York Stock Exchange under the ticker PINE.
Consolidated-Tomoka, which is Alpine's sponsor, plans to sell or contribute a portfolio of 20 of its single-tenant net-lease income properties to the REIT. The REIT aims to raise capital for its planned acquisition of 15 properties from Consolidated-Tomoka for approximately $125.9 million in cash.
Consolidated-Tomoka will contribute five of the assets in exchange for about 1.2 million units of Alpine's operating partnership. The units are expected to be valued at approximately $24.5 million based on the preliminary midpoint estimate of Alpine's IPO price range. It also plans to invest $7.5 million in Alpine common stock via a concurrent private placement.
Upon completion of the transactions, Consolidated-Tomoka is expected to own an approximately 17.5% stake in Alpine.
Upon closing of the IPO, Alpine plans to enter into a management agreement with Consolidated-Tomoka with an initial term of five years, in which the latter will serve as an external manager of Alpine for an annual base management fee equal to 1.5% of Alpine's total outstanding equity.
The parties also plan to enter into an exclusivity and right of first offer agreement at the planned IPO closing, whereby any proposed acquisition of single-tenant net-leased properties by Consolidated-Tomoka must first be offered to Alpine. All of Consolidated-Tomoka's remaining single-tenant net-leased properties would be subject to a right of first offer in favor of Alpine should the former seek to monetize those assets at any time while the management agreement is in effect.
Consolidated-Tomoka's board formed an independent directors committee to review, negotiate and approve the proposed transactions with Alpine, which are subject to satisfaction of all conditions, including the closing of the IPO.
Consolidated-Tomoka added that it will shift its investment focus to higher-return multi-tenant office and retail properties in "strong" metropolitan statistical areas and select growth markets across the U.S.
Proceeds from the planned sale of the company's portfolio to Alpine and from its recent land joint venture, which generated about $97 million in proceeds, will be used to finance property acquisitions through a 1031 like-kind exchange transaction structure. The company will also keep its C-corporation status and retain its option to convert to a REIT in the future.