Copper Property CTL Pass Through Trust

OTC:CPPTL

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and welcome to the Copper Property CTL Pass Through Trust Conference Call. [Operator Instructions]. Please note that today's conference call is being recorded with an online replay available 1 hour after the conclusion of this call.

Additional information can be found on the Investors section of the company's website at ctltrust.net.

[Operator Instructions]. I will now turn the conference call over to Trust's Investor Relations representative Jessica Cummins.

[Jessica Cummins]

Thank you, operator. Good morning, everyone. Welcome to the Copper Property CTL Pass Through Trust Conference Call. Over the past few days, the Trust filed with the SEC, a 10-K containing JCPenney's year-end 2023 financial statements and 8-K containing its April 2024 monthly reporting package and its quarterly report on Form 10-Q for the period ended March 31, 2024. Each of which are available online at ctltrust.net.

On the call today, Neil Aaronson, the Trust's Principal Executive Officer; and Larry Finger, its Principal Financial Officer, will discuss these filings as well as other Trust activities. In addition, a representative from GLAS, our trustee will be available to answer questions.

Please note that during this conference call, some of the comments will be forward-looking statements. All statements other than statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements may be identified by the use of forward-looking terminology such as anticipate, believe, continue, could, estimate, expect, intend, may, might, our vision, plan, potential, preliminary, predict, should, will, or would or the negative thereof or other variations thereof or comparable terminology and include, but are not limited to, the Trust's expectations or beliefs concerning future events and stock price performance.

The Trust has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Trust believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control.

These factors, including those discussed in the Trust registration statement on Form 10 filed with the Securities and Exchange Commission may cause its actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

For a further list and description of such risks and uncertainties, please refer to the Trust's filings with the SEC that are available at www.sec.gov and on our website. As such, it is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, Tuesday, May 14, 2024.

[Operator Instructions]. I will now turn the call over to our Principal Executive Officer, Neil Aaronson.

[Neil Aaronson, executive]

Thank you, Jessica, and welcome, everyone, to the First Quarter Copper Properties Trust Earnings Call, and thank you for your continued interest in Copper Properties Trust.

We continue our focus on achieving sales consistent with the long-term value of our portfolio. As you know, portfolios are not homogeneous, and our sales strategy takes that into account by targeting appropriate cap rates for each property based on our view of their relative value.

Consistent with that, in the first quarter, we sold a portfolio of 3 properties, one in Aurora, Colorado, one in Newnan, Georgia and one in Kissimmee, Florida, which was sold for $16.5 million in the aggregate, representing an 8.2% cap rate and a gain on sale of $1.5 million.

Since the Trust formation, we've sold the 6 distribution centers and 33 retail properties for a total of $1.011 billion, and a gain on sale of $136 million. The distribution centers were sold at a cap rate of 6.3% and the retail properties have been sold at an average cap rate of 4.8% or 6.1% excluding the San Bruno sale. We've sold 21 of the original 29 option properties and 12 CTL properties. We are continuously monitoring market conditions with the objective of achieving maximum value for the certificate holders through either a bulk sale of the portfolio or accelerated individual dispositions.

We remain confident that the combination of the quality of the real estate portfolio and the advantages of the master lease will allow us to achieve maximum value and a significant premium for the certificate holders.

With that, I'll turn the call over to Larry Finger.

[Larry Finger, executive]

Thank you, Neil, and welcome, everyone. On May 9, we filed an amended 10-K which we've also done in each of the 3 prior years. The master lease records that JCPenney provided us with their year-end audited financial statements. And the SEC requires that we include those in our 10-K.

While JCPenney's year runs through January, ours ends December 31, and our 10-K filing deadline is obviously tied to our year-end. Therefore, while JCPenney has consistently provided the financial statements within the time period recorded under the master lease, this is beyond the deadline for our 10-K filing. Thus, each year, we filed an amended 10-K to include the JCPenney financial statements upon our receipt thereof.

Including the distribution we've made on Friday, to date, we distributed $1.3 billion. That represents rental income of about $300 million and sales distributions of $988 million.

In terms of guidance, subject to the impact of sales, we anticipate a monthly distributions from operations are expected to continue to be between $7.5 million and $8 million or between $0.10 and [ $0.105 ] per certificate, supplemented by net sales proceeds as they occur.

With that, we'll open the call to questions.

[Operator]

[Operator Instructions]. Our first question is from Alex Arnold with Odeon Capital.

[Arthur Arnold, analyst]

I thought I heard the word accelerated in front of the word dispositions in Neil's statements. I'm just trying to get a sense of what the demand environment is like and sort of what the strategy is from a marketing standpoint going forward?

[Neil Aaronson, executive]

Well, I wouldn't read too much into that particular word. It's just -- if we look at that as we think through all of the strategic opportunities for us to dispose of assets. I was more referencing it as there are multiple ways we can do it. It's either through individual sales, small portfolio sales or a bulk sale of the portfolio. So there was nothing -- I wouldn't read too much into the word accelerated by any stretch.

[Arthur Arnold, analyst]

The last time you guys -- we had you guys live, it seemed like you were -- Larry gave some indication that there were very, very sort of minor green shoots with regard to tire kicking in demand, but nothing to prove out the market. Is there any change in the demand environment or what you guys are seeing in terms of interest?

[Neil Aaronson, executive]

I think -- I would tell you, I think the interest has been consistent over the last several months. We do continue to field multiple calls on lots of different properties. But obviously, given where interest rates are, it's not the frothiest real estate environment right now.

[Arthur Arnold, analyst]

And what's sort of dictating your thresholds in terms of long-term value and what's an applicable offer versus not?

[Larry Finger, executive]

Alex, the problem is that if we share that with you, we're also sharing that with our buyers. So...

[Arthur Arnold, analyst]

Understood. Maybe we can have sort of a candid conversation later. That's fine.

[Operator]

There are no further questions at this time. I'd like to hand the floor back over to management for any closing remarks.

[Neil Aaronson, executive]

Once again, we appreciate everyone on this call's continued interest in Copper Properties Trust, and we look forward to updating you all at our next quarterly conference call. Thanks again.

[Operator]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.