Copper Property CTL Pass Through Trust

OTC:CPPTL

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen. Welcome to the Copper Property CTL Pass Through Trust conference call. 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 the trust's investor relations representative, Mary Jensen.

[Mary Jensen]

Thank you. Good morning, everyone, and welcome. Earlier this week, the trust filed with the SEC an 8-K containing its February 2023 monthly reporting package and its annual report on Form 10-K for the year ended December 31, 2022, 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 the statements are -- of historical facts 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 terminologies 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 on the trust registration statement on Form 10 filed with the Securities and Exchange Commission, or the SEC, 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 sec.gov. 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, Wednesday, March 8, 2023. [Operator Instructions]

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

[Neil Aaronson, executive]

Thank you, Mary, and welcome, everybody, to the Copper Property Trust's investor call, and thank you again for your continued interest in the company. While the market has softened over the last 2 quarters, we were nonetheless very productive during 2022 and continued to be productive even in the last quarter. During the year, we sold 14 retail properties for a total of $161 million and recognized a gain on sale of $22 million on these properties. Since the trust's formation, we have sold the 6 distribution centers and 27 retail properties for a total of $973 million and a gain on sale of $131 million. The distribution centers were sold at a cap rate of 6.3%, and the retail properties were sold at an average cap rate of 4.5% or 5% -- excuse me, 5.8%, excluding the San Bruno sale. We've now sold 21 of the original 29 option properties and 6 CTL properties. That being said, we have seen a definite softening in the market, and therefore, we expect our sales pace to slow over the near term.

With that, I'm going to turn the call over to Larry, who will discuss more specifics on our numbers with you.

[Larry Finger, executive]

Thanks, Neil, and welcome, everyone. As a reminder, further details regarding all of our sales are available in the sales tab on the property data spreadsheet, which is downloadable on our website, ctltrust.net. To date, we've distributed just over $1.1 billion. Rental income distributions were $174 million, and sales distributions were $949 million. Subject to the impact of sales, monthly distribution from operations are expected to be between $7.5 million and $8.5 million per month or between $0.10 and $0.11 per certificate. That, of course, will be supplemented by sales proceeds as sales occur. We've now satisfied all NASDAQ listing requirements, but given the volatility in the markets, we feel that it would not be advantageous to list at this time. As market conditions evolve, we'll continue to reevaluate this decision.

And with that, we'll open the call to questions.

[Operator]

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

[Arthur Arnold, analyst]

I was wondering if we could just drill in a little more to the current market conditions and maybe if you could quantify it in terms of size of pipeline, deals in play, cap rate shifts, what you're seeing out there to sort of understand how much things have softened. And then also as a follow-up, just what's the strategy to proactively market relative to what it was 6 to 12 months ago?

[Neil Aaronson, executive]

Yes. No, it's a great question. I think there is no -- there are not any, what I would call, definitive, oh, we've seen an exact shift of 100 basis points or 150 basis points. The market is shifting a little bit all over the place. I think there are -- we continue to receive, on a daily and weekly basis, inbound opportunities and inbound inquiries into our assets, some of which are bargain hunters, looking to take advantage of the fact that cap rates have shifted. So they're coming in with what we would consider lower-ball offers and not offers that we're willing to entertain.

And I think right as we sit here today, we are very confident for a number of reasons in the quality of assets we have in the -- and in the protection we have in the master lease and the value of that master lease. We sit here steadfastly confident in that. And so from our perspective, we are not looking to entertain those types of offers in a softening market and are taking a strategy of continuing to believe in the values of our assets in the long term and looking to only sell assets into the market and values that we believe over the long term we'll realize.

So I can't -- as I said, I can't specifically say, "Oh, the offers are coming in, and they're all 150 basis points wider or 100 basis points wider or 200 basis points wider." It's just we continue to receive interest but just don't want to sell into a softening market unless we get really appropriate values.

[Larry Finger, executive]

Yes. Alex, by the way, good to talk to you. I might add that, basically, the perspective broadly is we have a sense of what we believe the assets are worth long term. And when we -- if we can sell them at that pricing, we will. If not, we will wait until we believe that the market turns back to be able to meet those numbers.

[Operator]

And our next question is from the line of Oren Shaked with BTIG.

[Oren Shaked, analyst]

Neil and Larry, I just wanted to maybe follow up on Alex's train of thought and I appreciate the commentary. Any way you could maybe frame for us relative to 2022, relative to your internal expectations, just any way you could maybe provide some context on as you look forward to 2023, we're already almost a quarter of the way in. How should we think about the number of sales that you might be able to pursue now that you have had some experience with this environment for, as you guys mentioned, a quarter or 2? Can you be maybe -- can you maybe provide us with a little bit more of a framework for the number of sales, size of sales that you think you might be able to pursue over the next 12 months?

[Larry Finger, executive]

I hate to give you a nonanswer. But if you can tell me where you believe interest rates will be 6 months from now, then I can give you an answer. It's -- I mean interest rates are -- that is a huge portion of the capital that is used to buy real estate assets and our assets, in particular. And with debt costing significantly more and loan-to-value ratio is going down, either buyers are not willing to buy at all or they're not willing to buy at a price that makes any sense. And until the interest rates change materially, I don't think we're going to be making many sales.

[Oren Shaked, analyst]

Okay. And so is that a way of saying, Larry, that we should assume that the vast majority of the offers that you either have in hand or that have been indicated to you are what you would characterize to be, as Neil said, low-ball offers?

[Larry Finger, executive]

Yes. Not 100%, but yes.

[Neil Aaronson, executive]

Yes. And again, I just -- maybe I used that term as just sort of a figure of speech. We're in constant conversations with some attractive offers in that, but there are definitely -- there's a world out there of folks that think, "Oh, the market softened. Let me just -- let me see if I can pick off some bargains." And we feel steadfastly for a number of reasons that we've discussed on either prior calls or on individual investor meetings over the course of time, we believe steadfastly in the value of our real estate and the value of our master lease, and we have no interest in selling into that market or those types of -- that type of mentality.

[Operator]

At this time, I will turn the call back to Neil Aaronson for closing remarks.

[Neil Aaronson, executive]

Once again, guys, we -- just to reiterate and now some of my closing remarks are similar -- are sort of related to the questions that were asked. So it will be a little bit redundant. But as an overall viewpoint on the progress we've made, we are very proud of the accomplishments we had in 2022 and prior and have returned close to $1 billion back to the shareholders and feel we have a portfolio that is still very valuable and will return north of that on the balance of the portfolio. And so we're very proud of the accomplishments we've had. We look forward to what 2023 brings as the market hopefully normalizes and are very patient because of our belief in the value of our portfolio and our lease and look forward to continuing to return capital to you guys while we hold assets and then as we sell them in the future. And we thank you for your continued interest in the company.

[Operator]

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