Mobile Infrastructure Corporation

Good afternoon and welcome to the Mobile Infrastructure Corporation fourth quarter and full year 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Casey Coterie, Investor Relations Representative. Please go ahead, ma'am.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us to review Mobile's fourth quarter and full year 2024 performance. With us today from Mobile are Manuel Chavez, CEO, and Stephanie Hogue, President. In a moment, we will hear management statements about the company's results of operations as of the fourth quarter and full year 2024. Before we begin, we would like to remind everyone that today's discussion includes forward-looking statements, including projections and estimates of future events, business or industry trends, or business or financial results. Actual results may vary significantly from those statements and may be affected by the risks Mobile has identified in today's press release and those identified in its filings with the SEC, including Mobile's most recent annual report on Form 10-K, and its most recent quarterly report on Form 10-Q. Mobile assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Today's discussion also contains references to non-GAAP financial measures that Mobile believes provide useful information to its investors. These non-GAAP measures should not be considered in isolation from or as a substitute for GAAP results. Mobile's earnings release and the most recent quarterly report on Form 10-Q provide a reconciliation of those measures to the most directly comparable gap measures and a list of the reasons why Mobile uses these measures. I will now turn the call over to Mobile CEO, Manuel Chavez, to discuss fourth quarter and full year 2024 performance. Manuel?

Thank you, Casey, and thank you all for participating in today's call to review our fourth quarter and full 2024 results. and discuss our business outlook for 2025. I would like to begin by thanking our team for delivering on key strategic priorities in 2024. This was our first full year as a publicly traded company, and the combined efforts of our team made it a year of substantial accomplishments. Highlights of the year included, first, our successful conversion of 29 of our 40 parking assets in our portfolio to management contracts from leases, which benefits us from both revenue generating and expense reduction perspectives. Second, we built out our sales and leasing team, which delivered higher new contract parking volumes in 2024, despite significant headwinds from the high attrition rates that have plagued the industry since the pandemic. Third, we strengthened our financial position. Fourth, we completed three asset sales at significant multiples of their net operating income as part of our ongoing asset rotation strategy. And lastly, beyond driving improved operating and financial performance, we took actions to build shareholder value. Taking a closer look at 2024, the conversion to managed contracts is meaningful in that it provides us as owners with important consumer analytics, which we utilize to assess parking trends in our markets. This gives us greater flexibility to optimize rates and utilization. At the same time, with managed contracts, we have more control over asset level expenses and can more efficiently deploy incremental resources to assets with the greatest revenue potential. Another 10 of our assets are slated for conversion in 2026 and 2027. By going to the market with a systematic process and data-driven approach, our sales and leasing team was successful in signing new contracts and building a considerable pipeline for opportunities in 2025 and beyond. Their success in bringing in new business has been masked for much of 2024 by post pandemic cancellations of corporate parking contracts, which brought attrition rates to four times higher than they were in 2019. We believe the impact from these cancellations is pretty much behind us as most of the corporates located in our markets have determined their policies with respect to the number of days their employees are required to spend in the office. In both the third and fourth quarters of this year, Revenue per available stall, or RevPass, showed year-on-year growth, which supports our expectation that we have reached an inflection point with return to office trends most prominent in the healthcare, professional services, food and beverage, and government sectors. In the 2024 fourth quarter, we saw the beginning of what will have a very positive impact on revenue growth from the conversion of Class B downtown office space to residential apartment living. which is taking place in several of our markets. In Cincinnati, the Mercantile Building began leasing in the fourth quarter of 2024. We stand to benefit from this new demand for 24-7 parking access versus the 9 to 5 p.m. access associated with commercial parking. In the first two months of 2025, we have experienced a continued pickup and utilization at this location as more tenants move in, and there are at least a half a dozen similar projects underway in our markets. with planned completion dates between now and 2027. In fact, the largest apartment building in Cincinnati, 7 West 7, is scheduled to open in April and is connected to our 1 West 7 asset. Looking at the medium term, we are pleased to report that we see a path forward for one of our largest portfolio assets, the 1,273 space garage that we own in Detroit that is adjacent to the Renaissance Center. which has 5.5 million square feet of office space and a 1,500-room hotel. This asset has been under considerable pressure since the pandemic when General Motors, which was the major tenant, and others permanently moved their employees at this location to other locations or converted them to a remote workforce. This has been a huge headwind for us, but there is a light at the end of the tunnel. a large real estate development firm together with General Motors has formed a joint venture to redevelop the Renaissance Center. They will be converting one of the towers into apartments, renovating another tower into an amenity-rich office space, building luxury condos, redoing the Marriott Hotel, and raising two existing towers and parking to make way for more cohesion to the riverfront with retail, civic, park, and entertainment venues. For context, This redevelopment will have a similar impact that the Hudson Yards development did on the west side of Manhattan. During the construction period, we will continue to be severely limited in our ability to maintain our net operating income at this location. Although we do have a base of business at the location unrelated to the center. However, once completed, which is scheduled for the 2028 to 2030 timeframe, we will have an asset that is worth multiples of today's value. We will have the only garage on the West side of the development that is connected to the center. And we project that this asset alone has the potential to drive as much as a 10 to 15% increase in our consolidated net operating income. This is an excellent segue to discuss our portfolio strategy. In 2024, we sold three of our assets as part of our portfolio asset rotation strategy. We were able to sell them at significant multiples of their parking income. Two of the assets were sold to companies planning real estate developments at those locations. Approximately 50% of our portfolio consists of core assets that currently generate about 80% of our revenue and over 80% of our net operating income. This gives us a strong base from which to closely evaluate our non-core assets. Following a detailed analysis to determine the future demand drivers and the intrinsic underlying land value of these non-core assets, we have decided to accelerate our portfolio optimization program by launching a 36-month asset rotation strategy that really began in 2024. This will involve the divestiture of the group of non-core assets between now through 2027. We plan to use the proceeds to invest in additional parking assets, repopulating our portfolio with fewer but larger assets that have multiple demand drivers, higher net operating income opportunities, and clustered in markets we like. As you know, we have a substantial pipeline of potential acquisitions, and our deep industry experience and relationships gives us access to deal flow that is not widely available. In other words, Recasting our parking asset portfolio is definitely a sweet spot for this management team, and we look forward to keeping analysts and investors apprised of our progress. Of course, right now the most compelling opportunity in parking real estate is mobile infrastructure stock. Our shares are selling at a substantial discount to our net asset value of $7.25 per share, which is based on parking income. and does not include the incremental value of our assets to strategic buyers planning new developments near our locations. In 2024, we repurchased 420,000 shares in mobile infrastructure stock, demonstrating our confidence in the company's long-term outlook. I will now turn the call over to our president, Stephanie Hogue, for a financial review of 2024, a discussion of our recent refinancings, and further insight and to the longer-term opportunities we see on the horizon.