FRP Holdings, Inc.

Good day, everyone, and welcome to today's FRP Holdings Incorporated earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star and one, that's star one, on your touchtone phone. You may withdraw yourself from the queue by pressing star two. Please note this call may be recorded. It is now my pleasure to turn the conference over to Chairman and CEO John D. Baker II.

Welcome to FRP Holdings Conference Call to review the fourth quarter and year-end results for 2021. I'm John Baker, Chairman and CEO of FRP, and on the line with me today are David DeVille Jr., our President, John Baker III, our CFO, David DeVilliers III, Executive Vice President, John Klopfenstein, our Chief Accounting Officer, and John Milton. Before we begin, let me caution you that any statements made on this call which relate to the future are by their nature subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These include but are not limited to the risk listed from time to time in our SEC filings, including our annual and quarterly reports. We have no obligation to revise or update any forward-looking statements other than imposed by law as a result of future events or new information. Revenues for the three months ended December 31, 2021, were $8,399,000, up from $5 million $833,000 in 2020. Operating profit was $259,000 versus $1,555,000 a year ago, and net income was a loss of $592,000 or six cents versus a profit of $1,493,000 or 16 cents a year ago. Driving these results were First, the inclusion of our second mixed-use project in Washington, D.C., the Marin, which was completed and reached stabilization early in the year. This accounts for the increase in revenues. Also attributed to the Marin was $659,000 in expense as the quarterly amortization of the fair value of the leases in place established when we booked this asset as part of the gain on re-measurement upon consolidation of this joint venture early in the year. Also contributing to the higher expense was a charge of $807,000 for a non-refundable deposit of a half a million dollars and due diligence costs on a potential warehouse property where the acquisition has recently been determined to be considered less than probable. The same quarter last year included a credit of $250,000 for settlement of an environmental claim on our Anacostia property. Also affecting the quarter was a decrease in interest income of $651,000 due to bond maturities and the repayment of the preferred loan on the Marin JV upon the building's refinancing. For the full year, net income was $28,215,000, or $3 a share. The key items were $26 million in gain from the re-measurement of the value of the marine upon reaching stabilization, and the $8,240,000 of operating profit from our mining royalties. This was offset by the $807,000 in due diligence and deposit costs mentioned earlier, also by $3,899,000 in amortization expense of the value placed on the Marion's leases in place as part of the write-up of that asset upon stabilization. Now, if I may, I will turn it over to David DeVilliers, Jr. to walk you through our segment's performance. David?

Thank you, John, and good day to those on the call this afternoon. I'd like to offer a window on our operations today and give some detail to John's opening remarks. Through our business segments, though our business segments are important silos in which to report and analyze the company, Operationally, we have some overlap and synergies that can be difficult to follow using our reportable business segments. So allow me to shine a light on the day-to-day at FRP. Basically, we employ a four-pronged approach to our business since 2018 when we liquidated our legacy warehouse portfolio. They would include our in-house, which includes our industrial, commercial, and land development platform. These properties are developed, managed, and owned 100% by FRP. The second leg of our stool is third-party joint ventures, which is the name states of projects done in conjunction with third parties, where FRP is the major owner but rely on third-party platforms to perform much of the day-to-day operations. Of course, we have mining and royalties, which has not changed. And the fourth leg of our stool is the lending ventures, where we are the principal capital source for residential land development activities. So relative to our in-house platform, in the third quarter of 2020, we sold a newly constructed and leased 94,000 square foot building in our Hollander Business Park, realizing a gain of $3.8 million or $40 per square foot. Adjacent to that site, in the fourth quarter of 2021, we delivered two speculative warehouses for a total of 145,540 square feet. One of these buildings, totaling 66,000 square feet, is now fully leased with occupancy scheduled for the second quarter of this year. Also, in Q3 of 2021, we broke ground on a 101,750 square foot build-to-suit warehouse building that will cap off the final building at Hollander Business Park. We expect to complete and provide occupancy to the tenant by year end. At the close of the year, Cranberry Business Park, a renovated 268,000 square foot multi-building warehouse park, was 100% leased and on schedule to be fully operated in this quarter, the first quarter of 2022, up from 87.6% occupied over the same period last year. To continue our pipeline of industrial building pads, we have begun seeking entitlements for the 55-acre track we purchased in late 2020. We expect this process to be complete later this year and have begun the building design process in the interim to create 675,000 square feet of warehouse product. Existing land leases for the storage of trailers onsite will help to offsite our carrying and entitlement costs on this tract of land. We were hopeful we can begin construction here in 2023. Finally, in September of 2021, we purchased another 17-acre parcel in Perryman Industrial Section of Harford County, Maryland, not too distant from the Cranberry Business Park. We've begun both building design and initial entitlement work on this site, which could support up to 250,000 square feet of warehouse buildings. Depending on market dynamics, construction on this project could begin as early as Q3 2022. Completion of these two new projects, plus the build-to-suit warehouse currently under construction at Hollander, will add another 1 million square feet of warehouse product to our industrial in-house platform that, when added to the assets in operation at Hollander Business Park and Cranberry Run, will total over 1.4 million square feet. Although the NOI for our in-house operations was flat, being $453,000 for Q4 2021 versus $466,000 in Q4 2020, all of the new buildings opened at the end of this past year and what will be coming online in this year should provide a substantial lift for our NOI in 2022. Relative to our mining and royalty, FRP maintains ownership of over 15,000 acres of mining lands under lease to major aggregate companies who pay rent and royalties. When possible, we then convert the mining land to a higher and better use upon having reached the end of its useful life as an aggregate facility. Our mining and royalty division saw total revenues for the quarter of $2,267,000 versus $2,383,000 in the same period last year. NOI was $2,137,000, a decrease of 3.7% or $83,000 over the same period last year. This decrease reflects a tenant temporarily shifting operations off our site in Manassas, Virginia for part of the year. Moving on to our third-party joint ventures, currently we maintain relationships and operate both stabilized and development projects with three distinct partners. MRP, Woodfield, and St. John Properties, as well as an investment in a Delaware statutory trust with a group called Capital Square. As of 12-31, our joint venture platform includes eight mixed-use projects in various stages of development and operation. Four are located in Washington, D.C., with MRP as our joint venture partner. These projects are Dock 79, Marin, Ryan Street Phase 1, and Verge. Verge will not be ready until third quarter of this year for any tenants. As of 12-31-21, 786 of the 1,026 apartments in operation were leased. This is up significantly from 2021 at the beginning of the year, because we were at 569 units. We also have two mixed unit projects in Greenville, South Carolina. This is where Woodfield is our development partner. Riverside opened its 200 apartments for lease in August and was 49% occupied at year's end. 408 Jackson will be placed in service in the third quarter of this year. Two additional projects that make up the balance of our third-party joint venture platform are Hickory Creek with Capitol Square and an office retail project with St. John's Box. Hickory Creek's 294 units remained above 95% occupancy for the year, while our joint venture with St. John, that includes 72,000 square feet of single-story office and 27,150 square feet of retail, remained at 46% occupied. So to summarize, relative to our third-party joint ventures in mixed-use developments, not counting Capitol Square at Hickory Creek and St. John, we are currently invested in six projects totaling 1,827 apartment units and 127,000 square feet of retail. At quarter end, only Dock 79, Marin, Riverside, and Bryan Street, totaling 1,256 apartments, were operating, and 62,000 square feet of retail tenants were occupying their respective spaces. The remaining apartments and retail spaces will be completed and ready for occupancy over the next 12 months. Net operating income for these assets was $2.1 million, for FRP for the fourth quarter of 2021 versus $1.4 billion in the fourth quarter of 2020. So 2022 should be a very telling story about the growth of our third-party joint ventures program. The last leg of our operating stool is lending ventures. This is a program where we provide working capital toward the entitlement and horizontal development of single-family residential products and ultimately a sale to national home builders. Our current project under development this year is Amber Ridge. Our total commitment for this project is $18.5 million. As with our Hyde Park venture that was concluded and we sold in 2020, this investment includes a charged interest rate and a minimum preferred return of 20%. above which a profit-induced waterfall determines the final split of proceeds. Entitlements at Amber Ridge are complete, land development is underway, and two national homebuilders are under contract to purchase all 187 lots. As of the year end, 34 lots had been taken down, with $6.3 million returned as of 12-31. of which $1,300,000 of that was interest income. As of the end of February, over 51 lots had been taken down. Our current lending structure is also called Presbyterian Homes, which is a new project, a 344-lot, 110-acre development in Aberdeen, Maryland. We plan to provide up to $31.1 million in funding under similar terms previous projects. Entitlements are underway and are the conditions precedent to settling on the land. No discussion today is complete without a nod to COVID-19. We have touched a few times on the impact COVID has had on FRP and our customers. We have been very fortunate as a company, both in life and business, throughout this global pandemic. FRP has remained a healthy concern that has been able to continue to grow and prosper despite the significant challenges we've all faced. We know we are not immune to the effects of this terrible global disease, but we are getting very close to normal at FRP with our team back in the office and warm weather on the way. We remain at the ready to assist our tenants, navigate these ever-changing waters, and continue to grow our portfolio. As a business and a collection of professionals, We stand atop a solid foundation financially that uniquely enables us to both capitalize on opportunities and make hard decisions, sometimes not to perform. It is this mission that has proven to insulate us from much of the troubles others have faced and is rooted and committed and focused on the fundamentals that guide how and where we bake and maintain investments. Thank you, and I'll now turn the call back to John.