FRP Holdings, Inc.

Good day, everyone, and welcome to the FRP Holdings Third Quarter Earnings Conference 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 the star and 1 on your touchstone phone. You may withdraw yourself from the queue by pressing star 2. Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to John Baker II, CEO and Chairman of FRP Holdings. Please go ahead.

Good afternoon, and thanks for joining us today. I'm John Baker, Chairman and CEO of FRP, and with me today are David DeVilliers, Jr., our President, John Baker III, our CFO, John Milton, our General Counsel, David DeVilliers III, our Executive Vice President, and John Klopfenstein, our Chief Accounting Officer. Before I begin, let me remind you that investors are cautioned that any statements made on this call which relate to the future are, by their nature, subject to risk and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These include risk, listed from time to time in our SEC filings, included but not limited to our annual and quarterly reports. We have no obligation to revise or update any forward-looking statements other than as imposed by law as a result of future events or new information. Listeners are cautioned not to place undue reliance on such forward-looking statements. This week, we issued two press releases. One, our quarterly results for the period ending September 30, 2022, and another announcing an agreement with Stewart Investment Company and MRP Realty. The first press release contained our quarterly results and outlook, which were very encouraging. Revenues for the quarter were $9,294,000. up 9.7% from the same period last year. Net income was $480,000, up 36% from a year ago, with increased rents and lower amortization charges moving the needle. Net operating income, which is our main internal barometer of success, was $17,970,000 in the nine months ended in September, up 32% year over year. David DeVilliers will walk you through our operations in more detail in a moment. The second press release announced an agreement with Stewart Investment Company, our longtime partner MRP, and ourselves to combine our various properties in the Capitol Riverfront, Buzzard Point, section of southeastern Washington into a joint venture. These ten properties, three of which include Dock 79, DeMarin, and our newly completed project, Verge, which just began leasing. These projects are owned by MRP and ourselves. There are three undeveloped properties owned entirely by FRP and Phases 3 and 4 of Riverfront and the Vulcan Ready Mix Plant in Buzzard Point. The final four are Stewart-owned parcels in Buzzard Point. As we develop new projects, FRP and MRP will control the design, development, and financing of the projects, with FRP owning at least 40% of each and MRP 20%. Stewart will have the right to retain 10% to 35% of the ownership on their properties and the right to buy 10% to 20% of FRP and MRP's properties. The Stewart properties are scheduled to be developed one every four years through 2035. The MRP, FRP properties can be developed whenever we so choose. The first deal will include our purchase of Stewart Phase 1 and Stewart's purchase of 35% of our Marin and Dock 79 projects. Excuse me, 20%. The bottom line is that these 10 properties will have 3,000 apartments in 3 million square feet of mixed-use developments. all of which are contingent except for some right-of-ways, and which comprise the entire southern entrance to the nation's capital. FRP, in conjunction with MRP, will have control of when and if these are developed, how they are developed, and how they are operated. This is one of the hottest apartment markets in the U.S., and by having control, we can make sure they are timed so as to maximize rents and absorption. We can control the design and quality of the projects, which will give this neighborhood a uniformly high level of beauty and quality that will ensure its reputation. By having MRP and Stewart co-invest in these projects, we retain the predominance of control And to the extent they invest, we reduce the capital required by FRP. Our people, especially David DeVilliers III, working with Arnold and Porter, our attorneys, have crafted a deal that is fair to all and which carefully outlines the rights of the parties. In short, we all know where we stand, and we all are excited about it. This will transform FRP in a carefully controlled process over two to three decades. We believe it's truly a deal made in heaven. Now, if I could, let me ask our President David DeVilliers to walk you through our ongoing projects.

Thank you, John, and good day to those on the call this afternoon. Relative to our in-house industrial platform for asset management, Net operating income for our in-house operations was $693,000 for Q3 of 22 versus $486,000 the same period last year, an increase of 48.1%. The second of our two spec buildings at Hollander Business Park, completed at the end of 2021 and collectively totaling 145,500 square feet, became fully leased in the third quarter. We expect full occupancy in the first quarter of 2023. Supply chain issues notwithstanding, the 101,750 square foot build-to-suit warehouse building that will cap off the final building at Hollander Business Park should also be ready for its tenant to occupy in the first quarter of 2023. Cranberry Run Business Park, our renovated 283 excuse me, 268,000 square foot multi-building warehouse park in Aberdeen, Maryland, became fully occupied in the first quarter of 2022. This park remains 100% occupied and is performing ahead of original projections. On the pre-development front, we have three projects in the queue. This past quarter, we completed the annexation process of the 55-acre tract in Harford County, Maryland, purchased in 2020. Building designed to create up to 675,000 square feet of warehouse product will follow in 2023. Existing land leases for the storage of trailers on site help to offset our carrying and entitlement costs. We are hopeful we can begin construction here in 2024. We are also knee deep into the permitting process to support an approximate 250,000 square foot warehouse building on our 17 acre parcel and the Perryman industrial section of Harford County, Maryland. Not too distant from our other assets in Aberdeen. Dependent on market dynamics, construction on this project could begin as early as Q2, 2023. Finally, during this quarter, we completed the purchase of 170 acres of industrial land in Northeast Cecil County, Maryland. This plot of ground will hold a 900,000 square foot distribution warehouse. Initial pre-development entitlements have begun, and assuming favorable market conditions, we expect to construct this building in 24 or 25. Completion of these three aforementioned land development projects, plus the build-to-suit warehouse due to deliver shortly at Hollander, will add 1.8 million square feet of additional warehouse projects product to our industrial platform that, when added to the assets in operation at Hollander Business Park in Cranberry, will total over 2.2 million square feet. As we look toward 2023, increased occupancy at the new buildings at Hollander and the fully occupied Cranberry-run business park should provide a healthy lift to our NOI. In our mining and royalty business segment. As John mentioned in his open remarks, our mining and royalty division saw revenues for the quarter of $2,471,000 versus $2,250,000 in the same period last year. Net operating income was $2,336,000, an increase of 10.34% over the same period last year, primarily due to the April purchase of the Blantford Quarry property in Lake County, Florida. Moving on to our third-party joint ventures. Currently, we maintain both stabilized and projects under development with three distinct development partners, MRP Realty, Woodfield Development, and St. John's Properties. As of 9-30-22, our joint venture platform includes seven mixed-use and one office retail project in various stages of development and operations. Four projects are located in D.C., where MRP is our joint venture partner. These projects are Dock 79, Marin, Bryant, Street Phase 1, and Verge. Leasing is underway at Verge, and we welcomed its first tenant this month. Verge was 97% complete at quarter's end. Dock 79 and Marin maintained better than 95% occupancies for the quarter. And the last retail suite at Dock 79 and 45% of the 8,500 square feet at Verge became leased during the quarter. Our transit-oriented mixed-use project just north of Union Station in D.C., Bryan Street Phase 1, saw its residential occupancy increase to 86.7% and retail occupancy was 71.4% as of September 30th. Our two mixed-use projects in Greenville, South Carolina, with Woodfield as our development partner, saw excellent progress. Riverside's 200 apartments were one year old in August, and the project was 92% occupied as of the end of the third quarter. Riverside also became a stabilized asset in the third quarter, defined as more than 90% occupied for more than 90 days. 408 Jackson's 227 apartments will be placed in service before the end of the year, and we're 98.6% complete at quarter's end. It's 4,539 square feet of retail is 100% pre-leased. Two additional projects that make up the balance of our current third-party JV platform are Hickory Creek, our DST, or Delaware Statutory Trust, in Richmond, Virginia, and an office retail project in Baltimore, Maryland with St. John's Properties. Hickory Creek's 294 apartment units remained above 95% occupancy for the third quarter, while our JV with St. John, that includes 72,080 square feet of single-story office and 27,950 square feet of retail, remained 48% leased and occupied at quarter's end. As of September 30, five projects, including Dock 79, Marin, Burge, Riverside, and Bryant Street, totaled 1,600 apartments in operation, which represents a 47% increase over the third quarter last year when we had 1,085 apartments in operation. The remaining 227 apartments and retail spaces currently under construction will be completed and ready for occupancy by the end of this year. FRP's share of the net operating income for these five projects was $3,315,000 for the third quarter of 2022 versus $1,931,000 in the third quarter of 2021, a 72% increase. So to summarize, relative to our current third-party joint ventures and mixed-use developments, Hickory Creek and Windlass notwithstanding, We are currently invested in six mixed-use multifamily retail projects, totaling 1,827 apartments and 126,000 square feet of retail. Finally, as a postscript to our third-party joint venture program and as some additional commentary on John's opening remarks, with our newly penned agreement with the Stewart Investment Company and our existing partners of 10-plus years, MRP Realty, we have a generational opportunity to create a unique waterfront destination among multiple projects, all controlled by a single ownership group with the freedom to pursue alternate development plans that individual developments cannot consider. The new partnership will add some 2,000 apartments and approximately 2 million square feet of mixed-use development to the existing 913 apartments and 900,000 square feet we already have in Southeast Washington. Together, the parcels represent over a quarter mile of uninterrupted waterfront along the Anacostia River at the southern entrance to our nation's capital. Pre-development activities on phase one, inceptionally planned for 400 plus apartments and 10,000 square feet of retail, located on one of the four parcels that Stuart brings to the venture, has commenced and we anticipate a shovel-ready project sometime in 2023. In our lending ventures, our current lending venture project, Amber Ridge in PG County, Maryland, is winding down. The total commitment to this project is $18.5 million. The 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. As of September 30, the horizontal development was complete. 124 of the total 187 lots, all of which are under contract to sale to national home builders, have been taken down, with $15.5 million inclusive interest have been returned to FRP as of 9-30-22. In March of 2020, When the world shut down, FRP maintained a portfolio of 500,000 square feet of operating industrial office and retail space and 599 apartments. As of September of 2022, FRP had 660,000 square feet of operating industrial office and retail space and 1,894 operating apartment units. with an additional 227 apartments and 101,000 square feet of industrial due to deliver in the next 90 days. This does not speak to our additional development pipeline which is formidable in the industrial and mixed use residential categories. This is a period of tremendous growth for FRP and it is a story we are eager and proud to share. None of this growth or breadth of opportunity would be possible without the solid financial foundation that separates us from much of the competition, enables us to both capitalize on great projects and sometimes make hard decisions not to. Thank you, and I'll now turn it back to John.