FRP Holdings, Inc.

Good day, everyone, and welcome to today's 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 touch-down phone. Please note this call may be recorded, and it is now my pleasure to turn the call over to John Baker. Please go ahead.

Good morning. I'm John Baker III, the Chief Financial Officer and Treasurer of FRP Holdings. And with me today are David DeVilliers, Jr., our President, John Milton, our Executive Vice President and General Counsel, John Klopfenstein, our Chief Accounting Officer, and David DeVilliers III, our Executive Vice President. As a reminder, any statements on this call which relate to the future are by their nature subject to risks and uncertainties that could cause actual results and events that differ materially from those indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings. We have no obligation to revise or update any forward-looking statements except as imposed by law as a result of future events or new information. To supplement the financial results presented in accordance with the generally accepted accounting principles, FRP presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The non-GAAP financial measures referenced in this call is net operating income, or NOI. FRP uses this non-GAAP financial measure to analyze its operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. This measure is not and should not be viewed as a substitute for GAAP financial measures. To reconcile GAAP to net income, please refer to the segment titled Non-GAAP Financial Measures on page 13 of our most recent earnings release. Now for financial highlights from the fourth quarter. Net income for the fourth quarter of 2022 was $2,756,000. or 29 cents per share versus a net loss of $592,000 or six cents per share in the same period last year. Net income for the fourth quarter compared to the previous year was impacted by a $653,000 decrease in amortization expense, a $678,000 decrease in operation expense, $1.4 million increase in net investment income, offset by a $311,000 increase in interest expense. Fourth quarter pro rata NOI for all segments was $6,260,000 versus $3,690,000 in the same period last year for an increase of 58.2%. Highlights for calendar year 2022 include net income of $4,565,000 or $0.48 per share versus $28,215,000 or $3 per share in 2021. The primary reason for the decrease in net income compared to 2021 was because 2021 included a gain of $51.1 million on the remeasurement of investment in the Mayor and Real Estate Partnership, which is included in income before income taxes. This gain on remeasurement was mitigated by a $10.1 million provision for taxes and a $14 million attributable to non-controlling interest. Net operating income for 2022 was $24.23 million versus $17.56 million in 2021 for an increase of 43%. David will touch on operations with greater depth and detail in his remarks, but I will briefly mention a few operational highlights. as soon as the siren passes, in case y'all can hear that. This year saw major increases in revenue and NOI across all three of our operating segments. Asset management had a 43% increase in revenue and a 39.2% increase in NOI for the year. Mining royalties revenue this year in 2022 increased 12.9%. over 2021 to 10.69 million, passing the $10 million mark for the first time in a calendar year. And NOI increased 13.6% over 2021 to 10.15 million. In 2022, Stabilized Joint Ventures saw a 21.7% increase in revenue to 21.44 million. and a 17% increase in pro-rata NOI to $9.47 million. Now, if I could turn things over to David Duvalier, Jr. to walk you through our segments in more detail. David?

Thank you, John, and good day to those on the call this morning. Today, I'd like to offer a bit of a slant on our financial results for this past quarter. Though our business segments are important silos in which to report and analyze company, Operationally, we have some overlap and synergies that can be difficult to follow using the reportable business segments that John referenced in his open remarks. So allow me to shine a light on the day-to-day at FRP using a more operational perspective versus GAAP. So basically, we employ a four-pronged approach to our business since 2018 when we liquidated our legacy warehouse portfolio. In-house, which includes our industrial, commercial, and land development platform. These properties are developed, managed, and owned 100% by FRP. Then we have the mining and royalties. We have third-party joint ventures, which, as the name implies, are projects developed in conjunction with third parties, where FRP is the major owner but relies on third-party platforms to perform the lion's share of the entitlements, construction, and the day-to-day operations. And fourth, lending ventures, where we are the principal capital source for residential land development activities and sales. Relative to our in-house industrial platform or asset management, increased occupancies and rental rates combine to produce a substantial increase in net operating income for these operations from a negative $268,000 in Q4 of 2021 to a positive of $902,000 for Q4 2022. Cranberry Run Business Park in Aberdeen, Maryland became fully occupied in the first quarter of 22 and remains 100% occupied. The two spec buildings at Hollander Business Park, totaling some 145,000 square feet, Completed in late December of 2021, along with our final warehouse at Hollander Business Park, totaling 101,750 square feet, should all become fully occupied in the second quarter. On the pre-development front, we have three projects in the queue. The permitting process is currently underway for an approximate 259,000 square foot warehouse building on our 17-acre parcel in the Perryman industrial section of Farford County, Maryland, not too distant from our other assets in Aberdeen. Depending on market conditions and local government posture, construction on this project could begin as early as Q2 of 23. In the fall of 22, we purchased 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 activities have commenced and assuming favorable market conditions, we expect to construct this warehouse in 24 or 25. Finally, in Q3 of 22, we completed the annexation process of the 55 acres we own in Harford County, Maryland that was purchased in 2020. Entitlements and buildings designed to create up to 675,000 square feet of warehouse product will follow in 2024, with construction to follow in 2025 or 2026. Existing land leases for the storage of trailers onsite, up to offsite, are carrying entitlement costs on this process. Finally, completion of these three aforementioned land development projects, plus the final warehouse at Hollander, will add just shy of 2 million square feet of additional warehouse product to our industrial platform that, when added to the other assets in operation at Hollander Business Park in Cranberry, will total nearly 2.4 million square feet. With the increased occupancy at the new buildings at Hollander and the fully occupied Cranberry-run business park, NOI in this segment should trend positively throughout the remainder of the year. Mining and royalty. As John mentioned in his open remarks, our mining and royalty division saw total revenues for the quarter of $2.9 million versus $2,267,000 in the same period last year. This is the most revenue in any quarter ever for this segment. Operating profit was $2,452,000 an increase of $485,000 over the same period last year. NOI in this segment was $2,779,000, up 30% over Q4 2021. Moving on to our third-party joint ventures, currently we maintain both stabilized and projects under development with three distinct partners, MRP Realty, Woodfield Development, and St. John's Properties. Projects that reach 90% occupancy for a period of 90 days are considered stabilized. Otherwise, they remain in development. As of the end of the year 2022, our JV program included seven mixed-use projects, six apartment retail, and one office retail project in various stages of development and operation. Concentrating on the apartment retail projects, I offer the following highlights. Four apartment retail projects are located in Washington, D.C., where MRP is our joint venture partner. These projects are Dock 79, Marin, Bryant Street Phase 1, and Burge. Dock 79 and Marin remain better than 93% occupied on average for the quarter, and with the last retail suite at Dock 79 being lease prior to the end of the year, the retail component of both buildings is now fully leased. Bryan Street Phase 1, our transit-oriented mixed-use project just north of Union Station in D.C., saw its total residential occupancy increase to 89.5%, and retail occupancy remained at 71.4% as of year end. Several small retail tenants that will make up our food hall concepts are due to open for business at Bryan Street over the next several weeks, helping to bolster the retail component, which has been severely curtailed by an elongated permitting timeframe and supply chain issues. Our newest project in D.C., Verge, welcomed its first tenant just before Thanksgiving, and at quarters in was 13.7%. Leased and 9.6% occupied. Nearly half of the 8,400 square feet of retail space at Burge is leased with design underway. Our two apartment retail projects in Greenville, South Carolina, with Woodfield as our development partner, are faring quite well. Riverside's 200 apartments were 18 months old in February. Joining Doc and Marin is our third stabilized asset in Q3 of 22. Riverside was 92.5% occupied and 98% leased as of the end of the fourth quarter. 408 Jackson's 227 apartments were placed in service just before the end of the year, and its 100th apartment went under lease on March 1. 408's 4,500 square feet of retail is 100% pre-leased, with interior construction now underway. Greenville is an exciting secondary market in the Southern Sun Belt. The city is seeing accelerating growth, and we continue to look out for additional opportunities in this part of the country. So to summarize, at year's end, the six apartment retail projects, including Dock, 79, Marin, Bryan Street, Burge, Riverside, and 408 Jackson total 1,827 apartments in operation, which represents a 67% increase over the fourth quarter last year. Strong renewals and rental rate increases, along with lease-up of the place-in-service projects, helped to increase FRP's share of the NOI for these six projects to $2.6 million in the fourth quarter of 22, a 29% increase over the same period last year. Finally, as a postscript to our third-party joint venture program, I have two items to mention. Our Hickory Creek project, a 294 DST investment in Richmond, Virginia, was sold in the fourth quarter of 22. with sale proceeds to the company amounting to $8.83 billion on an initial investment of $6 million. Total distributions for the year prior to the sale total an additional $332,000. Also in November, we entered into a new partnership with Stewart Investment Company and our existing partners of over a decade, MRP Realty, for the development of up to 10 mixed-use projects in the Anacostia and Buzzard Point submarkets of southeast Washington, D.C. These projects will come from four parcels owned by Stewart, phases three and four of our riverfront development, our site currently leased to Vulcan Materials, and the existing mixed-use department retail properties, Doc, Marin, and Verge, owned by MRP and FRP. Upon completion, these 10 projects will comprise over 3 million square feet of mixed-use development, including approximately 3,000 residential units and 150,000 square feet of retail. This partnership will solidify a generational opportunity to create and exclusively control a unique waterfront destination among multiple projects with the freedom to pursue development opportunities that are unavailable to individual partners. Together, these parcels represent over a quarter mile of uninterrupted waterfront along the Anacostia River at the southern entrance to our nation's capital. As part of the newly formed partnership, we, along with our partner MRP, sold a 20% tenant and common interest in both Dock 79 and Marin to Stewart Investment Company. The gross sale amounted to $65.3 million, with the equivalent of over $570,000 per apartment unit, 44.5 million of which represented FRP's share of the sale. Redevelopment activities on phase one, concessionally planned for 500-plus apartments and 10,000 square feet 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 late 23 for early 24. Looking on to our last operational enterprise, Lending Ventures. The first of our two current Lending Venture projects, Amber Ridge in PG County, Maryland, is coming to a close. The total commitment to this project was $18.5 million. The investment includes a charged 10% interest rate and a minimum preferred return of 20%. above which a profit-induced waterfall determines the final split of proceeds. As of year end, the horizontal development was complete at 135 of the total 187 lots, all of which are under contract to sale, have been taken down with $16.6 million inclusive of interest having been returned to FRP as of 12-31-22. Our current lending venture, now known as Aberdeen Overlook, is a 110-acre residential development project in Aberdeen, Maryland, consisting of 344 lots. Subsequent to year end, entitlements were complete, which was a condition precedent to the purchase of the land, which occurred in January. We've committed $31.1 million in funding under similar terms to Amber Ridge to this program. We have a contract of sale for all 344 lots from a national home builder, inclusive of 222 townhouse and 122 single-family lots that included a deposit of $3.3 million. Needless to say, we're watching this project closely as home building throughout the country has slipped dramatically. But we do have certain safeguards in place, and demand in the fourth quarter in this particular sub-market far outweighed the supply. In March of 2020, when the world shut down, FRP maintained a portfolio of 510,000 square feet of operating industrial office and retail space and 599 apartments. Today, FRP has over 760,000 square feet of operating industrial office and retail space and 1,827 operating apartment units. We also have over 435 acres of land in our development pipeline to support over 3 million square feet of additional development. FRP is at the dawn of an era of growth, all made possible by the breadth of opportunity we have been able to cultivate through the leveraging of our financial foundation, which uniquely enables us to capitalize on great projects and sometimes make hard decisions not to. Thank you, and I'll now turn the call back to John.