FRP Holdings, Inc.

Good morning, everyone. Welcome to today's FRP Holdings first quarter 2024 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 star 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. Also, today's call is being recorded, and I will be standing by if anyone should need any assistance. And now at this time, I'll turn things over to our host, Mr. John Baker III, Chief Executive Officer. Mr. Baker, please go ahead.

Good morning. I'm John Baker III, Chief Executive Officer of FRP Holdings, Inc. And with me today are David DeVilliers, Jr., our President. John Baker II, our Chairman. David DeVilliers III, our Chief Operating Officer. John Milton, our Executive Vice President and General Counsel, and John Koffenstein, our Chief Accounting Officer. 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 as 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 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 measure 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 net operating income to GAAP net income, please refer to the segment titled Non-GAAP Financial Measures on pages 9 and 10 of our most recent earnings release. Any reference to cap rates, asset values, per share values, or the analysis of the estimated value of our assets, net of debt, and liabilities are for illustrative purposes only as a reflection of how management views its various assets for purposes of informing management decisions and do not necessarily reflect the price that would be obtained upon the sale of the asset or the associated costs or tax liability. Now for our financial highlights from the first quarter. Net income for the first quarter was $1.3 million, or 7 cents per share, versus $565,000, or 3 cents per share, in the same period last year. This 130% increase in net income over the same period last year was driven by a $95,000 decrease in interest expense and a $400,000 increase in interest income, a $600,000 decrease in equity and loss of joint ventures due to the lease-up of The Verge, as well as a slight increase in revenue and operating profit from better multifamily and industrial and commercial segment results, offset by decreased royalties from the mining royalty segment and increased losses in the development segment. Pro rata net operating income for the first quarter was increased 22% from $6.99 million last year to $8.53 million in the first quarter of 2024. This increase in NOI was primarily due to a 92% increase in multifamily NOI as well as a 36% increase in industrial and commercial NOI compared to the first quarter last year. This increase in multifamily NOI was driven partly by improved results at DOC 79 and the Marin compared to last year, but mostly by the addition of two assets to this segment due to 408 Jackson in Greenville and Bryant Street in Washington, D.C. achieving stabilization. Yesterday we posted to our website a brief slideshow of financial highlights for the first quarter. For those who have not yet seen it, we are now publishing an estimated value of our assets net of debt and liabilities. This sum of the parts analysis yielded a per share value in the range of $32.89 to $36.59 per share. Before I turn the call over, I want to congratulate David DeVilliers III on his promotion yesterday to Chief Operating Officer. David, or D3, as he's known among his colleagues, is an invaluable member of our management team, which is not surprising because he studied at the feet of a master. David, on a personal level, if you'll indulge me, I just want to say how proud we are to have you as a member of the team, and we look forward to working with you in this new capacity as we start the next chapter in this company's history. I will now turn the call over to our new COO, David DeVilliers III, for his report. David?

John, thank you for those kind words. I'm humbled and look forward to filling this role. Allow me to provide an operational perspective on the first quarter results of the company. Starting with our commercial and industrial segment, this segment consists of nine buildings totaling nearly 550,000 square feet, which are predominantly warehouses and all located in Maryland. At quarter end, the buildings were 95.6% occupied. Total revenues and NOI for the quarter totaled 1.45 million and 1.16 million respectively, an increase of 36% and 47% over the same period last year. Moving on to the results of our mining and royalty business segment, this division consists of 16 mining locations, predominantly located in Florida and Georgia, with one mine in Virginia. Total revenues in NOI for the quarter totaled $2.96 million and $2.76 million, respectively, a decrease of 10% and 12% over the same period last year. The primary reason for the decrease is due to a reduction of royalties at our Manassas quarry to resolve a calendar year 2023 $842,000 overpayment by our tenant, who overestimated a portion of production tons, which is shared with other property owners. As to our multifamily segment, this business segment consists of 1,483 apartments and over 117,000 square feet of retail, located in Washington, D.C., and South Carolina. At quarter end, the apartments and retail space were 94% and 79% occupied. Total revenues in NOI for the quarter were $11.62 million and $6.8 million, respectively. FRP's share of revenues in NOI for the quarter totaled $6.66 million and $3.8 million, respectively. This is a significant increase over prior quarters due to our Bryant Street and 408 Jackson joint ventures being included in this segment as of January 1, 2024. As a same-store comparison, FRP shares of revenues in NOI for the quarter totaled $3.35 million and $2.09 million, respectively, an increase of 2% and 4% over the same period last year. Now on to the development segment. This segment is where we acquire, entitle, develop, and create new income-producing assets that are transferred into our commercial industrial and multifamily business segments upon reaching certain completion and occupancy benchmarks. The segment uses capital to entitle and develop lands and fund our vertical construction endeavors with the goal of turning our non-NOI-producing assets into NOI producing assets. The segment also lends funds to strategic partners and ventures to prepare and develop lands for sale to national home builders in exchange for interest and or profit sharing. In terms of our commercial industrial development pipeline, our 259,000 square foot, state-of-the-art Class A warehouse building located in the Perryman Industrial Sector of Harford County, Maryland, is well under construction and expected to be delivered in Q4 of this year. We have entered into two new joint venture agreements with BBX Logistics. The first provides for the construction of a 200,000 square foot warehouse building in Lakeland, Florida. The site is centrally located along the I-4 corridor between Tampa and Orlando. Permits for the development should be in hand during Q1 of 2025. The second provides for the construction of some 180,000 square feet of warehouse product in two buildings in Broward County, Florida. The site is minutes from Port Everglades and the Fort Lauderdale Hollywood International Airport with frontage on I-595 accessing the Florida Turnpike and I-95. Permits may be in hand by the first quarter of 2025 as well. In Cecil County, Maryland, along the I-95 corridor, we are in the middle of pre-development activities on 170 acres of industrial land that will support a 900,000 square foot distribution center. We look to secure permits in Q2 of 2025. Finally, we are studying multiple conceptual designs for our 55-acre track in Harford County, Maryland. Our various configurations should yield between 625,000 to 650,000 square feet of industrial product consisting of multiple buildings. Existing land leases for the storage of trailers onsite help to offset our carrying and entitlement costs until we are ready to build which could be as early as 2025, pending favorable market conditions. Completion of these industrial commercial development projects will add over 2.1 million square feet of additional industrial commercial product to our industrial platform, growing the business segment from 550,000 square feet to over 2.7 million square feet. As to our multifamily development pipeline, we have our newest project in the district known as VERGE. At quarter end, the 344 residential units were 91.6% occupied with 45% of its 8,536 square feet of retail spoken for. Total revenues and NOI for the quarter were just under $2,987,000 respectively. FRP's share of revenue in NOI for the quarter totaled $1.22 million and just over $605,000, respectively. Although our emphasis is on the industrial assets at this time, we will keep watch on market conditions and their impact on four multifamily projects that reside in our development segment. These projects represent over 1,200 apartments, and 58,000 square feet of retail. Turning to our principal capital source strategy or lending ventures, I have the following updates to our two current projects. Amber Ridge in Prince George's County, Maryland, consisting of 187 lots, is completely sold out. Final development activities to get off bonds are ongoing, and upon completion of this project, Interest income and profits are expected to total $3.8 million, a 20% profit on funds drawn. Our second lending venture, Presbyterian Homes or Aberdeen Overlook, consists of 344 lots located on 110 acres in Aberdeen, Maryland. We have committed $31.1 million in funding, $23.1 million was drawn as of quarter end, and over $5.8 million in payments were received to date. A national home builder is under contract to purchase all the finished building lots, and we expect to receive a minimum 20% profit on funds drawn. We also continue to entitle Hampstead Trade Center, which consists of 255 lots located in Hampstead, Maryland, and to explore second-life residential build-out options for our quarries in the South. The knowledge gained through our lending ventures has offered management a unique opportunity to leverage this development expertise, apply it to our mining lands, and potentially scale this strategy while creating a second life for our mining lands. In closing, we remain pleased with the company's performance, and excited about the growth potential being created in our development segment. Interest rates, inflationary pressures on expenses and construction costs, and existing supply and deliveries will continue to create headwinds and enhance scrutiny for new development starts. We do continue to move forward and seek entitlements for our development pipeline with several permits expected in 2025. Upon receipt of these permits, Management will remain patient, calculated, and cautious in pulling the trigger on vertical construction. Thank you, and I'll now turn the call back to John.