FRP Holdings, Inc.

Good day, everyone, and welcome to today's FRP Holdings Incorporated 2024 4Q 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 the star, then the 1 key on your telephone keypad. You may withdraw yourself from the queue by pressing the star 2 key. Please note, today's conference is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Matt McNulty. Please go ahead.

Thank you, Marjorie. Good morning. I am Matt McNulty, Chief Financial Officer of FRP Holdings, Inc. And with me today are John Baker III, our CEO, David DeVilliers III, our President and Chief Operating Officer, David DeVilliers Jr., our former longtime President and now Senior Advisor, John D. Baker II, our Chairman, John Milton, our Executive Vice President, General Counsel, and John Kloppenstein, our Chief Accounting Officer. First, let me run through a brief disclosure regarding forward-looking statements and non-GAAP measures used by the company. 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 to 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 GAAP, 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 are net operating income, or NOI, and pro rata net operating income. FRP uses these non-GAAP financial measures 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 Matters on pages 14 and 15 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 and as a reflection of how management views its various assets for purposes of informing management decisions do not necessarily reflect the price that would be obtained upon a sale of the asset or the associated costs or tax liabilities. Good morning. It's Thursday, March 6th. Now for our financial highlights following our fourth quarter results. Net income for the fourth quarter decreased 41.7% to $1.68 million, or $0.09 per share, versus $2.88 million, or $0.15 per share, in the same period last year. Last year's fourth quarter included a one-time gain of $9.8 million related to the termination of a loan guarantee at the Bryant Street project. For the year, net income saw a 20.4% increase to $6.39 million, or $0.34 per share, versus $5.3 million, or $0.28 per share, last year, due mainly to the improved results in our multifamily segment. The company's prorated share of NOI in the fourth quarter was up 21%, to $9.1 million, and year-to-date was up 26% to $38.1 million. The year-to-date pro rata NOI increase was mostly driven by the performance of our multifamily segment due to improved results at all six of our stabilized projects in this segment versus the same period last year. These six multifamily projects contributed an additional $4.6 million of pro rata NOI compared to last year. Versus last year, the mining segment contributed $2.7 million of additional NOI, and the industrial and commercial segment another $649,000. Over the last three years, we have grown pro rata NOI at a compound annual growth rate of 29.5% on a trailing 12-month basis. Earlier today, we posted to our website a brief slideshow of financial highlights for the fourth quarter, which includes, for illustrative purposes, an estimated value of our real estate assets, net of debt and liabilities, Our analysis yielded a per share value in the range of $34.63 to $39.22. In our last release for Q3, we changed the way we valued the mining royalty asset stream from an EBITDA multiple to a cap rate valuation as management believes this methodology more appropriately reflects how these assets should be valued. Again, we provide this information to reflect how management views its various assets for the purpose of informing management decisions. and do not necessarily reflect the price that will be obtained upon a sale of the asset or the associated cost or tax liability. I will now turn the call over to David for his report on operations. David?

Thank you, Matt, and good day to those on the call. Allow me to provide additional insight into the fourth quarter results of the company. Starting with our commercial and industrial segments, This segment consists of nine buildings totaling nearly 550,000 square feet, which are mainly warehouses in the state of Maryland. At quarter end, 95.6% of the buildings were occupied. Total revenues and NOI for the quarter totaled 1.3 million and 992,000 respectively, a decrease of 11% and 15% over the same period last year. The decrease was due to a 50,000 square foot tenant, which is 10% of this business segment, defaulting on its lease obligations. We are currently in the eviction process and expect control of the space in Q2 2025. 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 $3.5 million and $3.5 million respectively, an increase of 19% and 34% over the same period last year. As for our multifamily segment, this business segment consists of 1,827 apartments and over 125,000 square feet of retail located in Washington, D.C. and South Carolina. At quarter end, The apartments were 92.8% occupied and the retail space was 62.6% occupied. Total revenues in NOI for the quarter were 14.1 million and 7.6 million respectively. FRP share of revenues in NOI for the quarter totaled 8.2 million and 4.3 million respectively. This is a significant increase over prior quarters due to our Bryan Street and 408 Jackson multifamily joint ventures being included in this segment as of January 1st, 2024, and The Verge being included in this segment as of July 1st, 2024. These three projects contributed 4.8 million and 2.2 million in revenue and NOI this quarter. As a same-store comparison, which only includes Doc, Marin, and Riverside, FRP's share of revenues in NOI for the quarter totaled $3.4 million and $2.1 million, respectively, an increase of 2% and 12.2% over the same period last year. As stated in previous quarters, new deliveries in the D.C. market will continue to put pressure on vacancies, concessions, and revenue growth in the foreseeable future. Management continues to be diligent in tenant retention and rental rates in the market. We are pleased to have renewal success rates over 60%, with renewal rental rates trending over 2.5% in Q4. Now on to the development segment. In terms of our commercial industrial development pipeline, our 258,000 square foot state-of-the-art Class A warehouse building in the Perryman industrial sector of Harford County, Maryland is nearing completion. The cold temperatures and wintry precipitation that hit the mid-Atlantic toward the end of the quarter and most of Q1 2025 has delayed final paving and concrete truck pad installation. We do expect shell completion in Q2 2025, which will result in the asset moving from development to the industrial commercial segment. This will impact NOI negatively until it is occupied and stabilized, where after the operating expenses can be passed through to tenants and receive rent revenue. Our 200,000 square foot Class A warehouse building in Lakeland, Florida, located along the I-4 corridor between Tampa and Orlando, where FRP intends to be a 90% partner with Altman Logistics Properties, is well into the construction, drawing, and permit stage. A construction loan term sheet was executed in Q4. Final pricing is underway, and we expect vertical construction to take place in Q2 2025. This project is estimated to cost some $141 per square foot, with $9 triple net rents. FRP and Allman also partnered on a two-building industrial project totaling over 182,000 square feet 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. We are deep into the construction drawing and permit stage on this project as well. A construction loan term sheet was executed in Q4. Final pricing is also underway and we expect vertical construction to take place in Q2, 2025. The project is estimated to cost some $327 per square foot with $20 triple net rents. 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. Offsite road improvements, reforestation codes, and obtaining offsite wetland mitigation permits delayed our entitlement process. We now expect permits in early 2026. Finally, we are in the initial permitting stage for a 55 acre tract in Hartford County, Maryland. The intent is to obtain permits for four buildings totaling some 635,000 square feet of industrial product. Existing land leases for the storage of trailers on site help to offset our carrying and entitlement costs until we are ready to build. We expect to submit our initial development plan in Q2 2025, which puts us on track to have vertical construction permits in 2026. 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 stated in previous calls, permitting, constructing, and leasing the Perryman, Lakeland, Fort Lauderdale, and initial 212,000 square foot building in Harford County is our focus and goal over the next three years. These four buildings represent 850,000 square feet of new industrial commercial product with a total project cost of 146 million. These projects represent some 8.7 million to 10.2 million in total NOI when stabilized with FRP share of NOI ranging from 7.9 to 9.2 million. Turning to our principal capital source strategy or lending ventures, Aberdeen Overlook consists of 344 lots located on 110 acres in Aberdeen, Maryland. We have committed $31.1 million in funding, $26.5 million was drawn as a quarter end, and over $15.3 million in preferred interest and principal payments were received to date. A national home builder is under contract to purchase all the finished building lots by Q4, 2027. A hundred of the 344 lots were closed upon, and we expect to generate interest and profit of some 6.8 million, resulting in a 22% profit on funds drawn. In closing, we are excited about delivering our new 258,000 square foot Perryman industrial warehouse. and look forward to expanding our industrial footprint with Altman Logistics in South Florida in 2025 with our Lakeland and Fort Lauderdale projects. With new construction starts and deliveries falling to pre-pandemic norms, we expect market vacancies to top out in 2025, which should bode well for demand and rent growth as we deliver our new industrial projects. In 2025, We will have over 430,000 square feet of vacant or rolling over space in our industrial commercial segment, all located in Maryland. This has the potential to impact NOI in the short term. It allows us to re-tenant these spaces under current market rates, bolstering NOI upon lease up and occupancy. The average rental rate of the expiring industrial leases was $6.55 triple net And we are hopeful most of our new rental rates start in the sevens or greater. We expect short-term SOFA rates to remain stable for most of the year with a slight chance of a potential rate cut deep into Q4. With two floating rate loans that have the potential to be refinanced in 2026, we will watch the 10-year treasuring, which fell below four and a quarter this week. and the debt spreads to see if a more permanent and favorable debt structure is viable and accretive to our cash flow. Construction costs are entering a period of uncertainty as we await the impact of tariffs on steel, lumber, and gypsum. It is our plan to continue to monitor these data points and make careful, calculated, and informed decisions. Thank you, and I'll now turn the call over to John Baker III, our CEO.

Thank you, David, and good morning to all those on the call. We've had a remarkable run of NOI growth over the last three years, fueled by developing and then occupying the remaining industrial parcels at our Hollander Business Park, the lease up of three multifamily projects, and the continued success of our mining and royalty segment. As we mentioned in our earnings release yesterday, that level of growth is not sustainable and we expect NOI in 2025 to remain flat, if not slightly below 2024. We have vacancies in our industrial and commercial segment at our Cranberry Business Park and our new Chelsea building that will take time to fill and will have operating expenses that will negatively impact NOI compared to 2024. The mining and royalty segment is as strong as it has ever been, but 2024 NOI was positively impacted by a significant one-time payment which by its very nature is not repeatable. Our multifamily projects will find their NOI growth not through lease-ups but through increases on renewals and higher trade-outs, which will be a challenge for our DC assets as we compete with several new developments in our sub-markets. The real growth for our company in 2025 is the investment taking place in our development segment as we look to deploy approximately $71 million in equity capital investments in 2025 that will bear fruit over the next five years and beyond. 2025 is where we begin delivering on average three new industrial assets every two years with a five-year goal for doubling our industrial and commercial segment from 800,000 square feet with the addition of Chelsea to 1.6 million square feet. We will begin construction on our two industrial JVs in Florida, continue to entitle and permit our existing industrial pipeline to be shovel-ready in 2026, an effort to augment that pipeline with a land purchase, joint venture, or potentially both. While our focus is industrial, we will continue to develop multifamily assets as long as they meet our return thresholds. In 2025, we anticipate moving forward with two multifamily developments in Florida and South Carolina that would add 810 units and an estimated $6 million in NOI upon stabilization. Industrial has always been our bread and butter, And we will continue to leverage our competitive advantage in that asset class where we have the most experience and control over. But we believe multifamily joint ventures and growth markets, partners we know and trust, represent a useful hedge to our aggressive industrial development strategy. I will now open the call to any questions that you might have.

Thank you. And as a reminder, ladies and gentlemen, if you would like to ask a question, that is star 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. And again, that is star 1 for a question. We'll pause for just a moment to allow the questions to enter the queue. While we wait for those questions, we'll take our first question from Stephen Farrell with Oppenheimer. Please go ahead.

Good morning. Good morning, Stephen. I just have a question if we can clarify the $71 million in equity capital investments. Is that including both industrial and the multifamily?

Yes, that's everything.

And can you give a breakdown of, I guess, the Broward County, the multifamily, and then how much would be for existing or replenishing the pipeline?

Sure. Steven, this is Dave DeVilliers. As relates to our two Florida industrial projects, Lakeland and Signature, we also have, you know, two other projects that I spoke about. That industrial, I'll call it pipeline in the two Florida buildings, we're looking to deploy about $21 million in 2025. both for vertical construction of the Lakeland and Signature Florida projects, as well as entitlements and permits for our two other industrial properties. In terms of the multifamily, we have several projects in the pipeline. One is in Estero, Florida. One is in Greenville, South Carolina. And we also have two parcels in D.C. more or less along the Anacostia River between the soccer stadium and Nationals baseball stadium. Those projects represent the potential of $35 million of capital deployment to design, permit, and if we elect to go vertical in 2025, vertical construction at our Estero, Florida and Greenville, South Carolina project. So that's a pretty big chunk of it. Some of the other stuff has to do with, you know, leasing CapEx of our existing portfolio. And then we have some additional dollars to further our lands that we're looking to sell to third-party national home builders. The new... You know, we do have our eyes set on new... projects as John discussed, whether that's a land purchase or potential JV or, or, or both, um, you know, that number could be anywhere from, you know, 10 to $25 million this year if we can find it. And if we need to close on the land this year, a lot of times we're able to push, um, land closing off until we get all of our entitlements. but we've allocated capital to close on the land. That's what it takes. That's kind of a high-level breakdown of those tranches to get up to the $71 million.

That's a good breakdown. Thank you. For the acquisitions, are you looking around Maryland? Is it down in Florida? Is there any specific areas that are popping out?

I mean, I would say that our focus is in the southeast. You know, Maryland is our backyard. Right now it's just harder to get entitlements. It's harder to do business in Maryland than the southeast right now. But it's our backyard, and if there's an opportunity in Maryland that we like, we'll take it. But we're definitely looking at the southeast, given all the, you know, just the drivers that are happening in the southeast right now.

And do you think there's any potential to acquire an existing property, whether it's just in distress or someone looking to exit or are cap rates kind of away from what we would pay?

I mean, right now, you know, cap rates are away. We see a lot of, you know, stabilized assets that we can pick up, you know, call it low four or high four, low five cap rates. You know, a lot of them are trading 5% in-place NOI. You know, that just feels a little thin for us. But there's a lot of loans that were done three, four, five years ago, as you know, you know, in the high twos and threes, and you're not getting that right now. So we'll see if something pops up in the distressed market.

And just to ask about the tariffs, how do you think that – impacts or the flow of goods around Maryland and what's the impact to industrial there?

You know, if they stay in place and they're consistent, I think it will have an impact. You know, the two industrial buildings that we're looking to do in Florida, we kind of have gotten ahead of that. And we're looking to move forward before the steel tariffs come in place so those projects are uninfected. You know, if tariffs remain in place in Canada, where a lot of our lumber comes from, you know, some of these potential multifamily projects, we're going to have to take a look and just see where all that lands. So I think if they stay and they're consistent, It's going to have an impact more on the multifamily than on industrial in my mind.

Oh, that's good. Thank you, guys.

And ladies and gentlemen, that is star one for a question. We'll take our next question from Bill Chen with Rezone Partners. Please go ahead.

Hey, guys. Hey, Bill. Hey, Bill. Hey, good morning. I was just wondering, you know, we track the multifamily warehouse phase fairly closely via, like, public reads, but also, like, you know, we just talk with a lot of GPs out there. What are you guys underwriting to, you know, these new projects that you're looking to put, you know, dollars out the door this year? You know, can you go through by... If possible, by multifamily, by industrial, and then if you could segment it by geography as well, just so that we get a sense of what are the unlevered returns on these development projects.

Yeah, so yeah, we do put targets on each project, and we do tend to try to look at a specific market to determine if that return rate should be higher or lower based on what we envision the cap rates being on the other side. So I would say just generally right now it's somewhere in the 6.5% to 7% return on cost in the first year of stabilization. Untrended is kind of where we are. Obviously, we hope and we do underwrite, you know, conservatively, so we hope that when we get to the other side that, you know, we've had some cost savings and or we get higher rents than we put in the model, but that's kind of our break line.

Got you. And is that six and a half to seven for both multifamily and industrials, or is there a little bit of difference between the two asset classes?

I'd say it kind of moves between six and seven multifamily, um, depending on where the project is. Um, I think we were targeting somewhere around six and a quarter to six and a half. Um, on the most recent one that we were looking at D three, you probably actually had those numbers specifically that we had, we had targeted for woven and.

Yep. Um, yeah, no, Matt, you're, you're, you're a hundred percent correct. I mean, the location is a, is a big factor. you know, the industrial building in Southern Florida sitting right outside Fort Lauderdale by the airport is, you know, probably one of the most, you know, resilient markets that, that we do business in. So, you know, that return on cost, you know, we can, we can look to, you can target something lower than a six and a half, um, multifamily, you know, again, depending on where it is, um, we're kind of targeting that 6.5%, 7% in Estero, Arda, and Greenville, South Carolina. That 6.5% to 7% range is a pretty good target. Once you get into these more resilient core markets, maybe there's an argument for that 6.5% But if you get outside some of these poor markets and the next exit up and, you know, that 7% is more of the bullseye. Mm-hmm.

Mm-hmm. Mm-hmm.

Got you. And that's an untrended number?

That's trended. That's trended. Okay. Trended in kind of that year one, it's stabilization.

Mm-hmm. Mm-hmm.

I mean, just, like, to clarify, like, are you baking in, like, are you using today's rent? Are you, like, baking in, like, you know, 2%, 3%, like, annual rent increases between, like, when you put a shovel in the ground? Because these things, like, take time to build and take time to stabilize.

They do, and we constantly update it. I mean, when we get into these things, Bill, I mean, you take the current rental rate, and we basically say... you know, for industrial, you've got a year of design permitting, you got a year of construction and depending on the size of the building and market, you know, you've got another year to get to, you know, kind of that, that first year of stabilization. So we do, we take kind of the current rental rate. We see what the historic trend in escalations are. We see what people are putting in their leases, um, You know, when we make a decision, we've seen extraordinary rent growth. So the historic curve we don't believe in. So we're kind of taking current rates and putting, you know, a 2% to 2.5% escalator on that. And, you know, you can argue if that's conservative or aggressive or what, but that's what we do.

Got you. Thank you for clarifying that. And also, you know, the FRP is in this unique situation where it's got a large cash holding. We pay a lot of attention to the market, and, you know, the construction start has just absolutely fallen off the cliff. In these projects that you're moving forward with, are you finding yourself to be kind of the only game in town from a development perspective, or are you, like... If you give us some color on, if there were 10 projects previously, what are you guys seeing? Are you down to two, three projects? You know, any commentary on competition for GC, you know, general contractors? Are you seeing some kind of relief on the cost pressure the past few years? We've seen absolute relentless, you know, cost inflation on the construction side. So Any color on any of these that I just mentioned would be great.

Right. No, you're absolutely correct. I mean, new deliveries, new starts, you know, it has been a cliff. You know, I think, you know, kind of in 2022, we were just on, you know, a new start delivery that was non-sustainable. And, you know, we're kind of back to the pre-pandemic norms in my mind. And it just feels different to GCs and to our vendors. So it's not so much material pricing, but they have come down on their fees and their profit. You know, we've been able to get very, very aggressive prices numbers and fees and profits from our GCs. Um, and I would say this, I think that, you know, a lot of our competition went really, really fast and, you know, right now they just, they can't take that, that jump, you know, whether it's their risk appetite or their balance sheet or, you know, I can't answer for them. Um, but we see a great opportunity in the markets that we have targeted, you know, to build in 2025 when a lot of people just aren't and being able to deliver in 2026 and be one of the, you know, the only games in town, one of the only, you know, new construction projects delivering. And we think that's an advantage.

No, I agree with you. I think that, you know, it seems like the only people developing these days are large cap REITs with very low leverage so they could issue on secure bonds and, you know, kind of one-off companies like yours. Okay, no, that's helpful. Would you say that the, are you at pre-pandemic levels or are you kind of Are the markets you're in, are they at pre-pandemic normal construction, or are you guys actually below that at this point in your markets?

I think, you know, that's an interesting question. I'll just say from an overall – speak to industrial. From an overall industrial pipeline – Um, I was re a report done by new mark and they kind of said that at the end of Q4, you know, the industrial kind of the pipeline declined to 322 million square feet. And that is the lowest level of supply under construction since 2019. And they were saying that, you know, the pipeline is projected to fall to 2018 levels by the end of 2025. So I think we're kind of based on that. And I kind of agree. I feel like we're back in this, you know, 2018, 2019 level. And depending on what happens with tariffs and and interest rates and, you know, and some other programs coming out of the white house, um, you know, it's either gonna, you know, make it harder to start or it may go the other way. Your, your crystal ball is as good as Brian. Um, but I think the answer to your question, I think we're, we're kind of in this, that 2018, 2019 period.

Got you. Okay, thank you for that. I appreciate that. Going on the cranberry repositioning, and then also on Chelsea a little bit, you know, on the retirement market, you mentioned there's like 400,000 square foot of, you know, lease explorations. Is that all? I don't think that's all within cranberry. That's with Hollander in there as well, right? Is that correct?

That is really all – it's pretty much all in Cranberry. Okay. And it's also, you know, the new Chelsea building of 258,000 square feet. Okay, gotcha.

And, I mean, you – In the print market, you gave a blended rate, but really, I mean, those are really two different asset classes. I think Chelsea, based on my memory, if I'm correct, is really like a $9 market, and then Cranberry is an older product. And I'm assuming you just kind of break down by, you know, my understanding is when you bought Cranberry, you guys kind of got it for a song, put some CapEx into it, and it's generally... kind of like a smaller business or like relatively, right? Like as opposed to Chelsea, like a bigger, just like a newer, more class A. So my question there is, can you help us understand, you know, we learned of like the one tenant getting evicted in Cranberry. Can you talk about like what the market looked like to backfill that? And then, you know, when those leases renew, One, if tenants want to move out, how easy or how difficult would it be to backfill those spaces? And then what does the in-place rent look like versus market?

Sure. I would say that, just to give you some history, when we bought Cranberry, most of the leases, let's just say we're in the $4 range. And, you know, most of those leases were in place, you know, three, four, five years ago. And they were all done prior to, you know, this great increase in rental rates. And I would say that, you know, most of the expiring leases at Cranberry are in the high fives, low sixes. And to your point, this is a mix of smaller tenants, let's just say sub-25,000 square feet. We do have some below 50,000 square feet, but most of them are kind of in that, let's just say 25,000 to 50,000 square foot range. That market is really, really good. It's very strong. It's the bigger tenants, the $200,000s, the $300,000s, the $500,000s, that demand is way down. But the smaller size tenants, it's strong. It's out there. The market calls for sevens. And depending on improvements in term and everything else that can move around, given our basis at Cranberry, You know, we, we have the ability to go after tenants and backfill that space strongly and still make a very, very solid return given the basis of our project. Um, but at the same time, you know, w we want market rents and, um, you know, that that's what we want. So that's what we're going to go after. And it's going to, it's going to take time. It's all one market. We're not going to get it all done in one year, but over the next two years, there's no reason why we can't backfill that space, get that cranberry back to where it was with rental rates, the previous term rental rates.

Mm-hmm. And is, I mean, like, what do you think that occupancy number is going to get down to? I mean, like, if you can help me understand, like, is that, like, I mean, that's primarily 268,000 square foot. You've got one tenant, which is 10%. Okay, you backfill that. But are most of the expiring leases going to, like, stay in place? Like, I don't imagine this, like, massive move out of all the tenants, right? Like, I mean... Or is that a different situation where we expect most tenants to move out and back to a less space?

We expect all of the tenants to leave. And the reason why, you know, 57,000 square feet defaulted on us, they're not coming back. You know, that's... that in and of itself will take Cranberry from 96% occupancy to 60% occupancy. Okay. We have another tenant that built their own building, and when that's done, we fully expect them to leave. Okay. The other lease is a government contract lease, and that government contract lease is no longer valid, so they're leaving. And the other tenants have said that we're not renewing. We expect everyone to leave, and we expect the occupancy to get very, very low at Cranberry. Hopefully, you know, they all don't expire on the exact same date. Yeah. Cranberry is going to be a major, major focus. I see.

Okay. That wasn't expecting. I mean, is there something about the nature of the tenants there? I mean, obviously, like, you know, someone can pay rent. That's one thing. But, like, is there something about the nature of that? Is it, like, intentionally, like, a transitional asset type? Or, like, is there – I'm just kind of a little surprised by that.

Um, you know, I, I see this as, as, as fairly, I won't say normal, but, um, you know, we expect rollover. You know, they happen to be, you know, that one tenant wanted a three year, one wanted a five, one wanted a seven and. You know, it was a very important moment. It just happened to, you know, kind of these leases line up over 2025, you know, in different quarters of 2025. And it's kind of the nature of the industrial cycle. You know, I think we're, you know, we're cautiously optimistic about the rollover because now we're able to, you know, renew at market rents. So we believe, we believe in the product. We believe in the size spaces that we have. We really like, you know, where the market has gone and, uh, and look forward to, you know, to retenanting these spaces at a much higher rental rate.

And what about, um, What about Chelsea? How's, you know, any color on like the leasing velocity there?

So that building, because of the winter, we weren't able to put the final coat of paving down and we weren't ready to finish the truck work. And, you know, Q4 of 2024 and Q1 of 2025, those quarters changed. We don't expect a lot of action or communication during those months, especially when the building's not done and there's not a distinct delivery time. As we move into Q2, we do expect to have some paper trade hands and see if we can we can start getting some, some velocity. Right now there's been some phone calls. There's been some tours. There's, there's kind of been people kicking tires. So, you know, you've, you've got some action, but it's all, it's all talk. We look forward to getting, getting some term sheets and, um, being able to deliver. We did get a permit for, uh, a tenant improvement build out that we have in hand. that we just got. Um, so if we have someone, we hope that will accelerate our ability to get them in and occupying. We're trying to decrease, you know, that timeline to, you know, to do a deal, to permit, to construct and ultimately get them in.

Um, on the, Multifamily, I think you mentioned that you're moving forward with a project on the Ancasha. Is that phase three what would be next to the Marin?

So we had two adjacent sites next to Dock and Marin known as phase three and phase four. Yeah. Those were... under our PUD, a hotel and an office site. We made the decision a couple years ago that hotel and office were not two asset classes that we thought were the highest and best use on that site. So we embarked on modifying our existing PUD to get the zoning in place to do two multifamily developments there. We expect to get that zoning approval in Q2 of 2025 of this year. And then we have, you know, two years of entitling, getting construction drawings to be able to you know, be in a position to have the opportunity to go vertical there. Those are two sites that we're looking at. We would probably start phase four first, which is on the river, and work our way slightly back to phase three that would be adjacent to Marin. Okay.

So that's like the beer garden right there, right? So what's this? That's the beer garden, the Cove?

Correct. That would be the phase four site that we would start at.

And so the capital, if you do something, the capital's not going out in 25, that's likely at 27 if you go forward with that.

You know, it's going to be based on market conditions and you know, what we see in our assets. Um, but I can't, that timing, I can't, I can't argue that that's too conservative or too aggressive. Gotcha.

Okay. Um, all right. I think, um, I think I got, I think I got, you know, I think I have like all my, you know, I think, thank you for addressing all the questions I have. I mean, uh, if I may, uh, you know, I obviously, uh, You know, I ran a shareholder at this point for 10 years. I don't know if John Milton's on the call, but, you know, I remember when I went down and met with John and did the show phone call. So this year marks, like, my decade as a shareholder in the company. And, you know, I track the company very closely. I, you know, I appreciate you guys giving me the platform to voice my opinions. I would just like to leave with two comments. One, I think that we've been involved for a really long time. I think everyone in the company has done a really good job. I think the candor and the way that you communicate with shareholders is excellent, as is the feedback from other shareholders. I do want to just keep pushing on the idea that especially in today's environment where, you know, a shareholder could kind of disaggregate the assets, you know, between the multifamily holdings and the industrials. And we kind of like get large cap pure plays that pay a nice dividend and, and, you know, maybe like not get to the same level of undervaluation and, Uh, but you know, there was a time where I think, you know, the company traded at a much lower, you know, much bigger discount than some of the, the, some of the parts. Right. But I think today there's, you know, companies out there, like you could buy a basket of a, uh, you know, pick, you know, your, your, something, your multifamily exposure, pick your warehouse exposure, and then you kind of like recreate the company. and there's a current yield that comes with it. And that is part of some of the frustrations I hear from other shareholders, but also myself as a shareholder, where I'm okay if the company doesn't want to buy back any shares, but I think some sort of return of capital in the form of dividends would be helpful. I know you guys have a lot of iron, you know, uh, you got a lot of projects lined up. There's a lot of, you know, capital, but the company also, uh, is cash flowing a lot. It's grown. You guys done a wonderful job, grown the N a lot. So I think a dividend, even if you started out at 1%, uh, at a 1% yield, I think it's, it's, I think it demonstrates to shareholders that there is a plan and intention to return that capital and give us, you know, some yield, right? Even if it's a small 1% because, you know, from a total return perspective, getting some current dividend helps. And I think it will also solve another problem, which is the trading liquidity issue. I think there are certain shareholders who just, you know, won't buy any, won't buy any a real estate company without any sorts of yield. So I will keep, you know, pushing for that because I think it's important. I think it's something that, and I don't say this lightly, I would not have advocated this in 20, you know, in that 21, 22, because there's a lot of buildings that were still stabilizing. You know, there's still a lot of dollars going out the door, but I think we're at a point where there's, very high quality recurring and alive between them. And these are some of the best multifamily buildings and, and, you know, the aggregate royalty business is some of the best business I've seen. I think, I think the company could afford to pay something small, like a 1% dividend. So, you know, I, I just want, I know I've said this before, but you know, um, I appreciate you guys give me the platform to, uh, kind of voice my, my, uh, opinion as a decade plus shareholder, uh, So I'll end it there. But the other comment that I just want to kind of mention is I would also mention that from a cap rate perspective, we've been tracking multifamily cap rates since the Fed started raising rates. And we've seen, you know, a lot of deals transact. We've seen, you know, Blackstone deal. We've seen the KKR-Lenard deal. We've also seen a lot of smaller deals. I would say that this portfolio, Marin, Doc, 79, Brian, Street Purge, and Jackson, and Riverside, and I've seen all these assets with the exception of Greenville. I would say that you're probably too conservative with the cap rate. As you mentioned earlier on the call that on the acquisition side, really, it's in the high fours, low fives. And I'm just like, I'm going to see like a high end of five, six, fours. for an asset of this quality, that of this young on the river where people can't build more, except for what FRP owns, I think it's just a little bit too punitive. Because I've seen, you know, I think there was a time when people were like, what will multifamily cap rate shake out at? But I think we've had probably two years. We've seen some big deals. We've seen some small deals. And we talked to a lot of real estate GP. And a lot of real estate GPs would be very happy to buy, you know, this portfolio about 20 years older and pay like a 5% cap rate for it. So, you know, that's just, you know, some thought that I want to, you know, leave the company with. I have no further questions. I want to thank everyone for the for your, you know, for fighting the fight and for being very upfront and, you know, candid with the shareholders. I appreciate that.

Billy, thank you for all of that. Just a comment on your last point. The cap rates in our, you know, some of the parts analysis are, you know, really for illustrative purposes, we have no intention to sell anything right now. And so, you know, whatever the cap rate is, it's, it's really not important since we're going to hold onto the assets and we would love you to be correct in our estimate to be conservative whenever, you know, we come around to selling them. But right now the, you know, what we're focused on are the NOI and cash flows and growing those. So if cap rates stay at the level that you think they are, then the assets are only going to accumulate in value. And thank you for all of your insight and opinions and commentary.

Happy 10-year anniversary.

Well, thank you. I'm in. you know, it's been, it's been the, it's been the wonderful experience. Uh, you know, if I allow, like, I just want to give some, some, you know, a little bit more feedback on the cap rates. Um, uh, you know, I, like, like I think I communicate to everyone that, you know, hopefully one day my kids just didn't hurt my shares in this company. I think everyone in the company kind of thinks that way. Uh, I think that, uh, Part of the issue is just that I kind of joke that sometimes I'm paid IR for the company because a lot of prospective shareholders reach out to me. They know that I'm knowledgeable about the company and whatnot. And I think when they see a company publish a map, I know that there's no intention of you selling that. And I will say, I remember having a conversation with David DeVille II, and he told me that When you've got a building like that on the river and you've got that view that no one could build anymore in front of you, you build that once and you just sit on your butt. I totally agree with my family-owned stuff for 20, 30 years and we never sold any of it. I totally agree that there's no intention of selling any of this. I think what I'm getting at is that When a prospective shareholder, when a new shareholder look at this and they see the stock trade at where it trades at and they see the company put out a NAV, you know, in that $35 to $39 range, you know, they kind of just throw up their hand and say, oh, this isn't cheap enough. You know, there's not enough of a discount to private liquidation value. So it's not that you are or aren't going to sell those assets. I think that, you know, I don't think that, I mean, you know, from a company communication perspective, you know, the company definitely has a reputation for being conservative. And I think that, you know, again, like I keep praising the company for being very, you know, forefront and candid. I just think that a NAV value that best approximate like a real, you know, market arm's length transaction is, you know, is the best tool for shareholders because, you know, I think at Alumbra we're all in it together in that from a trading liquidity perspective, from a price discovery perspective, as everyone, the company work diligently to build value over time, you know, hopefully some of that discount and that shrinks over time. And, and it sets up this like beautiful compounding from today. Right. But I think that, If you know, um, you know, like 60 bips, uh, and, and multifamily 60 bips and cap rate Delta multifamily is a really big deal. So, uh, you know, uh, I, so, so that's where I'm coming from. That's where I think that, and then like, you know, to just like, you have that great, uh, still 10, nine or 10 years left on that 3% mortgage. You know, that's a huge asset. So I'm not saying be aggressive. I'm just saying that I think getting that NAV to best approximate market as the company continues to grow, as the company continues to add value, you know, grow and align, and you guys are all doing the right thing. But I think that, you know, Letting shareholders, I mean, not everyone's, like I kind of pride myself with doing a lot of work on the company, right? I've seen a lot of these assets, but not every shareholder will do that level of diligence. And then I think that when we have a NAV that is, you know, best approximate what a fair market is, it's a good starting point for people. Then they could drill down into it. And then that creates a mechanism for how that discount shrinks over time. So that's kind of my feedback to, you know, what was, you know, explained. And I wouldn't want you, I wouldn't want the convoy to sell any of these assets in today's interest rate environment.

Yeah, Bill, I think that's a very fair point. I think I understand your point, and I will do my job to go and, dig deep into the cap rates we're using, you know, current transactions and brokers and see if there's any room for adjustment on any particular markets or assets.

Thank you.

I appreciate that. Last thing we're going to do is be aggressive, but, you know, to be overly conservative doesn't help either. So let me just do a little digging and the team here will get together and make some changes if they're warranted. Thank you for that. Appreciate it. Okay. Thanks, Bill. We appreciate all your feedback.

I'd now like to turn the call back over to our speakers for any final or closing remarks.

Thank you for your continued interest in the company, and this concludes the call.

Thank you, ladies and gentlemen. That does conclude today's presentation. We appreciate for your participation. You may hang up at any time.