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.