FRP Holdings, Inc.

everyone and welcome to today's FRP Holdings Inc 2025 3Q 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 star 1 on your telephone keypad. Please note this call 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, Chief Financial Officer of FRP. Please go ahead.

Thank you. Good morning, and thank you for joining us on the call today. I am Matt McNulty, Chief Financial Officer of FRP Holdings, Inc., and with me today are John Baker III, our CEO, John Baker II, our Chairman, David DeVilliers III, our President and Chief Operating Officer, David Devillier, Jr., our vice chairman, John Milton, our executive vice president, Mark Levy, who will serve as our new chief investment officer, and John Klopfenstein, our chief accounting officer. Mark Levy came to us through our recent acquisition of Altman Logistics Properties, where he served as its president. First, let me run you through a brief disclosure regarding forward-looking statements and non-GAAP measurements 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 uncertainty are listed in our ICC filings. 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. The non-GAAP financial measures referenced in this call are net operating income, or NOI, and pro rata NOI. In this quarter, we provided an adjusted net income to adjust for the impact of one-time expenses of the Altman Logistics Acquisition, which is a material business combination unlike our historical real estate acquisitions or joint ventures where our expenses are capitalized. We also provided adjusted net operating income to adjust for the impact of the one-time material royalty payment in the third quarter of 2024 to better detect the comparable results in both the quarter and year-to-date. Management believes these adjustments provide a more accurate comparison of our ongoing business operations and results over time due to the non-recurring material and unusual nature of these two specific items. FRP uses these non-GAAP financial measures to analyze its operations and to monitor, assess, and identify meaningful trends in our operating and financial performance. These measures are not and should not be viewed as a substitute for GAAP financial measures. To reconcile adjusted net income, net operating income, and adjusted net operating income to GAAP net income, please refer to our most recently filed 8-K. Now to the financial highlights from our third quarter results. Net income for the third quarter decreased 51% to $700,000, or 3 cents per share, versus $1.4 million, or 7 cents per share, in the same period last year, due largely to $1.3 million of expenses related to the Oatman Logistics Properties acquisition, partially offset by higher mining royalties and improved results in equity and loss of joint ventures. Excluding the acquisition expenses this quarter, adjusted net income was up $281,000, or 21% over last year's third quarter. The company's pro rata share of NOI in the third quarter decreased 16% year-over-year to $9.5 million, primarily due to the one-time minimum royalty payment received in last year's third quarter. Excluding last year's one-time payment, adjusted NOI was up $104,000 in this quarter versus last year's third quarter. I will now turn the call over to our President and Chief Operating Officer, David Villiers III, for his report on operations.

David? Thank you, Matt, and good morning to those on the call. Allow me to provide additional insight into the third quarter results of the company. Starting with our commercial and industrial segment, this segment currently consists of 10 buildings totaling nearly 810,000 square feet, which are mainly warehouses in the state of Maryland. Total revenues and NOI for the quarter totaled 1.2 million and 904,000 respectively, a decrease of 16% and 25% over the same period last year. The decrease was due to same-store occupancy reducing by 24%, or 132,000 square feet, and the addition of 258,000 square feet of new development space generated by our Chelsea building in Harford County, Maryland, which was 100% vacant in the quarter. Combined, these vacancies total 51% of the business segment, and a focus to lease and increase occupancy is a priority. 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 $3.7 million and $3.8 million, respectively, an increase of 15% and a decrease of 26% over the same period last year. The decrease in NOI is the result of a non-recurring $1.9 million royalty payment in last year's third quarter. The disconnect between revenue and NOI is the result of GAAP accounting with the revenues being straight-lined. As for our multifamily segment, this business segment consists of 1,827 apartments and over 125,000 square feet of retail located in Washington, DC and Greenville, South Carolina. At quarter end, 91% of the apartments were occupied and 74% of the retail space was occupied. Total revenues in NOI for the quarter. were $14.6 million and $8.2 million, respectively. FRP's share of revenues in NOI for the quarter totaled $8.5 million and $8.2 million, respectively, a revenue increase of 2.9 percent, with NOI down 3.2 percent over the same period last year. The decrease in NOI was a result of higher operating costs. property taxes, and increased uncollectible revenue at Marin. The increase in revenue is the result of gap accounting, which again includes straight-line rents and uncollected revenue that is due but which has not been paid. 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. We continue to have renewal success rates over 55 percent, with renewal rent increases averaging over 2.5 percent. New lease tradeout rates are generally down to compete with new supply and strike a balance between revenue and occupancy. Management continues to be diligent in tenant retention and rental rates in the market. Now on to the development segment. In terms of our commercial industrial development pipeline, our two Central and South Florida industrial joint venture projects with Altman Logistics Partners, where FRP was a 90% and 80% owner, are under construction. Following our acquisition of Altman Properties, FRP now owns these assets 100%. The projects are in Lakeland and Broward County, Florida, totaling over 382,000 square feet, and shell completion is anticipated by summer 2026. Our Central Florida Industrial Joint Venture with strategic real estate partners, where FRP is a 95% owner, is pending permits for two buildings totaling over 375,000 square feet. The buildings are in Lake County, Florida, near Orlando. with options for investment in additional industrial development on adjacent properties in the future. We expect to break ground in Q4 on both buildings, with shell building completion expected in Q4 2026. 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, and we expect permits in early 2026 with a focus on attracting a built-to-suit opportunity. Finally, we are in the initial permitting stage for our 55-acre tract in Harford 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 help to offset our carrying and entitlement costs until we are ready to build. We submitted our initial development plan during the quarter, which puts us on track to have vertical construction permits in late 2026 and the potential to start a 212,000 square foot building pending market conditions in 2027. Completion of these aforementioned industrial projects will add over 1.8 million square feet of additional industrial commercial product to our platform. Our projects in Florida represent over 750,000 square feet that will be available for lease up in 2026. When stabilized, these projects alone are expected to generate annual NOI around 9 million, with FRP's share of NOI just over 8 million. Subsequent to the quarter end, the company acquired the business operations and development pipeline of Altman Logistics Properties, LLC. As discussed earlier, this allowed FRP to own 100% of the Lakeland and Broward County, Florida projects. The acquisition also included a minority interest in three industrial buildings totaling 510,000 square feet in New Jersey and Florida, which are currently in various stages of development and all delivering in 2026. FRP expects to have up to 8 million invested in the 510,000 square feet. with expectations of receiving over a two-time multiple on invested capital when the buildings are sold. The acquisition includes future development opportunities with the potential to develop three additional buildings totaling 725,000 square feet in Florida. 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, $27.5 million was drawn as of quarter end, and over $24.7 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. 180 of the 344 lots were closed upon, and we expect to generate interest and profits of some $11.2 million, resulting in a 36% profit on funds drawn. In terms of our multifamily development pipeline, Our joint venture with Woodfield Development, known as Woven, is under construction. FRP is the majority owner, and the project represents our third multifamily project in Greenville, South Carolina. Total project costs are estimated at $87 million and consist of 214 units and 13,500 square feet of ground floor retail. that is eligible to receive both South Carolina textile rehabilitation credits upon substantial completion and special source credits equal to 50% of the real estate taxes for a period of 20 years. The project is expected to be ready for lease up in Q4, 2027. In addition to Woven, our multifamily joint venture in Estero, Florida, located between Fort Myers and Naples, where FRP holds a 16% minority interest, is under construction with Woodfield as well. Total project costs are estimated at $142 million and consist of 296 units and 28,745 square feet of retail. The project is expected to be ready for lease-up in late 2027. These two multifamily projects are expected to boost FRP's NOI by over 4 million following stabilization in 2029. In closing, FRP will have over 1.6 million square feet of industrial space available to lease over the next 12 months, making leasing conditions an important factor now and over the next 12 to 24 months. Currently, the broader backdrop remains mixed. Continued uncertainty around trade policy and macroeconomic direction has extended decision cycles for many occupiers, particularly for larger blocks of space. Even so, on-the-ground activity in our target submarkets is improving. In Maryland, we are seeing increased tour velocity, especially among tenants in the 25,000 square foot range. While demand for over 100,000 square foot product remains selective, mid-bay activity continues to demonstrate meaningful resilience. Industrial fundamentals remain constructive. Rents are holding firm. New construction has declined below pre-pandemic levels, creating a healthier balance between supply and demand. We expect market vacancy to peak in the fourth quarter of 2025 with approving policy clarity supporting renewed tenant momentum. As we bring new product online in 2026, our pipeline is well-positioned to benefit from tightening fundamentals and continued strength in well-located Class A logistics assets. Across our core markets, we are seeing signs of stabilization and early recovery. New Jersey, vacancy held flat for the first time in 10 quarters, with mid-bay product remaining exceptionally tight and the development pipeline near cycle lows. South Florida is among the strongest markets nationally, with Broward County vacancy remaining around 5%, with rent growth near 5%. Palm Beach is absorbing near-term deliveries supported by enduring land scarcity and tenant demand. In Central Florida, market strength continues to bifurcate between bulk and mid-bay product. Our focus on mid-bay positions us to outperform. In Baltimore, Leasing accelerated in Q3, with roughly 2.9 million square feet executed and vacancy tightening to 7.4%. Modern logistics and manufacturing users continue to drive activity, supported by disciplined new supply and durable rent levels. Bottom line, we are operating in supply-constrained, high barrier markets where modern infill logistics space continues to command strong tenant interest. With deliveries aligned to improving fundamentals, we are positioned to capitalize on the next phase of industrial demand. We are leaning into the strength across our core logistics markets with roughly 400 square feet of vacancy in Maryland, and over 1.25 million square feet of Class A products scheduled to deliver in New Jersey and Florida in 2026, the backdrop is constructive. Vacancies are stabilizing and trending lower, and rents remain firm to rising. These conditions reinforce our confidence in achieving efficient lease-up across our portfolio and driving strong value realization. Thank you, and I will now turn the call over to Mark Levy, our new Chief Investment Officer, who we hired in concert with closing on the Altman Logistics portfolio in October.