Q4 2023 FRP Holdings Inc Earnings Call

Operator: www.frp.com.au Please stand by; your program is about to begin. If you need assistance during your conference call today, please press star zero. Good day, everyone, and welcome to today's FRP Holdings Inc. fourth quarter earnings conference call. At this time, all participants are in a listen-only mode.

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Good day, everyone and welcome to today's FRP Holdings incorporated fourth quarter 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 registered to ask a question at any time by pressing the star and one on your telephone keypad.

Operator: 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 one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two.

You may withdraw yourself from the queue by pressing star and two please note. This call is being recorded I will be standing by if you should need any assistance it.

Operator: 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 Chief Financial Officer, John Baker III. Thank you, Madison. Good morning.

It is now my pleasure to turn the conference over to Chief Financial Officer, John Baker, a third.

Thank you Madison Good morning, I'm, John Baker, and third Chief Financial Officer, and Treasurer of FRP Holdings.

John Daniel Baker: I'm John Baker III, Chief Financial Officer and Treasurer of FRP Holdings. And with me today are David deVilliers Jr., our President and Vice Chairman, and John Mildon, our Executive Vice President and General Counsel.

And with me today are David de Villiers Junior, our President and Vice Chairman.

John Milton, our executive Vice President and General Counsel John.

John Daniel Baker: John Klopfenstein, our Chief Accounting Officer, and David deVilliers III, our Executive Vice President. As a reminder, any statements on this call that relate to the future are, by their nature, subject to risks and uncertainties, but could cause actual results and events to differ materially from those indicated in such forward-looking statements. These arrests 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.

John Klopfenstein, our Chief Accounting Officer.

And David the value the third our executive Vice President.

As a reminder, any statements on this call relate to the future are by their nature subject to risks and uncertainties that could cause.

Cause the actual results and events to differ materially from those indicated.

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 it goes by law as a result of future events or new information.

To supplement the financial results presented in accordance with GAAP FRP present, certain non-GAAP financial measures within the meaning of regulation G promulgated by the Securities and Exchange Commission.

John Daniel Baker: 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 to monitor, assess, and identify meaningful trends in its operating financial performance. This measure is not and should not be viewed as a substitute for GAAP financial measures.

non-GAAP financial measure referenced in this call net operating income or NOI.

F. R pieces is not uses this non-GAAP financial measure.

Oh, hi, 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.

John Daniel Baker: To reconcile NOI to GAAP net income, please refer to the segment titled Non-GAAP Financial Measures on pages 12 and 13 of our most recent earnings release. Any reference to cap rates or 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 a sale of the asset or the associated costs or tax liability. Now for our financial highlights from the floor. Net income for the fourth quarter was $2.88 million, or $0.30 per share, versus $2.76 million, or $0.29 per share, in the same period last year.

Dragon sale NOI to GAAP net income please refer to the segment titled non-GAAP financial measures on pages 12, and 13 of our most recent earnings release.

Any reference to cap rates and asset values.

Her 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 of various assets for purposes of informing management decisions do not necessarily reflect the price to be obtained upon the sale of the asset.

The associated costs or tax liability.

Now for our financial highlights from the fourth quarter.

Net income for the fourth quarter was $2 eight 8 million or <unk> 30 per share versus $2, seven 6 million or 29 cents per share in the same period last year.

John Daniel Baker: That income for the fourth quarter of 2023 when compared to the previous year was impacted negatively by an increase of $879,000 in equity and a loss of joint ventures, as well as an increase in interest expense of $188,000 due to less capitalization. However, net income was positively impacted by an increase in interest income of $423,000 from increased interest earned on cash equivalents as well as improved revenues from our industrial and commercial segments. Fourth quarter pro rata NOI for all segments was $7.55 million versus $6.26 million in the same period last year, for an increase of 20.6%.

For the fourth quarter of 2023, one compared to the previous year was impacted negatively by an increase of $879000 in equity.

And loss of joint ventures.

Well as an increase in interest expense of $188000 due to less capitalized interest.

Net income was positively impacted by an increase in interest income was $423000 from increased interest earned on cash equivalents as well as improved revenues from our industrial and commercial segment.

Fourth quarter Pro rata NOI for all segments was $7 five $5 million versus $6. Two 6 million in the same period last year for an increase of 28, 6%.

John Daniel Baker: Net income for 2023 was $5.3 million, or $0.56 per share, versus $4.57 million, or $0.48 per share, in the same period last year. Fiscal year 2023 was positively impacted by an increase in revenues and profits in all four segments compared to 2022, and an increase in interest income of $5, excuse me, $5.42 million from cash and cash equivalents as well as our lending ventures compared to last year. These are offset by an increase of $6.22 million in equity and loss of joint ventures compared to the same period last year, as we lease up The Verge and 408 Jackson, as well as an increase in management company indirect expense of $553,000 and an increase in interest expense of $1.2 million. 2022 was also positively impacted by $874,000 in gain from property sales, which we did not repeat in 2023. Revenue, Operating Profit, Pro-Rata, NOI, and Net Income all experienced strong growth. Pardon me. No, I apologize.

Net income for 2023 was $5 3 million or 56 cents per share versus $4 five $7 million or 48 cents per share in the same period last year.

Year 2023 was positively impacted by an increase in revenues and profits in all four segments compared to 2022.

And an increase in interest income of $5, Oh, excuse me $542 million from cash and cash equivalents as well as our lending venture as compared to last year.

These are offset by an increase of $6 two $2 million in equity and loss of joint ventures compared to the same period last year.

As we lease up the birds in faraway Jackson as well as an increase in management company and direct expense of $553000 and an increase in interest expense at $1.2 million.

2022 was also positively impacted by $874000.

Dollars and gains from property sales.

We did not repeat in 2023.

Revenue operating profit pro rata NOI and that didn't come all experienced strong growth.

Pardon me.

Good.

Yeah.

Yeah.

John Daniel Baker: Revenue, operating profit, pro-rata, NOI, and net income all experienced strong growth this quarter and for the year to date. Compared to the fourth quarter of 2022, we grew revenues by 2.6 percent, operating profit by 17.2 percent, pro rata NOI by 20.6 percent, and net income by 7.8 percent. For fiscal year 2023, compared to last year, these metrics grew by 10.7%, 46.3%, 24.8%, and 16.1%, respectively.

Project.

Revenue operating profit pro rata NOI net income all experienced strong growth this quarter and for the year to date.

Third to the fourth quarter of 2022, we grew revenues by two 6%.

Operating profit by 17.2% pro rata NOI by 26% and net income by seven 8%.

For fiscal year 'twenty to 'twenty three compared to last year. These metrics grew by 10, 7% 46, 3% 24, 8% and 16, 1% respectively.

David H. deVilliers: Yesterday, we posted on our website a brief slideshow of financial highlights for the fourth quarter and fiscal year. For those who have not seen it, we are now publishing an estimated value of our assets out of debt and liabilities. Our analysis yielded a per share value in the range of $69.14 to $77.58. I will now turn the call over to David for his report. David

Yesterday, we posted to our website a brief slide show financial highlights for the fourth quarter and fiscal year.

But those who have not seen it we are now publishing an estimated value of our assets animal debt and liabilities. Our analysis yoga day per share value in the range of $69.14 to $77.58 I will now turn the call over to David for his report David.

David H. deVilliers: Thank you, John, and good morning to those on the call. Allow me to provide some operational highlights on the fourth quarter results for the company. First of all, a little housekeeping.

Thank you John.

Good day to those on the call allow me to provide some operational highlights on the fourth quarter results to the call.

First of all a little housekeeping, we've renamed two of our business segments to better describe the assets in the home.

David H. deVilliers: We've renamed two of our business segments to better describe the assets in them. Asset Management has now become Industrial Commercial, and Stabilized Joint Ventures has become Multifamily. So relative to our industrial commercial business segment, we currently maintain nine buildings in-house, making up nearly 550,000 square feet, which is predominantly where I work. At year end, we enjoyed 95.6% occupancy throughout this part of the portfolio. Full occupancy at our three industrial buildings at Hollinger Business Park in Baltimore, Maryland, as well as rent growth on renewals at Cranberry Business Park in Harper County, Maryland, have helped lift the NLI to $1.17 million for the quarter For the year, our $3.9 million in NLI for this segment represents an increase of 1.23 million or 46.2% over 2022. Moving on to the results of our mining and royalty business segment. This business segment saw total revenues for the quarter of $2.9 million, nearly flat versus $2.9 million in the same period last year. NOI in this segment was down $169,000 over the same period last year. However, NOI for the year was $11,720,199 versus $10,152,539.22, an increase of 15.4%.

That said management, that's now become industrial commercial and stabilize joint ventures has become multifamily.

So relative to our industrial commercial business segment. We currently maintain nine buildings in house, making up nearly 550000 square feet, which are predominantly warehouses at year end, we enjoyed 95, 6% occupancy throughout this part of the portfolio.

Full occupancy at our three industrial buildings that Hollander business Park in Baltimore, Maryland, as well as rent growth on renewals at Cranberry business Park in Harford County, Maryland.

Lastly, NOI to one $1 7 million for the quarter of 46, 41%.

The increase over the same period last year for the year are three $9 million in analog. So this segment represents an increase of.

1.23 million or 46, 2% over 2022.

Moving on to the results of our mining royalty business segment. This business segments saw total revenues for the quarter, a $2.9 billion nearly flat versus $2.9 million in the same period last year.

In this segment was down $169000.

Over the same period last year, however, NOI for the year was $11 million $720199 versus $10 million $152539 22, an increase of 15, 4%.

Yes.

David H. deVilliers: In the multifamily segment, Dock 79 and Marin, with its 569 apartments, had average occupancies of 96.4% and 94.7%, respectively for Q4, with all retail fully leased. Both projects enjoyed renewal success rates of 70% and 61%, respectively for the quarter, with Dock seeing a 1.6% rental rate increase on renewals and Marin seeing a 2.75%. Average occupancy is for all of 2021. All of 2023 for Doc and Maren was 95.6% and 94.36%, respectively.

And the multifamily segment dock 79 in Marin with this 569 apartments at average Occupancies at 96, 4% and 94, 7% respectively for Q4 with all retail fully leased both projects enjoyed renewal success.

So, 70% and 61% respectively for the quarter with docs seeing a one 6% rental rate increase on renewals in Marin, a 2.75% and crews.

Average occupancy for all of 'twenty one.

All of 2023 for docking Marin was 95, 6% and 94.36% respectively.

David H. deVilliers: Riverside in Greenville, South Carolina, with its 200 apartments, was 94.5% occupied at quarter end, with 53% of its tenants renewing, and an average increase in their rental rate of 2.04%. Average occupancy for Q4 was 95.21%, and year-to-date, 94.51%. The company's share of 2023 ProRata NOI for this business segment was $8.1 million, including an $800,000 ProRata NOI from Riverside. Although we saw rent growth in all three properties, higher collection balances and operating expenses caused NLIs to flatten year over year when you factor in the change in equity due to the tenant and common sale to the Stewart family at Dock and Marin at the end of 2022. In the development segment, These strategies included are industrial and commercial.

Riverside in Greenville, South Carolina with its 200 apartments was 94, 5% occupied at quarter end with 53% of its tenants for knowing at an average increase in their route right to point out 4% average occupancy for Q4 was 95 point to 1%.

Year to date 90 445, 1%.

The companys share up to 223 pro rata NOI for this business segment was $8 $1 million, including an $800000 pro rata NOI from Riverside.

Although we saw rent growth in all three properties higher collection balances in operating expenses caused analogs to flatten year over year. When you factor in the change in equity due to the tenant in common sale to the Stewart family a dock in Marin at the end of 2022.

In the development segment, we engaged in several strategies in this segment, which we used to grow the business. These strategies included our industrial and commercial.

David H. deVilliers: Multifamily, and Principal Capital Source Lenders. These strategies have grown the portfolio from one apartment project in four commercial buildings since liquidating our legacy warehouse portfolio in mid-2018 to over 750,000 square feet of commercial industrial product. 1827 multifamily units and several land parcels capable of additional growth. Our industrial commercial strategy consists of ground-up development from properties that are acquired, developed, managed, and, in most cases, owned 100% by FRP and transferred from development to the industrial commercial business segment when the shell buildings are complete. We currently have three projects in our industrial pipeline, in various stages of development. During the second quarter, we broke ground on the 259,000 square foot, state-of-the-art Class A warehouse building on our 17 acre site in the Perryman Industrial section of Hartford County, Maryland.

Multifamily and principal capital source.

These strategies have grown the portfolio from one apartment project and for commercial buildings since liquidating our language legacy warehouse portfolio in mid 2018.

Do over 750000 square feet of commercial and industrial products.

827, multifamily units and several land parcels capable with additional growth.

Our industrial commercial strategy consists of ground up development from properties that are acquired developed managed and in most cases, 100% by FRP and transferred from development to the industrial and commercial business segments. When the shell buildings are complete.

We currently have three projects in our industrial pipeline in various stages of development.

During the second quarter, we broke ground on the 259000 square foot state of the art class a warehouse building on our 17 acre site in <unk> industrial section with Harford County, Maryland.

That building is expected to deliver.

To deliver at the end of this year.

And northeast, Maryland, along the I 95 corridor, we were in the middle of free development activities on our 178 net acres of industrial land that will ultimately support a 900000 square foot distribution center or smaller.

David H. deVilliers: This building is expected to be delivered at the end of this. In Northeast Maryland, along the I-95 corridor, we're in the middle of pre-development activities on our 178 acres of industrial land that will ultimately support a 900,000 square foot distribution center or smaller, multiple buildings, depending on the market at the time. Depending on favorable market conditions, we will be in a position to break ground on this project as early as Q1 of 2025. Finally, we are studying multiple conceptual designs for our 55 acres in Harford County, Maryland, adjacent to our existing Cranbury Run business park. Various configurations should yield from six to 700,000 square feet, dependent on final design parameters and market demand.

Multiple buildings, depending on the market at that time.

Spending on favorable market conditions, we will be in a position to break ground on this project as early as Q1 of 2025.

Finally, we are studying multiple conceptual designs for our 55 acres in Harford County, Maryland, Jason to our existing Cranberry run business Park.

Various configurations should yield from six to 700000 square feet dependent on final design parameters and market demands exist.

Existing land leases for the storage of trailers onsite helped to offsite are carrying and entitlement costs on this property until we're ready to bill.

Which could be as early as 2025.

Completion of these three industrial development projects will add over one 8 million square feet of additional warehouse projects to our industrial platform that one completion. Upon completion will result in our industrial commercial business segments, consisting of over 235 million square feet.

David H. deVilliers: Existing land leases for the storage of trailers on-site and off-site are carrying an entitlement cost on this property until we're ready to build, which could be as early as 2025. Completion of these three industrial development projects will add over 1.8 million square feet of additional warehouse space to our industrial platform, which upon completion will result in our industrial commercial business segment consisting of over 2.35 million square feet. Subsequent to year end, we finalized our first ever industrial joint venture with BBX Capital for the development of a 215,000 square foot warehouse on I-4 highway between Tampa and Orlando, Florida. Assuming favorable market conditions, we hope to begin construction here in Q4 this year. Also included in this strategy is a joint venture project that is a 50-50 partnership with St. John's Properties called Windlass Run, which is part of a mixed-use development in White Marsh, Maryland that includes 3300 residential units and over 3.5 million square feet of commercial space. Our project currently includes 100,000 square feet of single-story office and retail in four buildings. At year-end, Wendlandt's was 87% leased and 78.3% occupied in the office product, and 38.2% leased and 22.9% occupied on the retail side.

Subsequent to year end, we finalized our first ever industrial joint venture.

With Bbs capital for the development of 215000 square feet warehouse on I four highway between Tampa and Orlando, Florida.

Assuming favorable market conditions, we hope to begin construction here in Q4 this year.

Also included in this strategy as a joint venture project, which is a 50 50 partnership with St. John's properties called Windlass run.

Which is part of a mixed use development in White Marsh, Maryland that includes 330 300 residential units and over three 5 million square feet of commercial space.

Our project currently includes a 100000 square feet of single story office and retail and four buildings at yearend Windlass was 87% leased and 78, 3% occupied the office product and 38, 2% leased and 22, 9% occupied.

On the retail side.

Our second development strategy is multifamily where.

Apartment projects are developed in conjunction with third parties for FRP is typically the major majority owner and we share acquisition development and asset management tasks with outside local market leaders, who facilitate day to day operations. These properties are house in the development section until they are completed.

That's maintained a 90% occupancy level for a period of 90 days before being moved to the multifamily business segment.

Currently this strategy houses, Brian Street, and verge in Washington D C.

David H. deVilliers: Our second development strategy is multifamily, where apartment projects are developed in conjunction with third parties, where FRP is typically the major majority owner, and we share acquisition, development, and asset management tasks with outside local market leaders who facilitate day-to-day operations. These properties are housed in the development section until they are completed and have maintained a 90% occupancy level for a period of 90 days before being moved to the multifamily business site. Currently, this strategy houses Bryant Street and Verge in Washington, D.C. 408 Jackson, Greenville, South Carolina. Bryant Street, consisting of 487 apartments and 91,000 square feet of retail in three different buildings, was 93.8% occupied, and the retail components were 96.6% leased and 82.7% occupied at quarter end.

And for Oh, eight Jackson, and Greenville, South Carolina.

Brian Street, consisting of 487 apartments and 91.

Thousands square feet of retail and three different buildings was 93, 8% occupied.

And this retail components were 96, 6% leased and 82, 7% occupied at quarter's end.

Overall departments that Brian Street average the renewal success rate was 65% and rental rate increases of three 8% as of quarter end.

This project will be transferred out of this strategy and development to the multifamily business segment at the end of this quarter.

Our newest project in the district Birch received its final certificate of occupancy in the first quarter of 2020 three.

It's 90% points excuse me, 97% leased and 85, 8% occupied.

45% of its 8400 square feet of retail spoken for at the end of the year. Please.

The lease up of this property has gone well.

And average occupancy for the quarter at Burch was 78.97%.

David H. deVilliers: Overall, departments at Bryant Street averaged a renewal success rate of 65% and rental rate increases of 3.8% as of quarter end. This project will be transferred out of this strategy and development to the multifamily business segment at the end of this quarter. Our newest project in the district, Verge, received its final certificate of occupancy in the first quarter of 2023, is 90% point, excuse me, 90% leased, and 85.8% occupied, with 45% of its 8400 square feet of retail spoken for at the end of the year. Leasing of this property has gone well. The average occupancy for the quarter at Verge was 78.97%.

Huawei Jackson, our second mixed use project with Greenville is located downtown shares the Street Plaza with floor field, along with the Greenville drive an affiliate of the Boston Red Sox.

Or wait Jackson was placed in service during the fourth quarter of 'twenty, two and its as of quarter end was 95, 2% leased 93, 4% occupied.

Brian like Brian Street.

This project will be transferred to the multifamily business segment at the end of this quarter.

Occupancy for the quarter was 93, 7%.

It's 4300 square feet of retail is fully leased and is targeting an opening date sometime this summer.

We're in the homestretch of lease up for all three of these aforementioned joint venture properties, when they reach stabilization or transferred to multifamily.

David H. deVilliers: 408 Jackson, our second mixed-use project in Greenville, is located downtown and shares a street plaza with Floor Field, home of the Greenville Drive and affiliated with the Austin Red Sox. 408 Jackson was placed in service during the fourth quarter of 22, and as of quarter end, it was 95.2% leased, and 93.4% occupied.

That's a business segment will have 1800, twenty-seven apartments, and 126000 square feet of retail.

Unlike a warehouse in the development segment, our multifamily assets are already in operation.

So if you refer to the development segment NOI on page 13 of our press release, you will note that these assets generated over five points four 6 billion in NOI in 2023 versus 2 million last year inclusive of an aggregate loss in <unk>.

David H. deVilliers: This project will be transferred to the multifamily business segment at the end of this quarter. Average occupancy for the quarter was 90.37%. 4,300 square feet of retail is fully leased and is targeting an opening date sometime this summer. We're in the homestretch of lease up for all three of these aforementioned joint venture properties when they reach stabilization and are transferred to multifamily. That business segment will have 1,827 apartments and 126,000 square feet of retail. Unlike a warehouse in the development segment, our multifamily assets are already in operation. If you refer to the development segment NOI on page 13 of our press release, you will note that these assets generated over $5.46 billion in NOI in 2023 versus $2 million last year, inclusive of an aggregate loss in NOI of $611,000 at 408 inverted.

$611000 at far away.

Yeah.

Still another strategy within development as our principal capital source program.

It's a program where among other lending.

Strategies, we provide working capital towards the entitlement and horizontal development of residential land, which is pre sold prior to commencement of any.

Infrastructure improvements and ultimately transferred to National Homebuilders. This strategy includes a charge, 10% interest rate and a minimum preferred return of 20% above which a profit induced waterfall determines the final split of proceeds the first of our two current projects.

Amber Ridge in Prince George's County, Maryland.

It was a peak capital out of $12 $8 million.

All 187 lots have been transferred out to the homebuilders.

And a final development activities should wrap up sometime during the second quarter of this year completion of this project interest income and profits should.

Are expected to total $4 million.

David H. deVilliers: So another strategy within development is our principal capital source program. We provide working capital towards the entitlement and horizontal development of residential land, which is pre-sold prior to the commencement of any infrastructure improvements, and ultimately transferred to national homebuilding. This strategy 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.

Our other current lender lending venture is called Presbyterian homes now.

Amber Aberdeen overlooked a three.

344 lot 110 acre residential development project in Aberdeen, Maryland.

We have committed $31 $1 billion in funding under similar terms to Amber Ridge.

$8 million was drawn at the end of the year Nash.

National Homebuilders under contract to purchase all of the finished building lots.

Horizontal construction has begun the first 11 finished lots had been taken down.

$4 $5 billion in interest and principal has been returned to the company by Europe.

David H. deVilliers: The first of our two current projects is Amber Ridge in Prince George's County, Maryland, with a peak capital of $12.8 million. All 187 lots have been transferred out to the homebuilders, and a final development activity should wrap up sometime during the second quarter of this year. At completion of this project, interest income and profits are expected to total $4 million. Our other current lender lending venture is called Presbyterian Homes. Now, and Amber Aberdeen Overlaw.

In closing we remain pleased with the company's performance and often and are optimistic about growth opportunities.

Challenges, we are foreseeing for awhile came to roost in the final quarter of 'twenty three.

We saw record setting residential rents began to flatten with increased competition.

Lots of new apartments coming online in Washington D. C. Over the next several quarters will directly compete with our waterfront assets. Unfortunately, two of these three assets are stabilized and we expect a third to stabilized prior to additional significant competitive apartment deliveries in the latter part of 'twenty four.

David H. deVilliers: 344 lot, 110 acre residential development project in Aberdeen, Maryland. We've committed $31.1 million in funding under similar terms to Amber Ridge. $20 million was drawn at the end of the, National Home Builders under contract to purchase all of the finished buildings, horizontal construction has begun. The first 11 finished lots have been taken down, and $4.5 million in interest in principal has been returned to the company by Europe.

<unk> and early 'twenty five.

We've been well served by the confidence we have placed in our design amenities and management teams, coupled with our careful and patient approach to development.

<unk> markets and competition is not new to us we stand on firm foundations in our steadfast belief the challenges to get opportunities.

With a strong dedicated and talented team in place FRP will continue to grow its portfolio and in turn its revenue and profit through a steady careful and well reasoned approach to the market. We look forward to building upon our successes and further cementing our place in the market.

John Daniel Baker: In closing, we remain pleased with the company's performance and are optimistic about growth opportunities. However, challenges we have foreseen for a while came to roost in the final quarter of 23. As we saw record-setting residential rents begin to flatten with increased competition, a surplus of new apartments coming online in Washington, D.C. over the next several quarters will directly compete with our waterfront assets. Fortunately, two of these three assets are stabilized, and we expect the third to stabilize prior to additional significant competitive apartment deliveries in the latter part of 24 and early 25. We've been well served by the confidence we have placed in our design, amenities, and management teams, coupled with our careful and patient approach to development. Weathering markets and competition is not new to us.

Thank you and I'll now turn the call back to John.

Okay.

Thank you David.

Many of you saw in our subsequent event note in yesterday's earnings release.

We announced a forward split of our common stock at a ratio of two closed post split shares.

Everyone Presplit sure.

Is it thinly traded company with a small number of shareholders. We believe this has the potential to add some liquidity to our stock.

At this point, we're happy to open it up to any questions that you might have.

At this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star to you. Once again that is star and one to ask a question. It will pause for a moment to allow questions to queue.

John Daniel Baker: We stand on firm foundations and a steadfast belief that challenges beget opportunities. With a strong, dedicated, and talented team in place, FRP will continue to grow its portfolio and, in turn, its revenue and profits through a steady, careful, and well-reasoned approach to the market. We look forward to building upon our successes and further cementing our place in the market. Thank you, and I'll now turn the call back to John. Thank you, David.

We will take our first question from Curtis Jensen.

With real body company.

Hey, Good morning can you hear me okay.

Sure Hey, Curtis how are you.

Good morning, Jerry.

Hey, John.

Thinking about Brian Street, and I don't.

Yeah.

Are we still in.

<unk>.

We don't have permanent financing on that.

Correct, yes.

What's kind of the status, there and where do you see that is it just a function of waiting until.

Rates get a little more attractive or.

Operator: As many of you saw in our subsequent event note and yesterday's earnings release, we announced a forward split of our common stock at a ratio of two post-split shares for everyone. Pre-split, we are a thinly traded company with a small number of shareholders. We believe this has the potential to add some liquidity to our stock. At this point, we're happy to open it up to any questions that you might have. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two.

Yes.

David can speak to this go ahead go ahead, David Yeah, I'll take I'll take a swing at Curtis yes.

Part of it is getting the retail.

And you know in an occupying and there is some free rent that you always go through and that side of the business. So that's where we're really waiting which should.

Hopefully it will be sometime drawing.

You know this year, but obviously, we're operating under a floating floating interest rate and we're looking to.

Curtis Robert Jensen: Once again, that is the star and one to ask a question. We will pause for a moment to allow questions to queue. We will take our first question from Curtis Jensen, with Roboty Company. Hey, good morning. Can you hear me?

Hopefully.

See that the interest rates start to drop a bit and then we'll look to permanently finance that program.

We obviously weren't in a position to do that when the construction loan came due which is why we did the interim financing which is also you know again.

Unknown Executive: Okay. Sure. Hey, Curtis, how are you?

Curtis Robert Jensen: Good morning, Curtis. Hey, John. Thinking about Bryan Street, and I don't know if we're still in a, We don't have permanent financing on that. Correct. Yeah. What's the status there? And where do you see that? Is it just a function of waiting till?

We.

Or on a floating rate.

But that's that's the main reason is just getting the the commercial side up operating and in and a little bit of stabilization then it'll be a better time.

Unknown Executive: Rates get a little more attractive, or David can speak to this. Go ahead. Go ahead, David.

To go with the market also with hopefully interest rates starting to go down towards the end of the year.

David H. deVilliers: Yeah, I'll take a swing at it, Curtis. Yeah. Part of it is getting the retail in, you know, in and occupying, and there is some free rent that you always go through in that side of the business. So that's where we're really waiting, which should sometime, you know, hopefully will be sometime during this year.

When you say retail is that mostly referring to the food court.

There's a little bit.

Matt is hard but Curtis we have another say call. It we've got to do.

Two leases.

That are executed for about 8000 square feet of the inline retail they are under construction now it took forever to get the the building permits out of the district.

David H. deVilliers: But obviously, we're operating under a floating interest rate, and we're looking to hopefully see that the interest rates start to drop a bit, and then we'll look to permanently finance that program. We obviously weren't in a position to do that when the construction loan came due, which is why we did the interim financing, which is also, you know, again, we are on a floating rate. But that's the main reason.

You know government agencies.

So that's an issue we have and we have another one.

L O I's out for another one so we're just trying to get all of that wrapped up and again, we don't see a hurry right now because of the interest rates.

And how do you.

Would you describe that.

Verge is now I mean is it kind of meeting your expectations.

For the most part yes there.

There are.

David H. deVilliers: It's just getting the commercial side up and running and a little bit of stabilization, then it'll be a better time to go into the market also with hopefully interest rates starting to go down a bit towards the end of the year. When you say retail, is that mostly referring to the food court, like the little, Yes, it's that part of it. Curtis, we have another call that we've got to Unknown Executive, FRP Holdings, Unknown Executive, FRP Holdings, Unknown Executive, FRP Holdings. And how would you describe, you know, the verge is now? I mean, is it kind of meeting your expectations? To the most part, yes, there are.

Significant.

<unk>.

Units coming online towards the end of this year.

They they have a pause as they will ultimately have a positive effect on that area. We're no longer kind of out in the middle of nowhere, because we will be a little bit more of the center of the doughnut as opposed to the outskirts because theres about 1400 units coming on that are further.

West if you will of the bridge and where we're located so.

They all started right after COVID-19.

So there was a dearth of new projects that were went under construction right. After COVID-19 and of course, there was pretty there's pretty low interest rates at that time too.

David H. deVilliers: Units are coming online towards the end of this year, and they have a positive, they will ultimately have a positive effect on that area. We're no longer kind of out in the middle of nowhere because we will be a little bit more of the center of the donut as opposed to the outskirts, because there are about 1400 units coming on that are further west, if you will, of the bridge than where we're located. So they all started right after COVID.

So theyre up and go and the good thing is a critical mass will help in some cases, but the interesting dynamic is there is nothing in the pipeline coming out.

After those two at the end.

In the end of 'twenty four in early 'twenty five.

Thank you.

We think we're in a pretty good place.

Just to follow up on what David's, saying permanent financing is is obviously the ultimate goal, but that's that's the only after we are able to grow the NOI.

David H. deVilliers: And so there was a dearth of new projects that went under construction right after COVID. And, of course, there were pretty low interest rates at that time too. So they're up and going. The good thing is that critical mass will help in some cases, but the interesting dynamic is there is nothing in the pipeline coming out after those two at the end of 24 and early 25. Yeah, I think we're in a pretty good head. We think we're in a pretty good place. Just to follow up on what David's saying, permanent financing is obviously the ultimate goal, but that's only after, you know, we are able to grow the NOI www.frp.org.au to where we had envisioned it. I don't think we'd go out and seek permanent financing.

You know, where we had envisioned it.

I don't think we'd go out and seek permanent financing.

It's Ed.

At the NOI that we're at right now our goal is to grow net operating income increased the value of the property. So that you know by the time, we get to the the end of the opportunity zone.

Okay.

10 year hold period.

We've got a healthy asset.

What's an appropriate amount of debt on it and Oh, and I mean, when I say appropriate I mean.

Right amount not too little not too much and.

The fact that we expect to get a.

John Daniel Baker: You know, at the NOI that we're at right now, our goal is to grow net operating income and increase the value of the property so that, you know, by the time we get to the end of the opportunity zone, the 10-year hold period, we've got a healthy asset with an appropriate amount of debt on it. And when I say appropriate, I mean the right amount, not too little, not too much.

Hum.

Interest rate on it you know in a few years.

Okay.

Yes speak to that and that's a benefit and and.

Sure.

Okay anyway.

Yeah, I think yeah between Brian Street.

<unk> Dock 79 Marin.

The D C market isn't where we want it to be but we've got really really good assets you've got good people running them. There's a lot of supply that's come on but it's.

John Daniel Baker: And the fact that we expect to get a good interest rate on it, you know, in a few years. That speaks to that. That's a benefit.

Scott Riverfront, it's not.

Certainly not the quality.

<unk> of our assets and we think in the long term that's kind of continue benefit us.

Unknown Executive: Anyway, uh, you know, I think, yeah, between Bryant Street, Verge, Doc79, Marin, and the DC market isn't where we want it to be. But we've got really, really good assets. You've got good people running them. There's a lot of supply that's come on, but it's not riverfront. It's not, certainly not the quality of our assets, and we think in the long term that's going to continue to benefit us. In your lending joint vent, in your lending ventures, is the National Home Builder a publicly listed company? Have you named it, have you named it NBR? It's NBR.

And your lending joint venture in your lending ventures as the National Homebuilder, a publicly listed company.

Named to be named to the.

And it sounds you are at the end they are.

Okay.

They were actually they are.

They we had a thought they had a soft opening for the Aberdeen overlook property.

About four or five weeks ago.

And as I said in the opening remarks.

We transferred 11 locks out to them.

At the end at the end of the year.

Unknown Executive: They were actually, they, uh, We had a soft opening for the Aberdeen overlook property about four or five weeks ago. And as I said in the opening remarks, we transferred 11 lots out to them at the end of the year, and we certainly have a pretty substantial deposit from them as well. And in their soft opening, they had over 400 people sign up for some of their different products. Now, signing up and buying is a pretty good size difference distance between the lip and the cup, but it's pretty favorable.

We certainly have a pretty substantial deposit from them as well and then theyre soft opening they had over 400 people sign up.

For for some of their different product now signing up and buying as is.

Pretty good for us different distance between the lift in the cockpit is a pretty favorable.

You know pretty favorable visual and it's a beautiful area and in one that's kind of once again is in the center of the doughnut shop in Aberdeen lot of construction.

Is going on around them as it relates to retail large hospital.

Curtis Robert Jensen: You know, pretty favorable visuals, and it's a beautiful area and one that's kind of, once again, is in the center of the doughnut up in Aberdeen. A lot of construction is going on around them as it relates to retail. A large hospital has opened up, and it's doubling its size. So, we're really excited about the potential for this Presbyterian Homes, which has now been entitled, now that it's opening up, Aberdeen Overlook. All right, I'll jump off. Thanks a lot and keep up the good work.

It has opened up in this doubling its size. So we're really excited about the potential for this Presbyterian homes, which has now been been entitled what now this opening up Aberdeen overlook.

Alright, I'll jump off thanks, a lot and keep up the good work.

Thank you Curtis.

We will take our next question.

Stephen Farrell with Oppenheimer.

Good morning.

Good morning, good morning, Stephen.

Yes.

And just a quick follow up on the D. C market are you currently offering concessions at the Marin in dock 79.

Stephen Farrell: Yeah, thank you, Curtis. We will take our next question. From Stephen Farrell with Oppenheimer. Good morning.

Stephen Farrell: Morning. Morning, Stephen. And just a quick follow-up on the DC market. Are you currently offering concessions like the mayor and then that 79? Small ones, if any. Again, we saw rent growth in Dock and Marin for the year. We had 2.8% renewal rent growth in Dock 79 and 4.21% rental growth in Marin.

Small ones if any.

<unk>.

Again, we saw rent growth and dock and Marin.

For the for the year, we had two 8%.

Renewal rate growth and dock 70, 9412, 1% rental growth in there.

On trade outs in Marin were one 9% they weren't as good and dock 79, because at the beginning of the year, Steve in the first two or three months of 2023.

Unknown Executive: Unknown Executive, FRP Holdings Inc. Stephen, the first two or three months of 2023, we had a, We replaced the manager on site. We had lost a little bit of occupancy, and so we wanted to get the heads back in the beds, and that kind of eroded some of our potential profitability, which is why we did have a little bit. We had some concessions there. Everything's pretty much stabilized now, and so we're in pretty good shape. And I might have missed this at the beginning, what were the biggest drivers in the operating expense growth of those two properties? They're across the board, probably one of the biggest ones.

We had a.

We replaced the manager on site, we have lost a little bit of the occupancy and so we wanted to get the heads back in the beds and that kind of eroded some of our you know of.

Our potential profitability, which is why which is why we are we did have a little bit we had some concessions there everything is pretty much stabilized now and so we're in pretty good shape.

And then I might have missed this at the beginning what were the biggest drivers in the operating expense growth that those two properties.

There.

Across the board, probably one of the biggest ones.

And and.

Unknown Executive: And Marin was, we had some utility issues. And so that was pretty big. And the other two things, Stephen. One is security.

Marin was was we had some utility issues and so that was pretty big.

And the other two things.

Steve and one is the.

It was security.

Unknown Executive: DC, like any, a lot of these towns, cities have had problems with, you know, security, and we wanted to get out in front of the problem. So security is definitely higher there, and also for rent collections. We are slowly getting better because we were unable to generate the collection process because of COVID. COVID, they did not allow people to get thrown out. You couldn't go to court, couldn't do anything.

D C like Andy a lot of these towns and cities have had problems with.

Security and we wanted to get out in front of the problems. So security is definitely higher.

There and also our rent collections.

Are slowly getting better.

Cause we were unable to.

Generate the collection process because of Covid.

Covid Covid they did not allow people to get thrown out you couldn't go to court couldn't do anything and so theres an incredible overhang that is slowly starting to work its way through the system it used to take up.

Unknown Executive: And so there's an incredible overhang that is slowly starting to work its way through the system. It used to take, up until sometime in the beginning of 23, more than a year to start and complete the process, going through trying to collect on the debt and then ultimately evictions to get the properties back. Now it's down to about, you know, seven months, so we're going in the right direction. But those are probably the two biggest. And we saw with Bryan Street that when you refinance the construction loan, the bank required us to commit some more capital. And I'm seeing this trend continue; whether it's construction loans or permanent financing, banks are refinancing at 50 to 60% LTVs as opposed to 70%. And I think there's an opportunity to provide gap financing to the borrowers so that they can maintain their debt and equity levels. I know FRPH is not a lender, but if there was an opportunity to provide that gap financing along with an equity component, would you consider it? Demetrius O'Brien, Strayed Now listen carefully, and just generally.

Up until sometime in the beginning of 'twenty three it used to take.

Over a year.

To start and complete the process.

Going through trying to collections and then ultimately <unk>.

<unk> you have to get the properties back now it's down to about seven months. So we're going in the right direction, but those are probably the two biggest reasons.

And we saw that Brian Street, when you refinance the construction on the banquet acquired Institute.

Some more capital.

And I'm seeing this trend continue.

Construction loans or permanent financing that banks are refinancing at 50% to 60% Ltvs as opposed to 70% and I think theres an opportunity to provide a gap financing to the borrowers.

They can maintain their debt and equity levels.

I know <unk> is.

It's not a lender but.

There was an opportunity to provide that gap financing along with the equity component would you consider it.

It means a broad street.

Yes.

And just generally.

Unknown Executive: I would say, generally, I would probably say no. We've got a pretty strong development pipeline. We're focusing more on the industrial side in the near term, but we have some really good locations and some good projects on the multifamily side too. So we want to maintain as much dry powder as we can.

Yeah, I would say, probably generally I would probably say no.

Yeah, We've got we've got a pretty strong development pipeline.

We're focusing more on the industrial side.

In the near term, but we have some really good.

Locations at some good projects in the multifamily side too. So we don't we want to maintain as much dry powder as we can.

Unknown Executive: And so I don't see us, and I certainly defer to John, but I don't see us going out and being mezzanine lenders or that kind of stuff. No, I think... Yeah, you're absolutely right, David. I think we're going to use our... equity to protect our own assets. Thank you. We appreciate it. But we'd have to get, you know. I think, number one, we are more than comfortable with the amount of exposure we have in the DC apartment marketplace right now. I don't think we're looking for additional exposure, and we would have to get really, really smart on another asset or another marketplace before we did something like that. And I just don't think that's the best use of our time or money. But yeah, you're right.

So I don't see us.

I might defer to John but I don't see us going out and being as you know mezzanine lenders or that kind of stuff no appetite.

[laughter], Yes, youre, absolutely right, David I think we're going to use our <unk>.

The equity to protect our own assets.

But we'd have to get you know I think number one we are more than comfortable with the amount of exposure we have to the D. C apartment marketplace right now I don't think we're looking for additional exposure and we would have to get.

Really really smart on.

On another asset or another marketplace before.

Before we did something like that and I just don't think that's the best use of our time more money.

Unknown Executive: That is an interesting opportunity, but I don't think we have the bandwidth to take on kind of an additional investment strategy. No, that's understandable.

Youre right that is an interesting opportunity that's just not.

I don't think we have the bandwidth to take.

To take on kind of and additional investment strategy.

Yeah.

No no thats understandable.

Stephen Farrell: And with Amber Ridd, all the lots are sold. Are there any more interest or principal payments that will come in from that? Pretty much no, it's we're just kind of wrapping it up. There's not a whole lot left. So even there's some closing out of bonds and that kind of stuff before we can actually close. David, correct me if I'm wrong, but aren't there some funds that are going to be released because, Um, I think if I'm right, the overall return of principal and interest and profit is $22 million, and right now, we've received $20.2 million. Yeah, from a cash standpoint, there's still roughly $700,000 that we are holding as the lender to complete some of the remaining programs.

And with Amber Ridge all the lots are sold is there any more.

Interest or principal payments that will come in from that.

Pretty much no. It's we're just kind of wrapping it up if there's not a whole lot left Steven Theres, some closing out of bonds and that kind of stuff before we can access.

David Correct me, if I'm wrong, but aren't there some funds that are going to be released because.

I think if I'm right.

The overall <unk>.

Expected.

Return of capital.

The return of principal and interest in profits of $22 million and right now we've received $22 million.

Yeah.

Uh huh.

From a from a from a cash standpoint, there is still a roughly.

Roughly $700000.

That is we are holding as the as the lender to.

To complete some of the remaining programs and so we haven't finalized the actual interest in profit.

Stephen Farrell: And so we haven't finalized the actual interest in profit, you know, to FRP, but when the dust settles, we believe it's gonna be about $4 million in interest and profit we received on that project, which will probably be tallied out sometime in the first or second quarter. Thank you. One last question before I turn it over. The warehouse in Aberdeen. How much of the $30 million development cost was funded in 2023? Um, I think it was about seven.

To FRP, but when the dust settles, we believe it's going to be about $4 million in interest and profit we receive from that project, which will probably be tallied out sometime in the first or second quarter.

Okay. Thank you last question before I turn it over the warehouse in Aberdeen.

How much of the $30 million development cost was funded in 2023.

Hum.

Unknown Executive: It could have been about $17 million. John K., are you there? Can you help me with that? Um, 16 is what I remember, but Yeah, I was I was looking, I was actually looking at the Amber Ridge issue.

It was about seven.

It would've been about 17 billion John K argue there can you help me with that.

16 is what I remember, but.

Yeah. It was I was look as its actually looking at the Amber Ridge.

Unknown Executive: What was the question again? Chelsea, Chelsea, how much money have we put out in Chelsea? And I assume does that also include what we have in the land? It would, yeah, I'll pull it up.

Issue what was the question again.

Chelsea Chelsea, how much money, we put out.

And Chelsea and I assume does that also include what we have in Atlanta.

It would yeah I'll pull it up.

Unknown Executive: Is there, in the meantime, is there another question? And that's all I have. Thank you. Actually, Steve, let's see. Chelsea, Chelsea, Chelsea, now I don't, I don't have it.

Is there does it mean meantime is there another question.

And that's all I have thank you.

Actually Steve loves to see.

Chelsea Chelsea Chelsea now I don't my own.

Yeah.

Unknown Executive: Speck Buildings, we spent, we incurred in 23, about $9 million. Welcome everybody. Plus, the land gets to the 30, Yeah.

Secondly, as we expect we incurred in <unk> and 'twenty three about $9 million.

Okay.

Welcome.

Plus the land gets to the 30.

Yeah.

Okay.

Stephen Farrell: Great, thank you very much. Sure. Once again, if you would like to ask a question, please press star and one on your telephone keypad. Now, we will take our next question from Bill Chen with resume partners. Bye, guys.

Great. Thank you very much.

Sure.

Once again, if you would like to ask a question. Please press star and one on your telephone keypad now.

We'll take our next question from Bill Chen with Russo partners.

Yeah.

Hi, guys.

Bill Chen: Hey, Bill, www.frp.frp.com. Good to have you join the call. Could you provide a little more detail on the Florida industrial joint venture? Yeah, I mean, it's a we've always taken a little step back, just like we did with the multifamily. Bill, we've always been looking to expand our platform and our program, and we always felt the best way to do that was to find people and locations where the project was actually going to take place. And we found I've had a relationship with one of the people for 20 years, and he moved back to Carl Gables, Florida.

Hey, Bill.

[laughter].

Uh huh.

Having joined the call.

Could you provide a little more detail on the Florida industrial AR.

Venture.

Yeah.

Yeah, I mean, it's we've always again.

It takes a little take a step back we've always like we've done with the multifamily Bill we've what we've always said we've been looking to expand our platform and are on our program and we've always felt the best way to do that was to find.

People in locations, where the project was actually going to take place.

And we've found I've had.

Had a relationship with one of them the people for 20 years, he moved back to Karl Gables, Florida.

David H. deVilliers: And anyway, they came to us late last year and said, Look, we've got this project halfway between Orlando and Tampa, literally right on I-4. I mean, which is a main thoroughfare between the two areas, the market is very strong, and it's a 215,000 square foot building that we're working on developing, and it looks like things are penciling out. We will look to start that building sometime in the third quarter of this year....

And any way they came to us.

Late last year and said look we've got we've got this project halfway between Orlando and Tampa literally right on high four.

<unk>, which is a main thoroughfare between the two where the market is very strong.

And it's a 215000 square foot building that we are that we're working on developing.

And.

It looks like it's if things.

Oh Wow.

We will look to start that building sometime in the third quarter of this year.

Uh huh.

Hum.

David H. deVilliers: There are strong boots on the ground people like MRP, BBX Logistics is actually the name of our partner. They're a subsidiary of BBX Capital. They're a public company. They're a pink slip public company. They're very strong financially. They've been around since the late 1960s.

Strong boots on the ground people like MRP.

<unk> logistics is actually the name of our partner there or a subsidiary of <unk> capital.

There are a public company.

There are things slipped public company.

Very very strong financially they've been around since the late sixties.

David H. deVilliers: Thank you. So there's a there's a very good synergy between the two companies culturally as well as personally. So we're excited about this opportunity. Unknown Speaker And just so that, could you talk about the kind of relative mix of equity ownership? I mean, you know, would FRP be able to, is this over 50%, like it would be another equity line item, or would this be like consolidated, could you talk about that a little bit? Um, we're going to be the controlling ownership interest. We're probably going to be because, again, we are holders and these guys are sellers. Okay, so we would rather be buying, taking a 10 to 20% share of their ownership at retail and holding and keeping our 80 or 90% at wholesale, as opposed to getting so much into our partners that it would add a lot of money to the basis of our property.

So there's a there's a there is a very good synergy between the two companies culturally as well as personal lines. So we're excited about this opportunity.

Got you and just so that.

Could you talk about kind of the relative mix of the equity ownership.

Wood.

With FRP be able to.

Is this over 50% like would this be another equity long I know I'm always be like consolidated like could you talk about that a little bit.

We're gonna be the controlling ownership interest, we're probably going to be.

Because again, we are holders.

These guys are sellers.

So we would rather be buying take a number 10% to 20% of their ownership at retail.

And holding and keeping our 80 or 90% at wholesale.

As opposed to give you're getting so much into our partners that it would be you would add you know that.

David H. deVilliers: So we're kind of treading water in that direction. Let me just clarify that you and I, FRP, will be the controlling holder in this project where we'll wind up with 80 to 90% ownership, is that correct? Yeah. Okay, and I guess their role is to be boots on the ground, almost like, like, like, like, the actual developer. They're doing the work. Is that kind of a natural relationship? Yes, we will be actively involved. I mean, again, we've been in the industrial business for over 30 years. And so they're going to lean on us for the design. We certainly have done enough of those. They have, to some extent, too.

A lot of money to the basis of our properties. So we're kind of we're kind of treading water in that direction.

Let me just clarify that.

So FRP will be the controlling holder in this project, where we will wind up with 80%, 90% ownership is that correct.

Yeah.

Okay, and I guess that their ROE is to be boots on the ground almost like like Oh like what the actual developer there doing the work is that kind of the nature of the relationship.

Yes, but we will be actively involved I mean again, we've been in the industrial business for over 30, some years and so.

They're gonna leaning on they lean on us for the design.

We certainly have done.

Lots of these they have to some extent too and so.

Bill Chen: And so I think it's a really good relationship and a good balance. Mm hmm. Mm hmm. That's you. Um, okay. Thank you.

I think it's a really good.

Relationship and a good balance.

Mhm mhm.

Sure.

Okay. Thank.

David H. deVilliers: Thank you for that. And I mean, if you don't mind, if I probe like, what is our underwriting potential, like, stabilized unlevered yield on a project like this? We haven't decided, but it's going to bubble up on a straight return on cost basis. It's got to be above six and a half percent, or we won't start it. Okay, okay. Um, okay, that's, that's very helpful.

Thank you for that.

And.

I mean, if I if you don't mind my probe light what are we underwriting potential like a <unk>.

Stabilized unlevered yield on a project like this.

We haven't decided but it's been above on Oklahoma straight return on cost basis, It's gone.

Above six 5% or we won't start it.

Okay.

Okay.

Okay. That's.

That's very helpful.

Bill Chen: And I mean, is there a possibility, you know, like in Maryland, within the investor day, we, you know, you guys have provided that a lot of those Maryland projects could potentially come in at an unleveraged yield of eight or even above eight, like, you know, is there potential for this project to kind of hit those kind of numbers? Sure, we hope so. Okay, the market is the market is big and strong, and there's little vacancy. So you understand the way the game's played. And we don't go, we don't start these things unless we feel pretty good about our summer ready condition. We're not required to do anything.

And I mean is there is there a possibility you know like in the Maryland.

During the Investor day.

You guys had provided that.

A lot of those Maryland projects could potentially come in at an unlevered yield of eight.

At or even above a like is there is there potential for this project and kind of get those kind of numbers.

Sure we hope so.

Okay.

The market is the market is as big and as strong and Theres little vacancy so.

Yeah.

You understand the way the games played in.

We don't go we don't start these things unless we feel pretty good about the shovel ready condition were not required to do anything.

Bill Chen: We're just, we want to get to the point, you know, get the contractors ready, get the numbers, get a guaranteed maximum price, look at the market, all of the above. Speaking of contractors, have you seen that the GC world kind of like, call it capacity, call it, you know, just slack, whatever you want to call it, just gets a little bit better from a development perspective? If you're saying, "Are their prices getting tighter?", is that your question?

We wanted to get to the point.

Get the contractors ready to get the numbers get a guaranteed maximum price look at the market all of the above.

Mhm.

Speaking seeking the contractors have you.

Seeing that the GC where ocado.

Like.

Coal capacity call it.

You know just slap whatever you want to call it just get a little bit better.

From a development perspective.

If you're saying are there price is getting tighter.

David H. deVilliers: The price is getting better, timelines improving, you know, whatever you may be, or just, you know, cost coming down, you know, being able to move faster, you know, more willing to work with you, etc. All of your comments, and thank you for that, Bill, all those comments are positive.

Sure.

The prices getting better timelines, improving you know what.

Whatever you may be or just cost coming down.

Being able to move faster.

More.

More willing to work with the U S.

Et cetera.

All of your comments and thank you for that fill all those comments are positive yes.

David H. deVilliers: We have, as you know, a 259,000 square foot building under construction now. We're building that in-house, effectively under subcontracts, so we have, but from that standpoint, we're seeing pricing come down a little bit, we're seeing timeframes coming down to some extent. They're not back to where they were, but they're getting better. Got you, got you.

Okay.

As you know we have the 259000 square foot building under construction now.

We know we're doing we're building that in house effectively or sub contracts.

So we have but from from that standpoint, we're seeing pricing come down a little bit we're seeing time frames coming down so to some extent they are not back to where they were but they're getting better.

Got you got you I appreciate the feedback on that.

Bill Chen: I appreciate the feedback on that. I have a big question I'll save for later, but I just want to provide some commentary. I think that I want to thank the team for, you know, splitting the stock. I know that we really, you know, no one's really going to wind up owning more shares. But I think that I really do think that it will improve liquidity as just the absolute share price goes lower and the bid-ask, you know, in terms of absolute pennies, could get a little tighter. I think that will help with trading. So thank you for taking the initiative to, you know, take that action.

I have a big question and I'll save for later, but I just wanted to provide some com.

Commentary.

Think that I want to thank the team for splitting.

Splitting the stock I know that we really.

No one is really going to wind up owning more shares, but I think that I really do think that it will improve liquidity as just the absolute share price goes lower and the bid ask in terms of absolute kind of pennies.

Get little tighter I think I think that will help with the trading so thank you for taking the initiative to.

Q2.

To take that action.

Bill Chen: I think it really demonstrates to the shareholders that you guys are thoughtful; you guys are thinking about that. And I also just want to commend the company on the share buyback. You know, I've said this many times before, I think buying back at 54 bucks is a great price, especially in light of the recent transaction that I'll talk about. But I think that even at today's price in the low 60s, I think it's still a great use of capital. I know there's a lot of, you know, a lot of cash earmarked for a lot of projects. But I think we're also at a point where the company is generating a lot of cash. So I will always be a cheerleader for more share buybacks.

I think it really demonstrates the shareholders that you guys are thoughtful you guys are thinking about that and.

I also just want to commend the company for for the share buyback.

I see.

Said this many times before I think buying back at 54 box is a.

It is a great price, especially in light of the recent transaction that I'll talk about but I think that even at today's price.

In the low sixties I think is still great use of capital I know Theres a lot of you know a lot of the cash is earmarked for a lot of projects.

But I think we're also at a point, where the companies generating lot of cash so I will always be a cheerleader for more share buybacks. So.

Bill Chen: So, you know, I want to really commend you guys for doing the share buyback. And I'm just, you know, nudging that it's, you know, more share buyback will always be better. And which so my final question is sort of, Mar Marietta recently announced the, you know, the deal to, you know, two transactions, Blue Water Industries, and there's one other transaction, and I looked at the numbers, and essentially what I get to is they spend about two and a half billion dollars for those two transactions, roughly, and they bought about a billion dollars of reserves, and if I'm doing my math right, that pegs the value at about $2.50 for a ton of aggregate reserves, and a lot of the markets are kind of similar, right, and if anything, maybe we can even go so far to say that FRP's market, which is Georgia and Florida, which is probably growing even faster than some of those markets, and which like naturally kind of brings me to like some back of the envelope math at $2.50 per ton of reserve times a half a billion 500.

Want to see.

To really commend you guys for.

Doing the share buyback and I'm just nudging that.

It's more share buyback will always be better.

Which.

So my final question is sort of.

Yeah.

We Martin Marietta, and our recently announced the.

The deal too.

Two transaction Bluewater industries.

And there's one other transaction and I looked at the numbers.

And essentially what I get to you is they spent about $2 billion for those two transactions roughly and they bought about $1 billion of reserves and if I'm doing my math right that pegs the value at about $2.50 for a ton of aggregate.

Reserves and a lot of the markets are kind of similar right.

Anything maybe we even go so far to say that.

<unk> market, which is Georgia, and Florida, which is probably grow even faster than some of those markets.

Naturally kind of brings me to why some back of the envelope math it.

At $2.50 per ton of reserve times, a half a billion 500 now I get it like they bought the whole operation right. They bought the operating company and the.

Bill Chen: Now I understand that they bought the whole operation, right? They bought the operating company, and the prop co was the land company, and there are two separate streams of cash flow, but you know I think it's fair to say that the FRP's royalty structure and the land ownership accounts for at least half of that, which would peg the value at $1.25 a ton of reserves. And if you do the math, multiply by 500 million tons of reserves I mean, you know, I don't know, like, I'm just kind of like that.

Prop coal.

The land coal and there is.

Two two separate streams of cash flow, but.

I think it's fair to say that the the frp's royalty structure and the land only ship a counsel at least half of that we should take the value at $1 25, a ton of reserves and if you do the math multiply by 500 million tons of reserve that like pegged the aggregate business that.

It's something.

Like at $750 million.

You know I don't know like if we get lucky.

I'm just kind of like.

Yeah.

I'm, just like trying to figure out like figure out that's probably on the high end you know like if you use the EBITDA multiple but like you really got to strip out the DNA because there is no capex for the royalty structure it kind of like <unk>.

<unk> added 22, 23 times EBIT multiple is kind of want to get to you like like I I get to like a $400 million to $750 million valuation for the for the aggregate business owned by Fr. Ph is it's kind of like I am wondering if you guys have any thoughts on that like you.

What I'm, saying kind of makes sense or where there's somewhat.

Subtle differences about those two deals that they just did that that's very very dramatically different.

Is is assuming that the royalty structure plus the land ownership accounting for like 50% of the deal like that like is that fair, so like any thoughts or commentary color or feedback that that you can provide.

No.

I'm all years.

Hey, Bill.

Love your $750 million valuation.

I would say that it's definitely on the high end, but.

Here, you're bullish approach to the aggregates industry.

I, obviously have some insight into the.

Dr. Martin purchase of Bluewater industries.

I would venture.

Venture to guess that they didn't do it on a reserves basis, but more on an EBITDA basis and that.

That transaction is probably I mean, I don't think they would have done it where it not accretive to there.

Right not an accretive transaction and so if you look at their.

Their EBITDA multiples.

It's going to be.

Somewhere in the ballpark of there.

Slightly below and Thats I think thats.

It's probably inappropriate way to.

Mhm value it you know.

You could make this gets into sort of granularity but.

The.

The way you would value.

Probably a more appropriate way to value our royalty stream is.

You apply an EBITDA multiple to be revenue.

Not.

Not our NOI just because of that.

That revenue is.

Yes.

Their EBITDA yeah.

We have to take into account.

You know cost.

And overhead et cetera.

Yeah.

And.

And that factors into the.

And to our NOI.

I think that's the appropriate way to look at it.

Multiple obviously a perpetuity so that's taken into.

And do account your.

Your reserves.

I don't know that.

That any.

Operator.

Values.

A transaction on a per reserve.

Uh huh.

Uh huh.

Tonnage basis, when they when they purchase.

And when they make a make a purchase.

Yeah.

We have gone about valuing our reserve stream.

It does not take into account that the second license.

Of the.

The mining land and so your mileage may vary on how you.

<unk>.

Our value to the second life a lot of them are.

Coming up in a lot of them are way off in the near term future, but I can promise you that.

EBITDA multiple.

It takes into account and nothing like that.

So.

But put your own value on it but.

You would be correct.

And thinking that.

The using an EBITDA multiple.

But certainly under value.

The royalty and royalty lands.

Hum.

I was I mean, I I've been a shareholder since 2015 in and.

A lot of years.

So I've seen what this royalty business have done them in it's grown its spin out cash flow and there's only been two acquisitions had been no capex to this business.

On the $25 million of total acquisitions.

One in 2012, and then the recent one asset too right versus Martin Marietta passed to replace the machinery that gets worn down right. So I would argue that the right multiple is really like an EBITDA less capex number or like like what that <unk>.

Number and I wanted to bring that up because that capex number.

To be like a third of the EBITDA for Vulcan or Martin Marietta, So like.

The Capex is a third of EBITDA than like your EBITDA. Multiple is is really like you can kind of get you need to get to like EBITDA multiple or EBITDA less capex like.

So like.

Using your EBITDA multiple is definitely with two concern.

Is it like a true apples to Apple is really like our EBITDA less capex multiple because I haven't seen any capex with frp's royalty structure right.

So that I've been a shareholder for 99 years now so I just want to like.

Alright.

Get your thought on that like if I'm looking at it the right way and.

I think that's it's an interesting way to think about it and we would just need.

Can you kind of need on that a little bit more.

That's.

That's insightful.

Yeah Yeah.

At the end of the day at the end of day, what I'm trying to do is is I think real estate and real asset investing inherently has locked parks because a lot of times that the depreciation is like is it real is it not and I'm trying to figure out owners Ernie right and what I've been very pleasantly surprised being a shareholder in your company.

Is that the owners, earning in this <unk> business has been way better than any sorts of Bcf any switzer apply.

Multiple like it just like.

Just consistently surprises me to the upside and I think that like EBITDA multiple just isn't reflective and EBITDA less capex or EBIT multiple.

He is like way more accurate of a measure so.

Just some proof of thought there.

Okay.

Thank you for that failure.

We appreciate obviously, we appreciate all of your you know Youre out your thought and it's.

Uh huh.

And hopefully we can continue to stay the course and continue to build on the relationship.

Yeah, Yeah, I'm not going anywhere guys.

[laughter].

[laughter] I'll now go to anywhere you guys will have to deal with me for a long time, so that's a great.

That's a great problem for us to have.

[laughter] I mean, it creates a minor problem that I, you know I won't sell anything so theres no liquidity in the stock.

[laughter].

Okay great.

Appreciate all of us here.

Your oil for your support and your category.

We really do.

Yeah.

I appreciate everything you guys do and that that's all the questions and comments I have.

Okey doke.

Okay Yep.

We will take our next question from Phil Ratner private investor.

Hi, I was just wondering if you could flesh out a bit the cash balance how much of that is earmarked for capital first as well.

What is essentially freely available for things like share repurchases and other discretionary.

Types of investments.

Hey, Bill.

Hi.

We believe we have.

In the ballpark of.

$80 million earmarked for capital expenditures for 2024.

And we obviously want to keep.

A pretty healthy capital cushion and we have plans beyond.

2025.

The stock price will obviously.

Dictate.

The extent to which we make share repurchases has been in terms of.

Any kind of meaningful.

Share repurchase program.

I think that we would.

In terms of major.

You know.

Blocks of capital. It's it's it's all going to go back into.

To developing assets as opposed to share repurchases.

We're gonna enable opportunistically, if we have a chance but.

Yeah.

Not going to be.

A meaningful amount compared to what we put into development.

Thank you and then with respect to the.

Aggregates assets.

You said that you don't factor in the second lifestyle you into your NAV analysis.

If you were to include that second life value.

Can you provide any parameters around what you think an appropriate secondly valuation would be for your for your assets.

Yes, Bill I think that's.

It's so nebulous.

Given the timeline of events.

The two that come to mind are.

Fort Myers and.

Lake Louisa.

[noise] brooksville as well and.

Yeah.

Yeah.

A long ways away from from Fort Myers unlikely.

Uh huh.

I think that it would just be.

A pie in the Sky number it's essentially raw land and so in terms of going through entitlements and.

And.

Turning in permitting.

Right.

Yeah, just if I were to give you a number wouldn't be.

Based on anything.

[laughter] reality so.

We have.

Nothing to base. It on say right now is that prefer not to guess.

Is your comment around entitlements.

Perhaps suggesting that.

There might not be as much land value as investors might think because the entitlement process and the cost involved would be pretty significant relative to the to the second my value or is it just more that it's so far out in the future that.

Yeah.

Okay Yeah.

Okay, and then one last question.

Going back to the previous.

Questioner so this Martin Marietta transaction.

Seems like a very high multiple and if you look at Martin Marietta stock in stocks of comparable companies. These companies are trading at very high valuations.

You guys.

Clearly very opportunistic investors can you just comment on why.

Why you would continue to own these assets as opposed to monetizing them in what appears to be a pretty robust environment for these types of assets.

That's an interesting question I think one.

Uh huh.

You look at.

The way that they've pushed price.

Just the accelerated.

Growth of our income stream.

As good as the.

The valuations are.

<unk>.

I think we're going to take a bet on them.

Now outpacing the present value.

And it's.

To Bill's point.

Slapping an EBITDA multiple on a on the royalty stream that maybe that's not the appropriate way to look at it and I don't know.

Vulcan are martin or any of our other tenants appetite for.

Pouring money into reserves that they already control.

I think everybody's kind of happy with that.

The way things are we certainly are and.

Just from an after tax per se perspective.

If we had a.

At $300 million transaction that we have.

We're desperate to make.

Maybe that would be a source of liquidity, but to just sell the asset and pay the taxes on it.

That's certainly not.

The best use of.

The money, we generate from those assets.

Yes.

Got it and then.

Are there.

There are also I mean.

They have been.

$10 million a year with no debt on it as a tremendous cash flow engine.

The fuel that free development so.

You know I think we were really happy with that debt.

That income stream the way it is.

Thanks, so much but you know.

Do you want to pay.

Hill's valuation for them, we're all ears.

[laughter] well it just seems it just seems to me that you.

You know you don't know until you go out and hire a banker and run a process and.

No.

An environment, maybe like 12 months to 24 months ago.

Yeah.

The likelihood of finding a good bid might've been.

Not there, but you know the market has it seems like the market changed from my perspective, but maybe to your point.

They already control of the asset so what's the point, but you never know until you hire a banker.

Very true.

No just given our relationship.

Martin in bulk in a bad and appetite for buying.

Those assets are.

We'd probably hear about it.

<unk> asked it too.

The purchase of the Blanford property.

We were able to accomplish that because.

Of our relationship with Vulcan and they just add as a policy didn't want to put money in to reserves that they already controlled.

You are correct in that.

Don't ask don't get but.

Yeah, I think if they wanted to buy them.

The second they want to buy them are going to hear about it.

Yeah.

Okay Gotcha.

Well. Thank you for all the explanations right. It's very helpful. Appreciate it yeah, absolutely bill.

Just to follow up on that real quick.

For the last.

10 years.

Aggregates valuations on an EBITDA basis. It then.

Historically high and so.

Two years ago, if we yeah, we could have looked at it and said.

Yeah.

Constraining at 20 times.

Let's sell these things and obviously we would have.

Forgone, a really incredible.

Incredible.

Growth in our royalty stream so.

We're long on the aggregates industry.

It's in our blood.

Unless.

Unless something very seriously changes, we're going to continue to use that.

That cash flow stream to field development.

Uh huh.

Yeah.

Okay.

It appears that we have no further questions at this time I will now turn the program back over each of our presenters for any additional or closing remarks.

Before we go I just want to congratulate.

David The Valley Junior on his election to the board of directors yesterday as its vice chairman.

David has given his professional life to this company.

He is the backbone.

<unk>.

What this company has become and it's a well deserved honor. So I just wanted to congratulate him.

Okay.

And I want to thank you all and we appreciate your continued.

Investment and interest in the company.

And really appreciate all the questions you had so thank.

Thank you and that concludes this call.

This does conclude today's program. Thank you for your participation you may disconnect at any time.

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Hum.

Mhm.

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Hum.

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