John Baker - Chairman and CEO David deVilliers - President John Milton - CFO John Klopfenstein - Treasurer and CAO.

Bill Chen - Rhizome Partners.

The following is a recording for John Milton with Florida Rock Properties Incorporated on Tuesday, May 8, 2018 at 1 p.m. Central Time. Excuse me everyone, we have John Baker in conference, Executive Chairman and CEO of FRP Holdings Incorporated. Please be aware that each of your lines are in listen-only mode. And at the conclusion of Mr.

Baker presentation, we'll open the floor for questions and at that time instructions will be given as the opportunity follows you would like to ask a question. I'd now like to turn today's conference call over to Mr. John Baker. Sir, you may now begin..

Thank you and good afternoon. As mentioned I am John Baker, Chairman and CEO of FRP Holdings Inc. With me today are David deVilliers, our President; John Milton our CFO; and John Klopfenstein our Chief Accounting Officer. Before we begin, let me remind you that this call may contain forward-looking statements.

Such statements reflect management's current views with respect to the business and its financial results related to future events and are based on assumptions and expectations that may not be realized and are inherently subject to risks and uncertainties.

Future events and actual results, financial or otherwise may differ perhaps materially from the results discussed in such forward-looking statements. Additional information regarding these and other risk factors may be found in the company's other filings made from time to time with the Securities and Exchange Commission.

You all have seen our numbers, sales for the quarter were up 36% from the March 31, 2017 quarter driven primarily by the inclusion of our Dock 79 apartment project into our financials. Earnings of 1,560,000 were up 8% versus last year.

Our asset management segment earnings were up 8%, royalties were flat, and Dock 79 showed a loss because of the huge depreciation and amortization on that asset. A more revealing metric is our net operating income which was up 22% over last year.

During the quarter we concluded negotiations with an affiliate of Blackstone Real Estate Partners to sell them our 41 warehouses located primarily in the Baltimore-Washington market for $358,900,000. Pending shareholder approval at our Annual Meeting on May 14, we expect to close on this transaction the following week.

It is our belief that the combination of low but rising interest rates, the current low cap rates that industrial assets are going for and the enactment of the corporate tax reduction made this an opportunistic time for us to sell.

Assuming the sale goes through, our charge will be to invest the after-tax proceeds in projects that yield a better return on our investment. We are looking at several opportunities with both save taxes as a 1031 exchange and net acceptable returns, but we are a long way from pulling the trigger on any other.

Our goal is to proceed conservatively knowing full well that we're late in the cycle and facing expensive cap rates on the back side as well. Cash is a wonderful asset and we will treat dearly. We will look for opportunities to develop properties or by aggregate assets is our target.

If unsuccessful we may buy stock back or we many return the cash to our investors as dividend. Let me now turn the conversation over to David deVilliers. We hopefully will have sold a large percentage of our revenues and assets within a few weeks and I have asked him to focus on what your company will look like after the sale.

David?.

Thank you, John, and good day to those on the call this afternoon. As John articulated in his opening remarks, we had a busy and I must say a productive quarter in all of our business segments.

Normally at this time I would be reporting on the performance of our asset management business segment but in light of the proposed upcoming sale it would appear to make the metrics for first quarter of 2018 somewhat in consequential. I am happy to provide them during the Q&A if asked.

Relative to our Mining and Royalty segment, revenues increased slightly for the quarter just ended over the same period last year by 0.6% or of that $10,000 to $1,772,000. This is mainly due to increases in tonnage sold at several locations offset by unusually harsh winter and logistical issues of the few of our more northern location.

Total operating profit in this segment was flat at a $1,541,000 a decrease of about 18,000 over the same period last year. We expect aggregate pricing to improve and volumes to pick up at Fort Myers as our tenant begins to mine more on our property.

Finally, as we had mentioned last quarter our tenant Cemex received approval from the appropriate authorities to mine our property at Lake Louisa. The county should issue the mining permit during the third quarter of 2018 and Cemex expect to begin mining operations by the end of 2019.

With respect to our land development and construction segment, this segment is main driver behind our growth and as John mentioned in his opening remarks we have a lot of work to do. In any event this segment generates minimal revenues but incurs significant cost to accomplish its objective.

Capital expenditures in this segment for the quarter were $925,000 most of which were attributable to the ongoing construction of our latest spec building at the Patriot Business Park in Manassas, Virginia. This is our final building in this park. It is also part of the proposed warehouse sale.

In addition to the actual capital outlays, an extensive amount of time during the quarter was spent on many development projects, including; one, working with our joint venture partner, with the ongoing management Dock 79 for Phase 1 at RiverFront.

Two, finalizing the predevelopment activities for the next phase of RiverFront or Phase 2, three, further to refining of entitlement request for both our Hampstead property and a new residential land development and building lot sale projects entitled Essexshire, that will consist of 129 single family dwelling lots.

Both plans include several multifamily product types in order to maximize each assets profitability and expedite their disposition.

And finally we’ve been working with our joint venture partner as we begin to move toward completing construction this fall and the beginning of the marketing of Phase 1 of our Windlass Run Business Park venture which now includes four buildings totaling 100,000 square feet of single story office and small retail space.

At fall build out, this project will provide over 325,000 square feet of single story office and small bay retail Relative to our Riverfront on the Anacostia business segment, the Washington business journal had its annual award ceremony for best deals of 2017 earlier this month announced the Dock 79 with the place recipient in the best residential real estate project for 2017 category.

Needless to say we’re proud of this achievement. As for the metrics, occupancies as of March 1 were down slightly from the previous quarter to 90.8% along with percentage leased down to 91.8%. This was down slightly from the previous quarter, but the winter months historically are caused for a slight fall off in traffic and related new occupants.

The velocity has picked up recently and we have every reason to believe occupancy will reach higher levels by the end of the second quarter. As a matter of fact, this past Sunday our occupancy level was back to 94.7%.

More importantly as the first generation of leases have expired, we continue to exceed our budgeted success rates and rental rate increases. This past quarter the retention rate was 62% at an average rental increase of 2.8%. Also during the quarter the second retail space open for business and has been received with great enthusiasm by the public.

The retail component of Dock 79 which totaled 14,176 square feet with 46% occupied and 76% leased as of the end of the quarter. The third of four retail fleets is currently under construction and will not be ready to serve the public until after the baseball season in October.

In conclusion to echo John’s comment earlier, this past quarter was one of our most important ever for obvious reasons. Our portfolio of industrial real estate of decades to put together and the majority of the assets came from land we purchased developed and ultimately managed ourselves.

The reduction in corporate income tax rate combined with such a low cap rate environment that John had said earlier was just simply too good an opportunity to pass on. Though monumental, the sale of such a substantial portion this company will not leave us wanting for things to do.

Some of the larger projects include the vertical development of the remaining five building lots at two of our business parks in Hollander and Lakeside capable of handling over 500,000 square feet of warehouse office building, and the remaining phases of RiverFront on the Anacostia will require our attention not only in the near term but for well into the next decade.

And finally, our aggregates royalties and the second life of the quarries will be generating returns for this company and occupying management time for longer than many of us will be around.

In the short term, though, we will be hard at work on Phase 2 of RiverFront on the Anacostia consisting of 264 apartments and 6900 square feet of retail which broke ground in early April.

Constructing a spec warehouse of some 95,000 square feet at Hollander Business Park, which also broke ground in April, completing construction and beginning to lease up for the first phase of our joint venture of [indiscernible] business center and other projects mentioned above.

But most importantly, our greatest priority will be determining the highest and best use for the proceeds of the sale.

So in addition to seeking appropriate and opportunistic investments to replace the elimination of 60% of our revenue stream resulting from the sale of the warehouse platform, we also have a lot of exciting new projects in the Q and look forward to converting them into income production. Thank you. And I’ll now turn the call back to John..

Thanks David it's a great report. Now we turn it over for questions if you all have any..

[Operator Instructions] Our first question will be from Bill Chen with Rhizome Partners..

I just want to thought by saying that I really commend you guys for pulling the trigger on something that - I had some various companies that are investing book would not have done which is take the opportunity from Blackstone and sell that what you consider to be a very attractive cap rate.

So I really want to sort out by commending you guys for likely a tough decision which is probably similar to what you guys did over 10 years ago with the aggregate business and I think you guys do this and have a lot of credit for that.

My question really kind of surrounds on the - we've now got a lot of cash and may be if it possible you could go to all the detail on what we would do with that. I think you guys have mentioned there is some potential pent-up opportunities to the first some of our taxes.

And then the shares kind of trade higher today then they have in the past, probably the highest through the highest that have in a long time. And then is there a number you could provide on how much capital we could kind of put back into the ground and just so that I could pass a good sense of where that cash goes.

And just - if the answer is - what we like to sit on some dry powder and take advantage of it [indiscernible]?.

First of all Bill thanks for your nice words, I appreciate it and I think all of us do. The answer to your second question is the question we wake up with every morning. We are looking at some properties but we are a long way from pulling the trigger as I mentioned because we're doing due diligence, we’re trying to make sure that we’re comfortable.

We do not want to let this money burn a hole in our pocket and so we will look at these opportunities carefully. It's always a temptation to try to save the taxes. But it will not be a temptation for us if we do not think it is a good sound investment on its own.

And so that's what we’ll spend the next - certainly the next 45 days because in order to get 1031 that’s what we have to identify any properties we might do but it will be - we also didn’t have six months. So it will be an evolution, we’re looking at some aggregate properties, we’re looking at potential development properties.

I think those are what we do best and that’s where we would like to focus our energy. I appreciate your comment about keeping dry powder.

My thought is very similar the way I interpreted yours, now would not be a great time to buy stock in but you don’t know, I mean we will weigh that if we are unable to find things that we're comfortable with, then we’re going to dividend the money out to you.

I'm not saying it will be in six months or a year, but it will be when we come to the conclusion that we're not adequately and appropriately will be pulling the property and we’ll make sure you get your money back..

Thank you for that response, I probably trust any sort of capital allocation positions that you guys make will be best for all shareholders. Just a little follow-up and I really do mentioned, I really do mean everything that I said earlier about your position to sell I think that’s well deserved.

Just following up on last part of my previous question is, any estimate on how much of the capital could go into the existing development project that we have just so that I could understand how much will be put to work and earn a development style return on that capital?.

David you want to take a cut at that, the answer would be the equity and debt we put into Phase 2 which is….

We’re going to put the Bill probably in the neighborhood of about $20 million into Phase 2..

Starting into warehouse..

We've got a new spec building warehouse that we just started that's about 7.5 million. We’re doing some permitting and beginning to permitting for the next one after that. We've got a couple of these land development projects that are going through the entitlement process that will ultimately be sale type programs.

So we've got - take a number right off the bat - on the drawing board we’ve got probably close to about $35 million scheduled and as John said we’re looking at some other potential acquisitions but we really don't have any real graph be added to exactly what they are and if there is any really interest..

[Operator Instructions] I am showing no further questions at this time..

Well thank you very much for joining us. For those of you who are shareholders we have our Annual Meeting next Monday where we will vote on the sale of the warehouses. I hope you will join us, and if not we will see you or talk to you next quarter. Thank you so much..

Thank you. Ladies and gentlemen this concludes today's teleconference. You may now disconnect..