Good morning, everyone. Welcome to today's FRP Holdings First Quarter 2024 Earnings Conference Call. [Operator Instructions] Also today's call is being recorded. And now at this time, I'll turn things over to our host, Mr. John Baker III, Chief Executive Officer. Mr. Baker, please go ahead. .

Good morning. I'm John Baker III, Chief Executive Officer of FRP Holdings, Inc. And with me today are David deVilliers, Jr., our President; John Baker II, our Chairman; David deVilliers III, our Chief Operating Officer; John Milton, our Executive Vice President and General Counsel; and John Koppenstein, our Chief Accounting Officer.

As a reminder, any statements on this call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially as indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings.

We have no obligation to revise or update any forward-looking statements, except as imposed by law as a result of future events or new information.

To supplement the financial results presented in accordance with generally accepted accounting principles, FRP presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. 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 and to monitor, assess and identify meaningful trends in its operating and financial performance. This measure is not and should not be viewed as a substitute for GAAP financial measures.

To reconcile net operating income to GAAP net income, please refer to the segment titled non-GAAP Financial Measures on Pages 9 and 10 of our most recent earnings release.

Any reference to cap rates, asset values, per share values or the analysis of the estimated value of our assets net of debt and liabilities are for illustrative purposes only 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 the sale of the asset or the associated costs or tax liability.

Now for our financial highlights on the first quarter. Net income for the first quarter was $1.3 million or $0.07 per share versus $565,000 or $0.03 per share in the same period last year.

This 130% increase in net income over the same period last year was driven by a $95,000 decrease in interest expense and a $400,000 increase in interest income, a $600,000 decrease in equity and loss of joint ventures due to the lease-up of the verge as well as a slight increase in revenue and operating profit from better Multifamily and Industrial and Commercial segment results, offset by decreased royalties from the Mining Royalty segment and increased losses in the Development segment.

Pro rata net operating income for the first quarter was increased 22% from $6.99 million last year to $8.53 million in the first quarter of 2024. This increase in NOI was primarily due to a 92% increase in Multifamily NOI as well as a 36% increase in Industrial and Commercial NOI compared to the first quarter last year.

This increase in Multifamily NOI was driven partly by improved results at Dock 79 and the Merin compared to last year, but mostly by the addition of 2 assets to this segment due to 408 Jackson and Greenville and Bryant Street in Washington, D.C., achieving stabilization.

Yesterday, we posted to our website a REIT slide show financial highlights for the first quarter. For those who have not yet seen it, we are now publishing an estimated value of our assets net of debt and liabilities. This sum of the parts analysis yielded a per share value in the range of $32.89 to $36.59 per share.

Before I turn the call over, I want to congratulate David deVilliers III on his promotion yesterday to Chief Operating Officer. David or D3 as he's known among his colleagues, is an invaluable member of our management team, which is not surprising because he studied at the feet of a master.

David, on a personal level, if you'll indulge me, I just want to say how proud we are to have you as a member of the team, and we look forward to working with you in this new capacity as we start the next chapter in this company's history. I will now turn the call over to our new COO, David deVilliers III for his report.

David?.

John, thank you for those kind words. I'm humbled and look forward to filling this role. Allow me to provide an operational perspective on the first quarter results of the company. Starting with our Commercial and Industrial segment.

This segment consists of 9 buildings totaling nearly 550,000 square feet, which are predominantly warehouses and all located in Maryland. At quarter end, the buildings were 95.6% occupied. Total revenues and NOI for the quarter totaled $1.45 million and $1.16 million, respectively, an increase of 36% and 47% over the same period last year.

Moving on to the results of our Mining and Royalty business segment. This division consists of 16 mining locations, predominantly located in Florida and Georgia with 1 mine in Virginia. Total revenues and NOI for the quarter totaled $2.96 million and $2.76 million, respectively, a decrease of 10% and 12% over the same period last year.

The primary reason for the decrease is due to a reduction of royalties at our Manassas quarry to resolve a calendar year 2023 $842,000 overpayment by our tenant, who overestimated a portion of production tons, which is shared with other property owners.

As to our Multifamily segment, this business segment consists of 1,483 apartments over 117,000 square feet of retail located in Washington, D.C. and South Carolina. At quarter end, the apartments and retail space were 94% and 79% occupied. Total revenues and NOI for the quarter were $11.2 million and $6.8 million, respectively.

FRP's share of revenues and NOI for the quarter totaled $6.66 million and $3.8 million, respectively. This is a significant increase over prior quarters due to our Bryant Street and 408 Jackson joint ventures being included in this segment as of January 1, 2024.

As a same-store comparison, FRP shares of revenues and NOI for the quarter totaled $3.35 million and $2.09 million, respectively, an increase of 2% and 4% over the same period last year. Now on to the Development segment.

This segment is where we acquire, entitle, develop and create new income-producing assets that are transferred into our Commercial, Industrial and Multifamily business segments upon reaching certain completion and occupancy benchmarks.

The segment uses capital to entitle and develop lands and fund our vertical construction endeavors with the goal of turning our non-NOI producing assets into NOI-producing assets.

The segment also lends funds to strategic partners and ventures to prepare and develop lands for sale to national homebuilders in exchange for interest and/or profit sharing.

In terms of our Commercial, Industrial, Development pipeline, our 259,000 square foot state-of-the-art Class A warehouse building located in the Perryman industrial sector of Hartford County, Maryland, is well under construction and expected to be delivered in Q4 of this year. We have entered into 2 new joint venture agreements with BBX Logistics.

The first provides for the construction of a 200,000 square foot warehouse building in Lakeland, Florida. The site is centrally located along the I-4 corridor between Tampa and Orlando. Permits for the development should be in hand during Q1 of 2025.

The second provides for the construction of some 180,000 square feet of warehouse product in 2 buildings in Broward County, Florida. The site is minutes from Port Everglades and the Fort Lauderdale Hollywood International Airport with frontage on I-595, accessing the Florida turnpike and I-95.

Permits may be enhanced by the first quarter of 2025 as well. In Cecil County, Maryland, along the I-95 corridor, we are in the middle of predevelopment activities on 170 acres of industrial land that will support a 900,000 square foot distribution center. We look to secure permits in Q2 of 2025.

Finally, we are studying multiple conceptual designs for our 55-acre track in Harford County, Maryland. Our various configurations should yield between 625,000 to 650,000 square feet of industrial product consisting of multiple buildings.

Existing land leases for the storage of trailers, on-site helped to offset our caring and entitlement costs until we are ready to build, which could be as early as 2025, pending favorable market conditions.

Completion of these industrial commercial development projects will add over 2.1 million square feet of additional industrial commercial product to our industrial platform, growing the business segment from 550,000 square feet to over 2.7 million square feet.

As to our Multifamily development pipeline, we have our newest project in the district known as Verge. At quarter end, the 344 residential units were 91.6% occupied with 45% of its 8,536 square feet of retail spoken for. Total revenues and NOI for the quarter were just under $2 million and $987,000, respectively.

FRP share of revenue and NOI for the quarter totaled $1.22 million and just over $605,000, respectively. Although our emphasis is on the industrial assets at this time, we will keep watching on market conditions and their impact on 4 multifamily projects that reside in our Development segment.

These projects represent over 1,200 apartments and 58,000-square feet of retail. Turning to our principal capital source strategy or lending ventures, I have the following updates to our 2 current projects. Amber Ridge in Prince George's County, Maryland, consisting of 187 lots is completely [ sold out ].

Final development activities to get off bonds are ongoing and upon completion of this project, interest income and profits are expected a total $3.8 million, a 20% profit on funds drawn. Our second lending venture, Presbyterian Homes, or Aberdeen Overlook consists of 344 lots located on 110 acres in Aberdeen, Maryland.

We have committed $31.1 million in funding, $23.1 million was drawn as of quarter end and over $5.8 million in payments were received to date. A national homebuilder is under contract to purchase all the finished building lots, and we expect to receive a minimum 20% profit on funds drawn.

We also continue to entitle Hampstead Trade Center, which consists of 255 lots located in Hampstead, Maryland, and to explore second-life residential build-out options for acquirees in the South.

The knowledge gained through our lending ventures has offered management a unique opportunity to leverage this development expertise, apply it to our mining lands and potentially scale this strategy while creating a second life for our mining lands.

In closing, we remain pleased with the company's performance and excited about the growth potential being created in our development segment. Interest rates, inflationary pressures on expenses and construction costs, and existing supply and deliveries will continue to create headwinds and enhanced scrutiny for new development starts.

We do continue to move forward and seek entitlements for our development pipeline with several permits expected in 2025. Upon receipt of these permits, management will remain patient, calculated and cautious in pulling the trigger on vertical construction. Thank you, and I'll now turn the call back to John. .

Thank you, David. Not to put too fine a point on it, but the market conditions as described by David, have for some time led us to believe that our best path forward in the immediate future lies in industrial development. Returns are currently better than those multifamily projects and are less capital intensive and less reliant on debt.

Industrial development has always been our core competency, and we are excited to move forward on the projects we have in the queue.

Market and economic conditions will need to remain favorable, but the 5 industrial projects David described represent an estimated $191 million in CapEx for the company, which we have underwritten at a 6% to 7% return -- excuse me, 6% to 7% NOI yield on cost. This ability to pivot between asset classes is one of our strengths as a company.

The economy remains strong, but margins have tightened, costs have gone up and it requires real skill and the right assets to execute on projects that are accretive to investors.

We believe we are in an excellent position to do just that because we have a strong balance sheet combined with expertise across a number of asset classes from a nimble and energetic management and operations team. Before we open it up to questions, I want to take a moment to acknowledge our Chairman, John Baker II, who retired as CEO yesterday.

This company was wildly fortunate to have John Baker at the home for both his 10 years as CEO. The first time around he helped guide the company through the worst financial crisis of any of our lifetimes.

In his second tenure, he helped engineered the sale of our warehouse assets in 2018, which was not only a significant liquidity event but sparked a massive transformation in the direction of the company, of which he oversaw. His career in the aggregates industry is legendary. And he's universally respected among his peers, of which there are very few.

It also happens to be the greatest man I've ever known. As retirement leaves huge shoes to fill, and I'm incredibly humbled by the opportunity to continue his legacy. We are now happy to answer any questions that you might have. .

[Operator Instructions] And we'll go first this morning to Stephen Farrell of Oppenheimer Close. .

Congratulations to you both. .

Thank you, Stephen. .

I had a quick question. You mentioned financing a portion of the industrial cost with debt.

And do you know how you would do that? Would you mortgage some of the existing properties or would it be a construction loan or corporate level debt?.

David, do you want to take that?.

Sure. 2 projects that we would look to finance it would be construction debt, and those would be the 2 Southern Florida assets. .

And those are smaller in square footage compared to the other 2, correct?.

Correct. .

Yes, compared to the 2 Baltimore projects that we have. .

Yes.

And how much would a similar LTV as your residential, about 50%?.

We would test the -- I mean we would test the market. We'd have to see where so for rates, the spreads, we would just have to see where the credit markets are kind of Q1 2025 and just see what makes sense. But I would -- I think you're correct. I think the range is somewhere in that 50% to 55%. That would be my guess. .

And how is Phase I with Steuart affected by the undertaking of these development projects in the next 18 months? How should we think about the time line for development there?.

Steuart, again, Steuart, we're looking to secure permits, we'd look to secure them in Q1 2025. And at that time, we got to see what the wash-in market at Buzzard Point is at that time. A lot of supply is coming on time, and it just may not be the right time to pull the trigger there. But our balance sheet is pretty strong.

We have a partner at all 3 of these projects. And if market conditions warrant, we certainly could do -- we could do these projects, but we've got to make sure that the market is right for it. The appetite to move forward on Steuart, as things currently stand at the D.C. market is not there on our end, and it's not there on the Steuart end.

If you recall, this land has been in their family for a very long time, and it's a huge opportunity for them. They're not -- they don't need to move forward on it and they're not going to until everything lines up perfectly and all signs point yes. They're not incentivized --.

And when you first announced it --.

Sorry, what is your question --.

When you first announced the deal, there was kind of the 4-year development time frame for like one building or phase every 4 years. So that's -- there's nothing sort of -- there's no hard line of this development has to start by X date. .

Nothing that can't be extended, David III was the architect of the contract and agreement between the Steuart and us and MRP and they crafted an agreement that is really beautiful because everybody incentives are aligned in the same direction.

We do not execute on the purchase of that land until they say, yes, and they're not going to say, yes, if the underlying value of the land is depressed. And so the market's got to be right in order for them to achieve full value for their land and the market has to be right in order for us to move forward to want to execute this property.

And so we are complete -- our incentives are completely aligned with the Steuarts. It's just not going to happen until it's the right time for it to happen. .

And maybe I missed this.

Was there any comment on rents for the Maren, Dock in Bryant Street?.

We did not report on any of those. As it relates to rents, what --.

Just renewals --.

Okay. At Dock and Maren, our renewals for the quarter were pretty strong. They were up, call it, 2.5% on both of those assets. Our South Carolina assets, 408 Jackson in Riverside, renewals were also strong.

Renewals at 408 Jackson were about 3.5% and the trade-outs were 7.3%; Riverside was 1.6% on renewals and trade-outs were pretty flat; at Bryant Street, very strong; at Coda, renewals were 8.2% and trade-outs were 9.7% and Chase renewals were 4% and trade-outs were 7%; at Verge, it was relatively flat. It's a new project.

It hasn't reached kind of occupancy and moved into our multifamily segment, but excited where more things are going there. .

[Operator Instructions] And gentlemen, it appears we have no further questions this morning. Mr. Baker, I'd like to turn things back to you for any closing comments. .

Thank you all, and we appreciate your continued investment and interest in the company. .

Thank you, Mr. Baker. Ladies and gentlemen, that will conclude today's FRP Holdings first quarter 2021 earnings conference call. We'd like to thank you all so much for joining us and wish you all a great day. Goodbye..