FRP Holdings Inc Stock

Good morning, ladies and gentlemen, and welcome to the FRP Holdings, Inc. Second Quarter 2026 Earnings Call. [Operator Instructions] At this time, it is my pleasure to turn the call over to Matt McNulty.

Thank you, Mike. Good morning, and thank you for joining us today. I'm Matt McNulty, Chief Financial Officer of FRP Holdings, Inc. And with me as speakers today are John Baker, III, our CEO; David deVilliers, III, our President and Chief Operating Officer; and Mark Levy, our Chief Investment Officer. Also joining us on the call are John Baker, II, our Chairman; David deVillier, Jr., our Vice Chairman; John Milton, our Executive Vice President; and John Klopfenstein, our Chief Accounting Officer.

As a reminder, any statements on the call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings. Additionally, to supplement the financial results presented in accordance with generally accepted accounting principles, FRP presents certain non-GAAP financial measures within the meaning of Regulation G.

The non-GAAP financial measures referenced in this call are net operating income, or NOI, pro rata NOI, funds from operations, or FFO, and FFO per share. We also reference debt service coverage and net debt as a percentage of the fair market value, which are not measures calculated in accordance with GAAP. FRP uses these non-GAAP financial measures to analyze its operations and to monitor, assess and identify meaningful trends in our operating and financial performance.

These measures are not and should not be viewed as a substitute for GAAP financial measures. To reconcile net operating income to GAAP -- to GAAP net income, please refer to our most recently filed 10-Q, earnings press release and our quarterly earnings deck published on our website.

I will now turn the call over to our President and Chief Operating Officer, David deVilliers, III, for his report on operations. David?

Thank you, Matt, and good morning, everyone. The second quarter unfolded largely as we expected. Industrial leasing continues to take longer than we originally underwrote, but tenant activity continues to improve. Our balance sheet remains exceptionally strong, and our long-term strategy has not changed.

Let me begin with where FRP is headed because it frames everything we do. At FRP, disciplined capital allocation is at the core of our strategy. We continually evaluate where each incremental dollar can earn the highest long-term risk-adjusted return. That philosophy has created a portfolio and pipeline that includes industrial, multifamily and mining royalties. Each business generates recurring NOI, creates long-term shareholder value and plays an important role in our company.

As we look ahead, however, we believe our greatest opportunity is industrial. Industrial real estate includes logistics, manufacturing, distribution and service-oriented industrial users. This offers the most attractive long-term investment opportunity across our markets. Accordingly, we expect most of our future discretionary growth capital to be invested in expanding our industrial portfolio.

We are not changing who FRP is. We are changing where incremental capital goes. Our objective is to grow industrial into a larger contributor to NOI and FFO over time while continuing to own, operate, develop and maximize the value of our multifamily and mining businesses.

Our Riverfront project along the Anacostia River illustrates that philosophy well. It is not simply another multifamily development. It is a legacy land position where years of entitlement, infrastructure investment and development have created value and returns that would be difficult to replicate by acquiring a comparable site today. Those legacy opportunities remain an important part of FRP's long-term value creation.

Together, these 3 businesses provide recurring NOI, financial strength and the flexibility to continue investing for the long term. We are executing that strategy from a position of financial strength. We ended the quarter with approximately $130 million of liquidity, including approximately $101 million of cash, supported by a conservatively leveraged balance sheet. That financial strength gives us the flexibility to lease, stabilize and selectively invest while maintaining the discipline that has long defined FRP.

For the quarter, we generated approximately $9.4 million of pro rata NOI and FFO of approximately $4.1 million or $0.21 per share. During the past year, the acquisition of the Altman Logistics significantly expanded both the scale of our industrial platform and the operating capabilities needed to execute this strategy. As our current industrial development pipeline delivers to the first quarter of next year, our industrial portfolio will grow from approximately 800,000 square feet at the end of 2025 to approximately 2.1 million square feet.

Encouragingly, leasing momentum continues to improve. Property tours, proposals, tenant discussions and active negotiations have all increased across multiple markets. We have signed approximately 20,700 square feet and have another approximately 97,500 square feet in active lease negotiations. While lease execution remains uneven, tenant activity today is materially stronger than it was a year ago, giving us greater confidence that occupancy and FFO will improve as more of those discussions convert into signed leases.

Mining generated approximately $4.1 million of NOI during the quarter, an increase of approximately 12% year-over-year. It remains a highly efficient business that produces durable recurring cash flow while requiring very little incremental capital and continues to provide important funding and balance sheet flexibility for our development strategy. The multifamily development pipeline will deliver 510 units in Greenville, South Carolina and Estero, Florida in the first quarter of 2028, growing the portfolio from 1,827 units to 2,337 units.

Within multifamily, the operating environment remains mixed. Greenville continues to perform well, while Washington, D.C. continues to be affected by elevated new supply and higher delinquency. We continue to view the supply pressures as cyclical rather than structural, although collections and delinquency remain influenced by the district's regulatory environment. Our focus is straightforward: operate the portfolio well, complete the developments already underway and continue creating long-term value through disciplined execution.

Multifamily remains an important business for FRP, just as mining remains an important business. And together, they complement the continued growth of our industrial platform. Together, our industrial and multifamily development pipeline discussed above represents approximately $506 million of total project costs and approximately $34 million of expected stabilized NOI, of which approximately $16.6 million is FRP share. Our objective is straightforward: deliver these projects, lease them, stabilize them and maximize the value they create for shareholders.

We now expect full year NOI of approximately $36.2 million, compared with our original plan of $37.1 million. The roughly $900,000 reduction primarily reflects $800,000 from delayed industrial lease-up and $1 million of operating headwinds in our Washington, D.C. multifamily portfolio. This is partially offset by the $850,000 of stronger-than-expected mining performance. Near-term FFO will continue to reflect lease-up timing, elevated platform costs and higher interest expense.

Importantly, the investments we have made in people, systems and technology have established the operating platform needed to support a much larger company and should generate meaningful operating leverage as occupancy improves. Our balance sheet remains one of our greatest competitive advantages with debt service coverage of approximately 2.82x and net debt equal to approximately 19% of fair market value and substantial available liquidity.

Our strategy is straightforward: continue leasing our industrial portfolio, deliver and stabilize the developments already underway, maintain one of the strongest balance sheets in the industry and continue investing in the long-term growth of our industrial platform while maximizing the value of the multifamily and mining businesses we already own. We believe consistent execution against those priorities will create substantial long-term shareholder value.

With that, I'll turn the call over to Mark Levy, our Chief Investment Officer.

Thank you, David, and good morning. I'd like to spend a few minutes providing some perspective on our industrial portfolio, what we are seeing in the leasing market today and how we are positioning the business as the current development cycle continues to evolve. An important place to start is where we are in the life cycle of the portfolio. A significant portion of our development pipeline has either only recently delivered or still approaching completion. This is against the backdrop of improving leasing fundamentals. Although tenant decision-making remains deliberate and transaction time lines remain longer than historical norms, activity overall has significantly increased as tenants across the spectrum continue to have solid operational results and maintain strong corporate balance sheets.

Most tenants are focused on the necessary investment to continue growth and increase market share. We are observing a manifestation of this across our portfolio. We currently have in process more than 110,000 square feet of renewals and pending new transactions, which is significant in the context of our available vacancies and have seen a notable increase in new-to-market leasing activity, particularly at Delray, Davie and Lakeland, the latter 2 of which have not yet reached substantial completion.

While concessions remain elevated prior -- relative to prior cycles, rental rates have remained quite resilient. The supply environment is also becoming increasingly constructive. Nationally, the industrial construction pipeline has contracted roughly 60% from its 2022, 2023 cycle peak. At the same time, absorption is strengthening.

We believe this combination should create an increasingly favorable supply-demand environment for projects delivering in the near to immediate term. This dynamic is particularly evident in our core markets of Florida, New Jersey and Maryland, where regulatory constraints, development restrictions and community opposition have made bringing new industrial supply to market increasingly difficult.

Last, we have made meaningful changes to how we approach leasing and marketing across the portfolio. We have changed almost all elements of our leasing playbook anchored by leaning heavily into long-standing relationships with tenants and the brokerage community. Those relationships are an important competitive advantage and differentiator as we work to convert this activity to executed leases.

Looking ahead, our priorities are consistent and remain unchanged. We remain focused on incremental improvements in occupancy quarter-over-quarter while selectively advancing new opportunities in core logistics markets supported by long-term demand drivers and meaningful barriers to entry. While the near-term objectives of leasing are indisputable, it is equally important we seek to build enterprise scale as we transition to a highly focused industrial operating and investment platform.

With that, I'll turn the call over to John Baker for his closing remarks.

Thank you, Mark, and good morning to everyone on the call. Overall results for the quarter were down modestly versus a year ago, but largely in line with our expectations, reflecting the occupancy pressures that have affected our D.C. multifamily assets and our Maryland industrial portfolio over the past several quarters. Those headwinds are still with us. But as I said last quarter, we've begun to see increased inquiry and leasing activity across most of our markets. That activity and engagement with potential tenants remains much higher than last year.

We just have yet to see that activity and engagement translate into additional signed leases. The optimism I expressed in Q1 remains, albeit a more cautious optimism. But as David said, execution is the priority, and we are focused on the things we can control. We have strengthened our leasing team to bring it in line with our stated focus of getting our industrial and logistics assets leased and stabilized.

As I said before, the single most important lever we have to improve the company's performance is same-store leasing. It has the most immediate impact and requires very little capital relative to development. It remains management's top priority. And while we did not see our efforts translate into tangible results, all of us are of one mind that given our assets and the team behind them, we will. Focusing on process over results is a cliche for a reason. It's true.

Operator, let's open the call for questions.

[Operator Instructions] Our question comes from Bill with Rhizome.

I'm trying to figure out what's going on in the multifamily in D.C. We own Camden, and obviously, rent and NOI trends are weak everywhere in D.C. in the Sunbelt. But it doesn't -- it seems like the D.C. assets owned by FRP is getting hit a little bit harder. Can you give -- provide some color on that?

Sure, Bill. Good to hear from you. I mean to get a little granular with D.C., I would say that our renewal increases, we are seeing positive. Across the board I would say all of them are above 1.5% in terms of renewal increases for this quarter. Where we're really getting hit is trade-outs when people leave and we've got to bring new tenants in, the trade-out rates are 10% lower than the previous tenant. So there's a focus on keeping tenants for sure, and our renewal rates on tenants are above 50%. So that's the good part.

The tough part is about 8% of these tenants aren't paying, and that's the real headwind. And it's really a product of the district's policies. And right now, the court systems are packed with all of us trying to get these tenants out. I mean we're looking at 12 months, 18 months to get these tenants out. So once a tenant stops paying and that delinquency stays with us for a long, long time. And that's kind of the landscape down in D.C. right now.

And I don't see it changing anytime soon. We're getting better at interviewing and preempting delinquencies, which has helped some. I would say that our economic occupancy this quarter has ticked up probably 75 basis points, and we hope to continue to see that trend. But we still have a pretty significant delinquency headwind from occupancy to economic occupancy.

Okay. So I would like to clarify, is that consistent across Maren, Dock 79, Bryant Street and Verge? Or is it more heavily weighted towards a Bryant Street, which is -- I spent a lot of time on the ground there. The Maren and Dock are, in my opinion, are one of the more premier assets down there with market-leading rent. Is the issue across the whole portfolio in D.C.? Or is it just specific to certain properties?

It's across the board. It's across the board. It really is.

Yes. It's -- unfortunately, it's all related to what David said is the district's policies on being able to evict tenants, and it takes so long that people have learned this. I mean, there's whole scams out there about it, and they're coming into the building knowing they're never going to pay rent. So it doesn't matter what building it is. They just -- if they can get past the guard gate and get a lease signed, they don't intend to pay. That's the big problem. And it's not everybody, obviously. I mean most people are good people and they pay the rent. There's just -- there's a small portion of people out there that have figured out this problem and are taking advantage of it, and the district has got to do something to fix it.

And David, correct me if I'm wrong, but the issue of delinquencies has been something of a constant and the extent to which it impacts us has sort of ebbed and flowed from quarter-to-quarter. The real issue that's been hitting us hard lately is just increased supply in the kind of Anacostia submarket of D.C., right?

I mean the supply really hurts us on the trade-outs. We're trying to compete with all these new deliveries and concessions are up to attract trade-outs, we've got to compete against that. So that's a piece of it. Again, as the supply gets filled and that asset kind of moves into a more stabilized position, we're kind of all on a more equal playing field, and we see that coming out. But the delinquencies are -- I don't see that changing anytime soon. That is a big hit.

I think to your point, we've been dealing with the delinquency issue for the last few years for sure. I think it's ticked up slightly in the last 6 to 9 months.

Well, I appreciate the color and the -- I'm just a little bit surprised because Camden is our biggest position and 13% of their footprint -- I mean, 13% of the NOI is in D.C. And I met with them for the past few years, they told us about this particular issue in Atlanta. And it was a big issue for them in Atlanta with the fraud, and I have never heard of them mention anything about D.C. being -- and I'm aware that this is an issue. People are very entrepreneurial, as you could say, if they could get a year free rent. But I -- it's just not an issue that they're dealing with. I don't know if it's better detection, the use of AI, whatever it may be. But I'm just a little bit surprised by the delta between what you guys are facing and the degree of delinquency versus what they are -- it's just not even mentioned about whenever I talk with them, and we had a face-to-face with them in June. So I would encourage the team to...

Bill, Camden is located where?

They have [indiscernible] units. They have 60,000 units and 13% of their NOI is in the D.C., Northern Virginia area.

Got you.

I mean that's an insignificant. I mean 60,000, 13% of that, that's a lot of units. I mean they definitely have exposure to the area. I mean, I would -- my suggestion would be they're clearly doing something where they're not dealing with this level of tenants not paying, I would definitely look into what kind of tools they're implementing because I think the screening process needs to improve here.

Yes. yes, we agree that the screening -- and we have been working on that with our property manager for the last 18 months and have implemented some new things, and they've been pleased with some of the results of being able to detect fraud in ways they couldn't before. So we'll continue to work on it for sure, but we know it's an issue.

I know a few years ago, we were all really excited about some of the acquisitions that we've made in the Maryland area for industrials. And Cranberry for a little while, looked like a really good use of capital, and that was very quickly leased up. And then we kind of had -- I was a little bit surprised by a lot of tenants leaving there. And then Chelsea, I think that's still really -- I mean, that's functionally all vacant right now. Can we just like help me understand what's going on there?

I know that U.S. overall vacancy is higher. But again, it's just the degree of delta. I know you guys have a smaller portfolio. So if you get a couple of leases that don't come through, it's magnified. But again, what's going on with the Maryland, Baltimore market as it relates to warehouses? I kind of thought that Chelsea would be a little bit further along on the lease-up -- and I don't know -- I can't tell what percent occupied lease Cranberry is these days. If you can provide some color on that, that would be helpful.

Sure. I'll start, and I will hand it over to Mark. As it relates to, I would call our Maryland same-store, which is really the Hollander Business Park in Baltimore City and the Cranberry Business Park in Harford County. That -- that same-store portfolio in Maryland was 92% occupied Q1 2025. And to your point, over time, currently, it sits at 70.6% occupied. And we lost a number of tenants, a lot of government tenants. And we had one tenant that basically went bankrupt and we had to throw them out, which was a big, big headwind.

We have tremendous activity at Cranberry right now, and we really see that picking up into next quarter. We have a number of renewals that we're working on right now, and we've got a number of tenants that we're in lease negotiations with right now, and we hope to see some changes here in the very, very near future. Chelsea we delivered last year is a product of really, really long, long decision cycles for tenants.

And with that, I'll kind of turn it over to Mark to give additional color on the market and what he's seeing on the ground.

Yes. So really, what we're seeing overall is that Harford County and Cecil County, sort of, call it, the Baltimore North markets, really, I would describe those markets as being caught between sort of larger logistics markets. And what is happening is that a number of larger users, call it, north of 250,000 square feet have been really looking at consolidation and figuring out ways that they can centralize their distribution operations to service a much larger region. And so that is just a part of the overall evolution of sort of the dynamics around sort of supply chain.

So what is happening is that users are really looking at locations that allow them to essentially get from, call it, Richmond to New York City within kind of a day's drive. And so oftentimes, a lot of those decisions lean into markets like Pennsylvania and New Jersey. There's been a tremendous amount of vacancy in Southern New Jersey, what I would describe as south of exit 6 on the turnpike. And there has been a tremendous opportunity for tenants to take advantage of the oversupply that has existed there.

And that has frankly captured a lot of the tenant demand that is in the market. That is sort of compounded by the fact that a lot of those sites in New Jersey have economic incentives associated with them, i.e., pilots and other job creation incentives, which further create a delta between Chelsea and those opportunities. So that's kind of where we've been.

The good news is that a lot of that space has really been absorbed. So the amount of supply that remains -- competitive supply that remains is a fraction of what it has been over the last, call it, 15 months. And there is very few new projects in the pipeline. So we are sort of seeing an opening relative to being able to capture some of that demand just based on pure availability. So that is kind of what I would sort of describe as the story over the last 15 to 24 months overall.

I think relative to Cranberry, look, I think it's -- the local tenant pool is not very deep. You're talking about generally smaller tenants that are looking at that project. That tenant pool tends to draft off of larger tenants. And there are ancillary businesses that are sort of created or grow based on servicing a larger tenant base. So given that, that market has been slow, there has not been a lot of sort of organic growth within that local tenant pool.

Cranberry is not going to attract a tenant from outside of the market. It is really going to -- it's -- again, it's very organic in nature. So those are the reasons. But I would tell you that optimistically, for the reasons that I just mentioned, I think that we have sort of turned the corner relative to that. We've got a couple of build-to-suits that we're looking at that are fairly large and especially in our Phase 2 at Crouse. So I do think that there are better days ahead for the market.

I mean, I've been following this company for -- I've been a for 12 years now, I don't know, somewhere in that range. And I've seen a lot. You mentioned build-to-suit and you mentioned Crouse. Is the strategy going forward to do any more spec? Or I mean, Crouse is 635,000 square foot. As a shareholder, I'd be very worried about doing a spec on something like Crouse or Mechanics Valley given the size.

Well, yes, look, I don't think the business plan today is to build or to deliver more spec space into the market unless sort of the fundamentals would dictate otherwise. The build-to-suit market is unique in the sense that there are very specialized operational requirements that tenants have that oftentimes cannot be accommodated in a spec building, at least cost effectively. So I think our focus relative to Mechanics Valley and Crouse is to continue to market those sites relative to build-to-suit opportunities. And if the fundamentals in the market change and we see some durability in those fundamentals, then I think we will obviously have a conversation as to whether or not it makes sense to develop a spec project.

But I don't -- there is no immediate or near-term plans to do that. I think there are plans, though, to have those sites shovel-ready and to get the entitlements perfected. So if there is an opportunity to execute that we are in a position to do so quickly.

Okay. And Mark, I mean, since I asked you here, the projects in Broward County, Camp Lake, Davie and Lakeland now represents a big chunk of the company's asset. Could you give some color on kind of the -- kind of leasing outlook or just kind of updates on those properties?

Sure. So in Broward County, I think by all measures, Broward County, Florida is probably the most supply-constrained submarket in the country with a sub-4% vacancy rate and extraordinarily high barriers to entry relative to identifying new development opportunities. Our site in Davie is really at the intersection of 2 major highway systems, actually 3 major highway systems 595, the Florida Turnpike and I-95, and it's very centrally located to both the airport and Port Everglades. So it's a very unique asset in terms of its location.

The building is not yet delivered. We are very close to signing a lease at a very strong rental rate for roughly 25,000 square feet, which I think will be a good bellwether for activity in the market. But we feel very, very confident that we will be highly successful in the lease-up of that project at rental rates that may set sort of new precedent in the market.

As it relates to Central Florida, that is really sort of the population growth story in Florida. There has been tremendous migration from inside or within the state of Florida to the I-4 corridor specifically. And there is also a number of tenants that are looking to consolidate operations that may exist separately within sort of the Tampa and Orlando markets. So again, similar to what we talked about in the Northeast, there are tenants that are looking at a consolidation play in a central location that allows them to service a larger sort of population base. So ultimately, that is one of the primary drivers of Lakeland. We are seeing really a tremendous amount of activity there. We have not signed any leases. The building is not complete, but we're seeing very strong activity.

Camp Lake is really a population growth story as well. It's more of a localized sort of service business type opportunity. So think about home services and contractor requirements, things like that. So based on the large expansion of the residential base in sort of Lake County and the surrounding geography, that is really driving a lot of the demand for Camp Lake, which is very early in the process. So I hope that answers your question. Certainly, I'm happy to dive in deeper if you'd like.

No, that's helpful. And I don't have any more questions, but I think I just want to share some thoughts as somebody who's been a shareholder for 12 years and who once owned probably like a top 5, top 10 shareholder in the company. I just want to say that given that the 10-year is almost 5% at this point, we've had one thing that I want the management and Board to think seriously about is there has to be a strategy to return some capital to shareholders either in the form of dividends or stock buybacks. And I say this is somebody who's owned the stock for 12 years. So I'm not someone here who's looking for some sort of quick catalyst. I've been with this company for a really long time.

And we could buy REITs, really high-quality ones that pay 6% dividend yield that's also going to grow that dividend. And in the face of that kind of opportunity, there's a real opportunity cost. But I think what's more important is that the -- there has to be some thought into 5 years from now, are we going to be still here and saying we're going to go on another round of huge build-out.

I think there is a very -- I think there's a happy medium where the company could set aside a certain amount of cash flow, even if small one into either share buybacks and not a share buyback just to offset management stock-based comp, but to buyback shares so that capital could be returned to shareholders and also do so accretively or pay a dividend because as someone who's been with the company for 12 years, I think I've earned the right to speak my mind freely.

And I think that if there is no thought that goes into any form of capital return, I mean, the whole point of owning real estate and hard asset is that we do share in some sort of cash flow at some point. And it's been a really long time. And I think that in 5 years from now, when all these assets stabilize, this company should have a lot of cash flow, a lot more cash flow than it does today. And that is something that I think management team and Board really have to think about because there's no thought given -- if there's no thought on it, then it's just another company that's just going to invest a lot more capital into the ground into building to grow a bigger pie, but when are we going to share it in some of the cash flow.

So that's -- I just want to speak my mind freely. I know many people on this call many, many years, think highly of you, but I thought that -- I think that's an area that where the company really haven't really done much on. So that's it. And thank you for answering my questions today and thank you for allowing me to express my thought.

Absolutely, Bill. Yes, we hear you for sure. And we appreciate you expressing your thoughts.

We now from Stephen Farrell with Oppenheimer.

I just have a quick question. There was a recent deal across from Bryant Street. Do you guys have any comment on that? Or what are your thoughts?

Stephen, if it's the deal that I'm thinking about, it did come up. We are in negotiations of refinancing Bryant Street. One of the major pieces to refinancing is the appraisal that did show up there. And I think it's a good indication of where that market is right now. And I think that's my comment. I think that's a good, good -- I think that's a good comp of where things are right now. I believe it was the Trammell Crow, the Rowan building.

The Rowan building.

Yes. And there was -- and it kind of closed at 6% cap rate. And I think that's a good indication of what people think about D.C. and that market right now, that's kind of my follow-up.

Just from that -- how do you think Bryant Street compares just as a -- not only like location, but this is retail, and I don't believe that had any retail. Is Bryant Street more attractive just compared to that asset or no, very similar?

I am always partial to our assets, and I'll leave it at that.

Okay. And with the development pipeline and what we have coming in the next, call it, to the end of 2027, I know we have the opportunities on taxes, I think, are in the first quarter next year. How much cash on the balance sheet is right now earmarked for developments and future use?

So Stephen, most of our capital has already been spent for our, I'll call it, our deliveries that I talked about. The equity capital always goes in upfront, and we've kind of committed all that. And as it relates to kind of vertical construction capital, I would say that I think about $8 million is going out over the next 2 quarters, and that's really going into Rowan.

And other than that, all of our vertical kind of capital has already been deployed. What we're focused on right now is deploying capital for leasing, and that comes when we have leases, and we think that's a good use of capital. And we're going to continue to entitle and get shovel-ready our sites. So when things -- when we see the markets improve, we're ready to attack that and hopefully have an advantage over others.

So the capital earmarked is really for leasing and for entitlements. And that's what we have a good stable of cash or liquidity to do. Right now, we've got $100 million of cash. We've got a line of credit that kind of gives us $130 million of liquidity. And that's more than enough liquidity to deal with entitlements and leasing and opportunities.

And how are you judging future opportunities versus a buyback now? And just in a simple term of thinking of that, you got $36 million NOI and market cap is about $430 million, which is above an 8% yield for a collection of assets that have a cap rate that's much lower. So what's sort of like your overall thought process on buybacks versus future developments?

I think as long as we've got projects to put capital into, and we are always going to opt for money into new projects over a dividend or share buybacks. I feel like right now, we've got a lot on our plate. And given kind of the sort of economic uncertainty, it makes sense to hold on to cash to go to play defense and offense. If we reached a point of where we have more cash coming in and projects to put money into then a dividend or a meaningful share buyback program would be part of what we do. That's not the case right now. And I think that any share buybacks in the near term will be done just sort of opportunistically. And that's sort of where we are with that.

Our next questioner is David Foley with Estabrook Capital Management.

I just had a quick question on G&A costs that look like they've gone up a lot, especially over the first 6 months of this year with the prior 6 months. Should we think about those G&A costs of where they've been in this first 6 months of this year running at a flat rate for the year? Or will they come down some? Or what do you see going on with them?

Flat rate is a good way to think of it. We've kind of built out our team, and we have no real new hires on the horizon.

Yes. I think the only thing in there, David, is there was not $1 million, but more than $0.5 million of sort of onetime cost in the first quarter in G&A on audit fees and legal fees that were sort of all related to that closing that won't recur, but the rest of it is pretty much a flat run rate.

Okay. I also just similar sentiments to the former caller about buybacks or dividends at some point here.

We now have Ted Goins with Salem.

So our first questioner Bill, good to have you on the call. We've all sort of leaned into your asking a lot of the heavier questions. Thank you for doing that over the years. When you are talking about the D.C. market and the delinquency issues and the challenges, and it doesn't seem like the baseball stadium is enough. And I'm wondering, we have 2 more Plats and we have the Bulkhead -- is there a talk or is there a view around developing more of an office-related ecosystem in that area? Or are we just dependent on kind of absorption and then we have the low-cost land, so we're the next to build? How do you all sort of envision that area 5, 6, 7, 8 years from now?

Yes. I don't think offices in. Go ahead, David, sorry.

No, I agree. I mean, at one point, when you looked at, I'll call it, our Riverfront properties, which we call at one point, Phases 1, 2, 3 and 4. Phase 1 is Dock 79, Phase 2 is Maren. And at one point, Phase 3 was an office and Phase 4 was a hotel. And then looking at that area, what was going on, we believe that, that is a great multifamily area. There's some headwinds right now. It's still the nation's capital. It's still the southern entrance to the nation's capital. It's on the waterfront. We've owned that land for a while. It has a very, very low basis. And I think there's a great opportunity to, one, maximize the value of the land that we have and at some point, create a multifamily waterfront portfolio there in Phase 3 and Phase 4 and even 664E. That's what we see now.

We certainly are not breaking ground right now given what's going on there. But 7, 8 years from now, we'll continue to monitor the market, continue to monitor the debt markets and construction costs and where our delinquencies are going. We've got great, great intel into that area. The data that we have is real. It's in our sandbox, and we'll see where it goes and make the right decision.

And with regards to the Bulkhead or 664 as you described it, I have a recollection that, that lease period was around now and...

Correct.

Is there -- are there better economic -- do we have better economics from that in a relatively short period of time?

We are currently in discussions with the tenant that's been there for a very, very long time. And we expect them to stay there until we're ready to develop or until it becomes such a nuance or nuisance to our adjacent properties, which at this point is just not. So we expect them to be there for a while until we're ready to break ground and develop that site.

Yes. I suspect that's a tricky one both ways. So good luck with that. Can we talk about the lease absorptions that are occurring -- that will occur in the warehouses in Florida? How do you intend to communicate that to your investors? Is that going to be through the quarterly earnings release? Or do you intend to sort of issue press releases so we can follow the progress there?

Quarterly.

Okay. And I read an article recently, we probably all read the same articles about demand for real estate in Florida. And have you all moved up a time frame on Brooksville at all?

Moved up the timeframe for developing it.

Yes.

Yes. I mean there was never a timeframe. It's just purely a function of the right developer coming along and wanting to take that property down. So the calcium mining is a really wonderful interim use someday when somebody wants to develop that land, they'll approach us, but there's no timeframe.

Okay. And I think I read most regulatory filings reasonably well, but not always. There was a fairly significant -- it look like a purchase in mid-March by our Chairman. Am I reading that correctly that was an outright purchase of shares?

Correct. Yes.

Congratulations on that, and thank you. I don't have any more questions. Thank you.

Thanks, Ted.

We now hear from Morris [indiscernible] with [indiscernible] Company.

I don't think I've been on the call before. I'm your fourth largest shareholder. And I'm old, and I've come across many developers who love to develop and they focus on developing, they love it, and they don't make money at it and many even go bankrupt. You guys are management heavy, and it's all -- you're talking about developing, stop developing, start managing your properties. The first thing I would do is not do anything more in blue states. We own real estate in blue states that we've been liquidated because it's an anchor. It's a political anchor. Landlords have no power, none. You're witnessing that. You're witnessing that in D.C. You can't even enforce your rent.

No more blue states, no more money spent in blue states. I would say to you, start putting your properties on the market in blue states. And as far as you develop stuff, but you don't manage it. Your earlier caller talked about buybacks. I mean, what is the matter with you people? You get this beautiful cash flow coming in from your mining revenues, royalties and you think you can just go [indiscernible] it all away.

I'm really, really disappointed that you are still talking about spending another nickel in a blue state. I mean, you don't learn, get your properties leased or put them on the market, get out of there. Start buying back your shares, act responsibly and all of you should take a 20% cut in your salaries. I mean you've not been performing. You have not managed your properties and stop new developments. I'm your fourth largest shareholder. And I thought maybe it was time for somebody to really get really pissed. Thank you.

Thanks, Morris.

Thanks, Morris.

[Technical Difficulty]

I just want to -- I wasn't going to talk about buybacks today earlier, but since other callers have brought it up, I just want to express my opinion that not every day that you get a company where the NAV is almost $40, you're trading at $21.5, everybody could do the math. If you buy back shares, you're going to make over 80 -- you're going to make 80%, 90% on that capital. There is no development projects out there that will give you that kind of guaranteed return. I wish I ran a public traded company where I get to just buy back as many shares as I can at 80%, 90% accretion. The math is the math. It's very simple.

I would say that I don't care about the trading liquidity. There is nobody who -- nobody that owns this company cares about trading liquidity at this point. Buying back your share will send a signal to the market that the management team here cares that this is trading at a deep discount. I was very, very -- I was not going to talk about buybacks today. My previous comment was about buyback, returning capital at some point in the future. But since the topic got bought up, and then the answer given, I thought was just really, really -- like I really disagree with it. It's just not the right use of capital.

If you can make 80%, 90% buying back shares, just do that. That's it. That's it. I do not I wouldn't go so far to say that get all your investments out of blue states. I wouldn't go that far. But I would say that right now, if there's one thing you could do to show shareholders that you care and that you understand capital allocation, you buy back shares.

And if the pushback on that is that earmark all this capital for all that stuff, then I would say that the order of priority would be you set aside the capital for leasing, you set aside the capital for any sort of debt that you may have to refi. And then like if you've got a shovel on the ground, if you're already committed to building something, you mid construction, you set aside the capital for that. Any other capital that you have in excess of that should absolutely be earmarked towards buying back shares.

This is not a topic that I was going to get into today, but since it was bought up by other shareholders and also the company's answer to this, just kind of got me a little fired up. I think that it is -- it's just the fact that like this is such simple math, it's such an easy lever to pull. And also, I just want to say, we own Camden. Camden sold the California assets and bought back 6%, 7% of their shares in the past year. They did 1031. They did a $3 billion buying asset 1031 and they bought back shares, bought back 7% of their shares at nearly a 7% cap rate, a fantastic use of capital. We're seeing every single large blue-chip REIT that we own.

There is another company, AH Realty Trust in your neck of wood that just bought back, I think, 6% or 7% of the shares just this year, just this year alone, every REIT that we talk to have told us this is not 2021. This is not 2023. Buybacks is absolutely a part of the capital allocation. This runs from REITs that are $0.5 billion up to $20 billion that we talked to. And I think it just absolutely tone deaf to just say that if there is an opportunity to go do developments, we're going to do development. No, you're trading at $21.50. The liquidity -- the trading liquidity has always been an issue. But I think if you actually bought back $10 million, $20 million, $30 million worth of shares, I think the market will actually care. Thank you.

Thanks, Bill.

Thanks, Bill.

There are no further questions in the queue. We did hear closing remarks from management prior to our Q&A session. So this does conclude our conference call for today.

Great. All right. That was something. Thank you all for your continued interest in the company, and this concludes the call.

Thanks.

Okay. You may now disconnect your lines at this time, and have a good day.

Good day, everyone. Welcome to the FRP Holdings, Inc. First Quarter 2026 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Matt McNulty, CFO of FRP Holdings. The floor is yours.

Great. Thank you. Good morning, and thank you for joining us on this call today. I am Matt McNulty, Chief Financial Officer of FRP Holdings, Inc. And with me today are John Baker II, our Chairman; John Baker III, our CEO; David deVilliers III, our President and Chief Operating Officer; David deVilliers, Jr., our Vice Chairman; John Milton, our Executive Vice President; Mark Levy, Chief Investment Officer; and John Klopfenstein, our Chief Accounting Officer. First, let me run you through a brief disclosure regarding forward-looking statements and non-GAAP measures used by the company. As a reminder, any statements on this call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings.

To supplement the financial results presented in accordance with generally accepted accounting principles, FRP presents certain non-GAAP financial measures within the meaning of Regulation G. The non-GAAP financial measures referenced in this call are net operating income, or NOI, and pro rata NOI. FRP uses these non-GAAP financial measures to analyze its operations and to monitor, assess and identify meaningful trends in our operating and financial performance. These measures are not and should not be viewed as a substitute for GAAP financial measures. To reconcile adjusted net income, net operating income and adjusted net operating income to GAAP net income, please refer to our most recently filed 10-Q. I will now turn the call over to our President and Chief Operating Officer, David deVilliers III for his report on operations. David?

Thank you, Matt, and good morning, everyone. I will begin with a review of our first quarter 2026 results and then discuss our operating priorities for the balance of the year and beyond. 2025 was a year where we significantly expanded the scale and long-term earnings potential of the platform. As we move through 2026, the focus shifts towards execution. Simply put, we need to fill buildings, stabilize projects and turn that embedded value into dependable recurring cash flow over time. For the quarter, we generated approximately $8.9 million of NOI and $3.6 million of FFO or $0.19 per share and ended the quarter with approximately $130 million of liquidity between cash and line availability. Late in the fourth quarter of 2025, we completed the Altman industrial acquisition for approximately $33.5 million adding roughly 1.6 million square feet of industrial development pipeline and expanding our presence in Florida and New Jersey.

Turning to Commercial and Industrial. The portfolio totals approximately 807,000 square feet and ended the quarter approximately 47.5% occupied compared to approximately 85% last year, primarily due to anticipated lease rollover timing, slower tenant decision cycles and the addition of the Chelsea building. Segment NOI totaled approximately $758,000 during the quarter compared to $1,139 million last year. We continue to believe this is more a timing issue than a demand issue. Today, we have approximately 423,000 square feet available for lease up, representing roughly $3.3 million of incremental annual NOI opportunity at stabilization. Execution now comes down the leasing velocity, pricing discipline and occupancy growth over the next several quarters. Operationally, activity feels materially different today than what we experienced in 2025.

We are seeing more tours, more proposals, more tenant dialogue and improving leasing activity across multiple markets. Through Q1, we have now signed or LOI-ed, approximately 53,000 square feet representing roughly $1 million of future annualized NOI as those leases commence and convert to occupancy. We still have substantial work ahead of us to remain focused on filling our buildings and believe the platform is moving in the right direction. Turning to Mining and Royalties. This segment generated approximately $3.8 million of NOI during the quarter, up $498,000 or 15% year-over-year, the second consecutive quarter of double-digit underlying growth with both volume and pricing trending favorably. Mining continues to provide durable, high-margin cash flow with minimal incremental capital requirements. Mining royalties remain an important stabilizing component of the company's overall earnings profile and balance sheet flexibility.

Moving to multifamily. The portfolio includes approximately 1,827 units across Washington, D.C. and Greenville, South Carolina. NOI totaled approximately $4.1 million during the quarter. First quarter results were below expectations, primarily due to lower occupancy and economic occupancy in our Washington, D.C. assets, higher operating costs and some softness in ground floor retail. From a market standpoint, South Carolina remains relatively stable with economic occupancy remaining in the low 90% range. Washington, D.C. remains more competitive due to continued supply pressure particularly from Vermeer and The Stacks, which impacted occupancy and concessions across Dock 79, Maren and Verge with economic occupancy remaining in the high 80% range during the quarter. Importantly, we view this primarily as a localized supply issue rather than a broader deterioration across the multifamily platform.

Development remains the company's largest long-term NOI growth opportunity. The Altman acquisition, which I mentioned earlier, was critical for 2 reasons. It expanded our pipeline and geographic footprint, and it gave us the management capacity to execute on it. Current pipeline represents approximately $441 million of total project costs with expected stabilized incremental NOI of approximately $30 million over time. This opportunity represents a significant increase in NOI and earnings. Our pacing remains disciplined and the focus is on execution, lease-up, stabilization and converting these projects into recurring cash flow over time and not simply growing to grow.

Turning to the full year outlook for 2026. We expect NOI to remain relatively stable in the approximately $37 million range while lease-up timing, elevated platform costs and higher interest expense continue to pressure near-term FFO. We expect FFO to remain pressured in the near term, with meaningful improvement tied to industrial lease-up and development stabilization, both of which are underway. Importantly, 2026 G&A is expected to be approximately $15 million to $16 million and reflects the investment in people, systems and infrastructure needed to operate at scale. Balance sheet discipline remains foundational. We ended the quarter with approximately $130 million of liquidity and conservative asset level leverage.

Importantly, while reported leverage metrics appear elevated on an EBITDA basis, asset level leverage remains conservative and liquidity remains strong. The balance sheet continues to provide substantial flexibility while we work through lease-up and stabilization. To close, 2025 was about building the platform. The next several quarters are about proving it. The near-term priorities are clear: lease the vacancy, stabilize the development pipeline and convert that embedded NOI into dependable recurring cash flow. We have the balance sheet, liquidity and now the operational infrastructure to execute, and we believe the pieces are in place for a meaningfully different earnings profile. Mining continues to perform, the D.C. multifamily supply overhang will clear and the industrial portfolio has the leasing activity to support it. With that, I'll turn the call over to Mark Levy, our Chief Investment Officer, to provide additional perspective on leasing activity, market conditions and capital deployment. Mark?

Thank you, David, and good morning. As we conclude the first quarter of 2026, we continue to be laser-focused on driving leasing execution, converting vacancy into recurring cash flow and continue building a scalable and disciplined industrial platform. Over the past several quarters, we conducted a comprehensive review of our leasing and operating processes. As a result, we have made targeted refinements, which will enable us to accelerate decision-making, gather better market intelligence and improve alignment between our leasing, development and asset management teams. The changes we have made will create greater consistency, accountability and execution visibility across the platform. Importantly, we are beginning to see measurable progress from those initiatives.

As David mentioned, we have signed leases or LOIs totaling 53,000 square feet, representing $1 million in annualized NOI. Furthermore, proposal activity, tenant engagement, tours and active negotiations have all increased meaningfully relative to prior periods. Our focus now is converting that activity into executed leases and recurring NOI growth. The drivers behind this are occupiers seeking greater space efficiencies, closer access to labor and better proximity to transportation infrastructure. In Maryland, where lease-up activity lagged our initial expectations in 2025, we recalibrated rent positioning where appropriate, expanded brokerage engagement and added additional leasing resources following the Altman transaction. We remain focused on balancing lease-up velocity with long-term value preservation and basis discipline.

In New Jersey and Florida, we continue to see encouraging tenant activity, particularly from logistics, e-commerce and third-party distribution users. While decision-making time lines remain longer than during peak post-pandemic environment, overall market conditions across many of our target submarkets continue to stabilize. From a broader market perspective, development starts declined materially during 2025 and into Q1 2026, while entitlement constraints and land scarcity will continue to limit future supply in many infill coastal markets. We are seeing the lowest level of starts since 2010, and the number of future starts continues to be hampered by high construction costs and yield on cost requirements.

This represents an opportunity for us as we have delivered or are delivering into submarkets marked by low vacancy and more limited competitive supply. From a capital allocation standpoint, our priorities remain focused on 3 key initiatives: stabilizing the current development pipeline, selectively advancing new development opportunities in high-barrier infill markets and expanding capital relationships that support disciplined platform growth while maintaining balance sheet flexibility. We are also using technology to build better market data sets and test our assumptions more comprehensively. Furthermore, we are also continuing to diversify revenue channels through selective build-to-suit opportunities, targeted value-add acquisitions and institutional capital partnerships that can support future growth and recurring revenue generation over time.

We are also making progress on that front, especially in the build-to-suit arena. Last, discussions with the prominent institutional investors and capital partners remain constructive. The feedback we continue to receive centers on confidence in the quality of our markets, operating platform, development capabilities and long-term industrial strategy. Additionally, from a capital markets perspective, financing conditions have improved modestly relative to the prior 12 to 18 months, although we continue to maintain a conservative underwriting posture and remain focused on downside protection and disciplined basis management. Overall, FRP continues to make incremental but meaningful progress towards our goals. We believe FRP remains well positioned operationally, strategically and financially as we continue executing on our industrial growth strategy and building a stronger and more scalable platform over time. I will now turn the call over to John Baker for his closing remarks.

Thank you, Mark, and good morning to all of those on the call. This quarter last year, we had better results than we expected, and I felt obliged to soften any enthusiasm they might inspire because of what we saw coming down the pipe for the rest of the year. I find myself in almost the exact opposite position relative to the first quarter of this year. The results this first quarter are worse than 2025, the headwinds we experienced last year are still with us, and yet I'm far more optimistic looking forward to the rest of the year and beyond. Leasing activity in our industrial space has completely flipped compared to last year which is fortunate given that it remains our core focus for the foreseeable future. Same-store leasing in particular, is the most important way for us to improve the company's performance because it has the most immediate impact and involves so little in CapEx compared to development.

The 50,000 square feet of leases signed or in LOI form that David and Mark referred to is the tip of the iceberg in terms of phone calls, tours and paper traded. The volume that produced that number is diametrically opposed to what was more or less amounted to silence in that space last year. I don't think we are seeing a return to the industrial boom of the COVID years, but even a return to a more normalized leasing environment is comforting after the uncertainty of 2025. Given our focus on leasing, I can't tell you how heartening that is. As I mentioned so recently on our fourth quarter call, the yardstick by which we measure success will be the performance of our same-store assets and the value created by our Development segment, specifically our 3 industrial assets under development in Florida. We have included a table in our quarterly supplemental materials for investors to track our progress in these areas. As David said, we have a long way to go in order to achieve our goals, but the path forward is markedly clear than it has been for some time. I think we'll open it up to questions.

[Operator Instructions] There appear to be no questions in queue at this time. I would now like to turn the floor back to John Baker for any closing remarks.

I really appreciate everyone on the call, taking the time to be with us and as always, for your continued interest in the company. This concludes the call.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Good morning. My name is John Baker, Executive Chairman of FRP Holdings, Inc., and it's my pleasure to welcome all of you all who have joined our annual meeting virtually today. I will be acting as Chairman of the meeting, and I now call the meeting to order.

Before proceeding to the business of the meeting, I'd like to introduce the following company directors and officers joining us today. The directors present are John D. Baker III, David deVillier, Jr.; Matt McAfee, Martin Stein, Jr.; John Surface, Nicole Thomas, William Walton and Margaret Wetherbee.

Key officers present are John D. Baker III, Chief Executive Officer; David deVillier III, President and Chief Operating Officer; John D. Milton, Executive Vice President, Secretary and General Counsel; Matt McNulty, Chief Financial Officer and Treasurer; and John Klopfenstein, Chief Accounting Officer; and Mark Levy, our Chief Investment Officer.

Also present with us are Allen Akins and Matt Smith with our independent auditor, Baker Tilly US LLP.

John Milton will be acting as Secretary of the meeting today. Mr. Milton will now report on the mailing of the notice of this meeting and the presence of a quorum.

Thank you, John. This meeting is held pursuant to a printed notice that was mailed on or about March 31, 2026, to each shareholder of record as of the record date, which was March 17, 2026. A count of shares present immediately prior to the commencement of this meeting indicates that 13,067,824 shares of the company's common stock were present or represented by proxy. This is 68.17% of the outstanding shares of common stock outstanding on the record date.

Thank you, John. I hereby declare a quorum to be present. Since the quorum is present, we will now proceed with the items of business. After the items of business have been addressed, we will open the floor for any questions, which may be asked by using the Raise Hand function on the Zoom platform.

While this meeting is virtual only, the company has designed the online format of this meeting to ensure to the extent practicable that shareholders are afforded the same rights [ and opportunities to participate as you would at an in-person meeting. ]

The first proposal is to elect 9 directors to serve until the next Annual Meeting of Shareholders. The nominees to serve as directors are John D. Baker II; John D. Baker III, David deVillier, Jr.; Matt McAfee, Martin Stein, John Surface, Nicole Thomas, William Walton and Margaret Wetherbee.

Mr. Chairman, I move that the proposed slate of directors be elected.

I second the motion.

The second proposal is to vote on the approval of the 2026 Equity Incentive Plan.

Mr. Chairman, I move to approve the proposed 2026 Equity Incentive Plan.

I second the motion.

The third proposal is to hold an advisory vote on executive compensation. Under the say-on-pay legislation enacted by Congress, our proxy statement includes a separate nonbinding resolution to approve executive compensation.

Mr. Chairman, I move to approve on an advisory basis the compensation of the named executive officers as disclosed in the Company's proxy statement.

I second the motion.

There being no further proposals to come before this meeting, let's proceed with the voting on these proposals. If there is any shareholder who wishes to voice a vote please raise your hand by using the Raise Hand function on the Zoom platform.

For your information, John D. Baker III and I are proxies named in the proxy card. In our capacity as proxies, we will cast our vote in accordance with the written instructions received from the respective shareholders.

Are there any votes to be received? If not, I would like to announce the results of the vote. All of the nominees have been elected to serve as directors until the next Annual Meeting of Shareholders, 2026 Equity Incentive Plan has been approved and compensation of the named executive officers as disclosed in the proxy statement have been approved on an advisory basis.

I will now open the floor for any remaining questions, which may be asked by using the Raise Hand function on the Zoom platform.

There being none, there is no further business to come before this meeting, and I declare the meeting adjourned. Thank you so much for joining us today.

Good day, everyone, and welcome to the FRP Holdings, Inc. Fourth Quarter 2025 Conference Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Chief Financial Officer, Matt McNulty. Sir, the floor is yours.

Thank you. Good afternoon, and thank you all for joining us on this call today. I am Matt McNulty, Chief Financial Officer of FRP Holdings, Inc. And with me today are John Baker II, our Chairman; John Baker III, our CEO; David deVilliers III, our President and Chief Operating Officer; Mark Levy, our Chief Investment Officer; and John Klopfenstein, our Chief Accounting Officer.

First, let me run through a brief disclosure regarding forward-looking statements and non-GAAP measures used by the company. As a reminder, any statements on this call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings.

To supplement the financial results presented in accordance with generally accepted accounting principles, FRP presents certain non-GAAP financial measures within the meaning of Regulation G. The non-GAAP financial measures referenced in this call are net operating income, or NOI, and pro rata NOI. In this quarter, we provided an adjusted net income to adjust for the impact of onetime expenses of the Altman Logistics acquisition, which is a material business combination unlike our historical real estate acquisitions or joint ventures where expenses are capitalized.

We also provided adjusted net operating income to adjust for the impact of the onetime material royalty payment in the third quarter of 2024 to better depict the comparable results year-to-date. Management believes these adjustments provide a more accurate comparison of our ongoing business operation and results over time due to the nonrecurring material and unusual nature of these 2 specific items.

FRP uses these non-GAAP financial measures to analyze its operations and to monitor, assess and identify meaningful trends in our operating and financial performance. These measures are not and should not be viewed as a substitute for GAAP financial measures. To reconcile adjusted net income, net operating income and adjusted net operating income to GAAP net income, please refer to our most recently filed 10-K.

I will now turn the call over to our President and Chief Operating Officer, David deVilliers III, for his report on company and segment financials as well as operations. David?

Thank you, Matt, and good afternoon, everyone. I'll begin with a review of our fourth quarter and full year 2025 results and then discuss our operating priorities as we move into 2026 and beyond. 2025 was a transition year operationally, but more importantly, it was a year where we significantly expanded the scale, capabilities and long-term earnings potential of our platform. As we enter 2026, our focus is shifting from repositioning and investment toward execution and the conversion of embedded value into cash flow.

For the year, we generated approximately $37.9 million of NOI and $22.1 million of FFO or $1.16 per share and ended the year with approximately $144 million of liquidity. These results were generally in line with our expectations and position us well for the next phase of growth. Late in the fourth quarter, we completed the Altman Industrial acquisition for approximately $33.5 million, adding roughly 1.6 million square feet of industrial development pipeline. While not included in our original budget, this acquisition significantly expands our platform and strengthens our presence in high conviction logistics markets.

Turning to commercial and industrial. The portfolio totals approximately 807,000 square feet and ended the year approximately 47.5% occupied or 69.9%, excluding our new Chelsea building compared to 95.6% last year. Segment NOI was approximately $875,000 in Q4 and $3.9 million for the year, representing declines of 11.8% and 13.6%, respectively.

The primary dynamic in 2025, which we anticipated entering the year was lease rollover timing. While occupancy declined as expected, leasing velocity was somewhat slower than anticipated as tenant decision cycles lengthened. Importantly, we view this as timing within the leasing cycle rather than a change in underlying demand. We currently have approximately 423,000 square feet available for lease-up, representing roughly 52% of the segment. At stabilization, this represents approximately $3.3 million of incremental annual NOI, representing a clear and visible earnings opportunity over the next 24 months.

Execution will be focused on leasing velocity, pricing discipline and progressing occupancy towards approximately 70% by year-end, with a path to stabilization in the low 90% range over the following 18 to 24 months.

Turning to Mining and Royalties. This segment generated approximately $3.9 million of NOI in Q4 and $14.6 million for the year, representing increases of 11.5% and 1.5%, respectively, with strong margins. The business continues to provide durable, high-margin cash flow with minimal incremental capital requirements and remains an important stabilizing component of our overall earnings and profile.

While quarterly results may fluctuate due to timing or nonrecurring items, underlying performance remains consistent and supports balance sheet flexibility.

Moving to Multifamily. The portfolio includes approximately 1,827 units across Washington, D.C. and Greenville, South Carolina. NOI totaled approximately $4.2 million in Q4 and $18.1 million for the year, representing modest declines of 2.6% and 0.4%, respectively, with average occupancy around 93% and economic occupancy, which reflects concessions and delinquencies of approximately 88%.

Fourth quarter results were somewhat below expectations, primarily driven by: one, retail revenue softness of approximately $127,000 NOI impact; two, lower occupancy at Maren, averaging approximately 89%; and three, continued operating expense pressures.

From a regional perspective, South Carolina remains stable with economic occupancy around 92%. Washington, D.C. remains more competitive due to supply pressure with economic occupancy around 87%. Our focus remains on resident retention, disciplined pricing, expense control and improving retail occupancy where possible.

Development remains a primary driver of incremental value creation. Our current pipeline represents approximately $441 million in total project costs with expected stabilized incremental NOI of approximately $30 million over time. The Altman acquisition expands our footprint in Florida and New Jersey, adds experienced development talent and enhances our relationship with institutional capital partners. We continue to underwrite conservatively, target yields on cost of approximately 6.7% or greater, market cap rates of approximately 5.25% or lower, target IRRs in the 15% to 20% range. Development value is realized over time through lease-up and our pacing remains disciplined and aligned with market conditions.

Stepping back, we operate a capital-efficient logistics platform designed to compound long-term per share value. This model combines development, selective ownership and partners to generate multiple sources of return, including development gains, durable cash flow and fee income. Our approach allows us to recycle capital, scale beyond our balance sheet and dynamically allocate capital across opportunities based on risk-adjusted returns. Importantly, this model allows us to generate value through development, convert that value into durable earnings and scale through partnerships, creating a more capital efficient and higher return platform over time.

Our estimated NAV per share is approximately $37.60, increasing to over $40 per share over the next 3 years compared to a current share price that has recently traded between $20 and $24. Closing this gap remains a central focus of management, and we believe execution across leasing, development stabilization and disciplined capital allocation will be the primary drivers of narrowing that discount over time.

Looking ahead, we view 2026 as an investment year. We expect NOI to be approximately $37.1 million to $37.7 million, with G&A increasing to approximately $15 million to $16 million as we integrate the Altman platform and continue investing in the infrastructure required to support a larger, more scalable operating platform. Importantly, this increase reflects intentional investment ahead of NOI growth, including the addition of the development, asset management and operational capabilities necessary to execute on our expanded pipeline.

As a result, G&A as a percentage of NOI is expected to be elevated in 2026, potentially in the low 40% range before declining meaningfully as leasing activity accelerates, development stabilizes and incremental NOI is realized. Over time, as the platform scales, we expect operating leverage to emerge with G&A trending toward a more normalized range in the low 20% area. We believe this is the right trade-off, investing today to unlock a significantly larger and more valuable earnings base over the next several years.

Balance sheet discipline remains foundational. We ended the year with approximately $144 million of liquidity, net debt to enterprise value of approximately 21% and a weighted average interest rate of approximately 5.24%. This liquidity provides flexibility to fund development, support lease-up and navigate market cycles without reliance on asset sales. To close, the next 12 to 24 months are about execution and value realization, leasing the industrial portfolio, stabilizing development and converting embedded NAV into durable cash flow are the key drivers of near-term performance.

We are seeing early signs of stabilization across our markets and fundamentals for well-located logistics assets remain constructive. In fact, we recently signed a lease for 15,000 square feet at Cranberry Business Park in Maryland with a face rent 38% higher than the previous tenant and in the final stages of a lease for over 26,000 square feet at Davie in South Florida with a face rate above underwriting.

We believe the work completed in 2025 has positioned us to drive meaningful growth in both NAV per share and durable earnings over the next several years.

With that, I'll turn the call over to Mark Levy, our Chief Investment Officer, to provide additional perspective on leasing strategy, capital deployment and market positioning. Mark?

Thank you, David. Good afternoon, everybody. So as we enter 2026, our priorities are straightforward: convert vacant square footage into durable cash flow and institutionalize a capital deployment model that is scalable, repeatable and risk aware. Leasing is the fulcrum of value creation in our industrial strategy. Over the last several quarters, we have formalized our leasing process across markets, tightening broker coverage, implementing structured outreach cadence, refining competitive intelligence and aligning leasing and asset management under a single execution framework. The objective is to eliminate variability in process while allowing flexibility and market response.

In Maryland, where leasing absorption lagged our initial expectations, we have adjusted. We recalibrated rent positioning where appropriate, expanded brokerage engagement and integrated additional leasing resources following the Altman transaction. We are underwriting to today's strike rents and protecting long-term basis rather than forcing velocity at the expense of asset value.

In Central and Northern New Jersey, we are seeing improving tour activity and proposal volume, particularly from e-commerce and third-party logistics users recalibrating inventory strategies. In Florida, demand remains structurally supported by population growth and the migration towards Florida-centric logistics networks rather than reliance on Southeast regional hubs.

Decision cycles remain longer than during peak years, but underlying utilization and supply dynamics are stabilizing into what I would characterize as normal post-COVID environment. On the supply side, development starts were materially curtailed in 2025 and entitlement friction, particularly in coastal infill corridors continues to limit new inventory. That dynamic should benefit well-located projects delivering into 2026 and 2027.

Our capital allocation framework this year centers on 3 initiatives: first, complete and stabilize the current pipeline, including capitalizing and advancing a 24-acre site in Southwest Broward County expected to deliver approximately 335,000 square feet of Class A logistics product. We are sizing leverage conservatively and underwriting lease-up assumptions that reflect current market velocity rather than peak cycle absorption.

Second, formalize a deployment model where basis discipline drive returns. We are targeting infill land positions along the East Coast where entitlement complexity and infrastructure adjacency create structural barriers to entry. Importantly, exit decisions will be made at stabilization, not inception. That preserves optionality, whether merchant realization to crystallize development spread or transition to longer-term hold where compounding cash flow and rent growth justify retention.

Third, continue diversifying return channels. That includes selective net lease build-to-suit opportunities, leveraging established occupier relationships, targeted value-add acquisitions where operational efficiencies and mark-to-market leasing can drive NOI growth and capital partnerships that allow us to scale without overextending the balance sheet. Promote economics and fee generation will supplement core NOI over time.

Capital markets are incrementally improving. Bank execution is more active, spreads have compressed modestly and equity capital is reengaging in development. We are not underwriting to peak leverage or assuming exit cap rate compression. Our posture remains conservative, protecting downside first, then optimizing upside. Across all industrial strategies, our filters are consistent, infill locations proximate to highways, ports and airports, deep labor pools, limited competing entitled land and basis that provides margin for error.

Industrial real estate rewards disciplined operators over full cycles. Our focus in 2026 is to institutionalize that discipline in leasing, in underwriting and in capital structure so the growth is durable and the balance sheet risk is measured.

With that, I'll turn the call over to John Baker for his closing remarks.

Thank you, Mark, and good afternoon to all those on the call. The financial results of 2025, while in line with expectations, don't tell the full story of everything we did this year. It can't be overstated what the acquisition of the Altman Logistics platform and its team opens up for the company in terms of where we develop, how we develop and with whom. This acquisition has refined and augmented a platform and pipeline that management expects will drive earnings and earnings growth, operational cash flow and net asset value.

In the short term, that growth will come through improvements in same-store industrial occupancy. Getting our industrial portfolio back to the occupancy levels we have historically enjoyed remains a priority. As David mentioned, fully occupied at current market rents, the vacancies in our current assets represent approximately $3.3 million in NOI growth. That's growth we can achieve with minimal capital expenditures, and it has the most immediate financial impact.

In the long run, we will continue to create value through our development segment. In terms of growing NOI, our top priority in this segment is developing and stabilizing our 3 industrial assets in Florida that are currently in development. We anticipate stabilization of these buildings totaling 762,000 square feet in 2028, which represents approximately $9.6 million in net operating income. These same-store development goals are achievable and measurable, and we have provided in Slide 12 of our quarterly supplemental presentation of results, a way for investors to measure and track the value these assets represent when fully leased. This is the yardstick by which we intend to measure our progress, and we intend -- we encourage investors to do the same. I think we can open it up for questions.

[Operator Instructions]

Your first question is coming from Stephen Farrell from Oppenheimer.

I just want to start with some quick questions on the D.C. market. I know there was a lot of supply that came on this year. And how is it absorbing that? And do you have any comments on a big drop in vacancy pretty much across the board from Q3 to Q4 at Dock, Maren, Bryant Street and the Verge was essentially flat. Any comments on that?

So in terms of D.C., I would say Dock and Maren and Verge are next to some large-scale multifamily that has come online, and they are offering, I would say, significant rental concessions, 2, 3 months. And that's something that we have to compete against, and we're trying to balance that. At the end of the day, it's a competitor. It's right next door, and it's going to put pressure on our occupancy. And that's something that we are experiencing at Dock, Maren, and Verge.

And something like how many units came on from that development?

It's probably 2,000 units.

2,000. Okay. And then have you guys offered concessions as well or raised your concession?

No. I mean, in areas where we see and just if we have a number of, let's just say, studio apartments that are all vacant and they've been vacant for a while, we are giving some concessions out, but we're trying to keep them limited. We've seen pretty good renewal success kind of in 2025, we kind of saw renewals, let's just say, 60% across the board with renewal increases of anywhere from 2% to 4%, which was good. But again, as you noted, occupancy at Dock and Maren if you just look at average 2024 against average 2025, it's down. And we're still dealing with delinquencies in the D.C. market as well.

And I think, David, you know the answer to this.

I was just going to say, I think the last time we checked on the absorption of those, call it, roughly 2,000 units, it was pretty deep into it, right?

The pace is good. They are absorbing units. And we've seen that. The velocity is there. Concessions and rental growth seem to be intense.

Yes. And then what was the case at Bryant Street because that's a different area of town?

Different area. Average occupancy in 2024 was, let's just call it, 91% and average occupancy in 2025 is 92%. So we saw a little push. At Bryant Street, renewal success, probably just below 60%, 59% with renewals 2.7%. There, we're definitely dealing with delinquency. And it's just tough to kind of push rents with the same pace that we're seeing operating expenses. So that's pushing NOI down at that particular asset that we have in D.C.

And what percentage of the vacancy is delinquencies? And is it still tough to get an eviction and get them moving and out of the unit?

It is. It just -- it takes time. It takes time. Bryant Street continues to improve overall, kind of, I'll call it, 2025 NOI compared to '24 NOI was up 5% at Bryant Street, which is great. And we hope to continue that trend.

I think, Stephen, you had asked to what percentage of the delinquency is vacancy or we don't -- the delinquency would sort of get added on top of vacancy. And I want to say it's probably in the 5% range. I can't be exactly right. So if you just added another 5% to our vacancy, that would kind of get you to our economic occupancy. There has been some legal changes in D.C. within the last 6 to 9 months, basically a Rental Reform Act that was put in place really to help landlords with a lot of these issues that we're facing on the eviction cycle. We've heard that it's starting to help, but it's going to take some time to really see anything go from what's taken us 15 months, maybe now taken us 13, but it needs to be like 3. So we'll see.

You have a lot of projects going on that are getting delivered this year. I just kind of want to run through them. The Altman JVs, how much construction there has been done? I think we're expecting the summer for it to be ready. How much capital do you still need to put into that?

I mean, just high level, all of our Florida assets are delivering this summer. And I would say that is around, let's just say, 600,000 square feet that's delivering this summer in terms of equity, all of our equity is in. All the additional capital is really being funded with our construction loans that we have. And all those projects are well underway. I mean we're very, very close to getting shell finals. And at this stage, focus is on marketing and leasing and the dollars that we're going to be spending are leasing dollars to get those things stabilized.

Our 2 projects in New Jersey are very, very close as well, looking to be shell completion final this summer.

The Central Florida industrial, that's going to be delivered this summer too? Is that [indiscernible].

Yes, the answer is yes.

Yes. So it's a little later in the year on Camp Lake.

On Camp Lake, that's right. That's a little later in the year, yes.

So Stephen, just to clarify, so when we said Florida projects, he's right, they're all delivering. But Camp Lake, Lakeland and Davie, basically, we own either 100% or in the case of Camp Lake, we own 95%. Those are long-term hold assets. And then the other project in Florida that came with the Altman acquisition is Delray, which is already delivered. We are a 10% partner in that. And the same with Hamilton and Parsippany, roughly 10% partner. And those are the merchant build and sell assets.

Okay. Got you. And just at Cranberry, is the Cranberry where we had the vacancy last year?

Yes.

Did I miss that you signed the lease there?

We did. We signed a lease for 15,000 square feet, which is good news. We couldn't share that news in 2025, but...

And I'm sorry, I missed this part. What was the rate?

I didn't disclose the rate, but I can tell you that the former tenant compared to the new deal that we had, the new deal, the base rent, the year 1 rate is 38% higher than the previous tenant.

Yes. I think that's the most exciting part about that. It indicates, one, where our rents were before and where they're headed.

And do you have any concern over the length of tenants taking to get someone in there? I know that you're dealing with an eviction and then any CapEx that you need to put into it to attract a new tenant. Does that give you any concern though?

It doesn't. Again, I just -- as we enter 2026, and we're kind of through, I'll call it, Q1, we've just seen increased activity, more tours, more proposals, better engagement across our markets. We're just seeing a combination of improving market activity. And as Mark pointed out, I think we have much better internal execution. And that gives us a lot more confidence in leasing velocity through 2026.

Yes. I would just add that we're really -- it's really not sort of a lack of demand. I just think that overall, it's a much more deliberate demand environment. So the process, the decision-making process typically is taking a little bit longer. There is more, for instance, in a -- for a larger, let's say, publicly traded company, there's more internal sign-offs that are now required. And there's just a higher level of focus being paid on things like labor adjacency and things like transportation costs, things like that.

And so obviously, with some of the macroeconomic factors around price of oil, things like that, that sometimes drives into the discussion around transportation costs and how that factors into sort of their total sort of cost of occupancy, if you will. So there's just a variety of different elements that sort of fade in and fade out at different points. But overall, holistically, tenant demand is much stronger and much more deliberate than it was in 2025.

And do you think that has any implications or effects on the Harford County development?

Well, one of the things that we have seen is that there is -- for occupiers that are requiring a much larger space, call it, spaces larger than 500,000 square feet, there are very few entitled land options remaining really along the entire Eastern Seaboard. I think nationally, there's something under 60 entitled sites that can accommodate buildings of 1 million square feet or larger.

So ultimately, larger tenants who are now reactivating into the market after sort of being on the sidelines for the last, call it, 24 months are finding really a dearth of options. So I think our positions in Harford County really will allow us to potentially entertain some of these larger requirements.

Both of our positions are located in markets that have very good labor pools that can draw even from as far south as Baltimore City and Prince George's County. So ultimately, we've got a very -- I think, a very strong positioning in the market. The sites are on the way to being fully entitled. And we've had some early constructive dialogue with a number of tenants regarding both our Kraus Phase 2 and our Mechanics Valley site.

Okay. That's good to know. And just last one here, Woven and Estero, are those all fully funded? Or do you need to and put up more capital for the developments?

Woven and Estero are both in different stages. Woven, we actually are a lender in that. So we do have additional capital through a bridge loan with them, but equity is -- all the equity is in for woven. Estero, we have probably another $3 million of equity that we would put into that. And then after that, the construction debt is there, it's ready to go. So very, very minimal cash required for each of those.

[Operator Instructions]

That concludes our Q&A session. I will now hand the conference back to Chief Executive Officer, John Baker, for closing remarks. Please go ahead.

I just want to close by saying how excited we are about what the future holds for this company. What the Altman acquisition has done for this company in terms of expanding the options we have and how we choose to develop our pipeline and future assets. It's the most exciting thing I've experienced since working here.

When you couple that with the leasing activity we've seen this year, it's really heady cocktail. I really appreciate everyone on the call taking the time to be with us on a Friday afternoon and as always, for your continued interest in the company. This concludes the call.

Good day, everyone, and welcome to today's FRP Holdings Inc. 2025 3Q Earnings Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions]

It is now my pleasure to turn the conference over to Matt McNulty, Chief Financial Officer of FRP. Please go ahead.

Thank you. Good morning, and thank you for joining us on the call today. I am Matt McNulty, Chief Financial Officer of FRP Holdings, Inc. And with me today are John Baker III, our CEO; John Baker II, our Chairman; David deVilliers III, our President and Chief Operating Officer; David deVilliers, Jr., our Vice Chairman; John Milton, our Executive Vice President; Mark Levy, who will serve as our new Chief Investment Officer; and John Klopfenstein, our Chief Accounting Officer. Mark Levy came to us through our recent acquisition of Altman Logistics Properties, where he served as its President.

First, let me run you through a brief disclosure regarding forward-looking statements and non-GAAP measurements used by the company. As a reminder, any statements on this call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings.

To supplement the financial results presented in accordance with generally accepted accounting principles, FRP presents certain non-GAAP financial measures within the meaning of Regulation G. The non-GAAP financial measures referenced in this call are net operating income, or NOI, and pro rata NOI. In this quarter, we provided an adjusted net income to adjust for the impact of onetime expenses of the Altman Logistics acquisition, which is a material business combination unlike our historical real estate acquisitions or joint ventures where we expense -- where our expenses are capitalized. We also provided adjusted net operating income to adjust for the impact of the onetime material royalty payment in the third quarter of 2024 to better detect the comparable results in both the quarter and year-to-date.

Management believes these adjustments provide a more accurate comparison of our ongoing business operations and results over time due to the nonrecurring material and unusual nature of these 2 specific items. FRP uses these non-GAAP financial measures to analyze its operations and to monitor, assess and identify meaningful trends in our operating and financial performance. These measures are not and should not be viewed as a substitute for GAAP financial measures. To reconcile adjusted net income, net operating income and adjusted net operating income to GAAP net income, please refer to our most recently filed 8-K.

Now to the financial highlights from our third quarter results. Net income for the third quarter decreased 51% to $700,000 or $0.03 per share versus $1.4 million or $0.07 per share in the same period last year due largely to $1.3 million of expenses related to the Altman Logistics Properties acquisition, partially offset by higher mining royalties and improved results in Equity in Loss of Joint Ventures.

Excluding the acquisition expenses this quarter, adjusted net income was up $281,000 or 21% over last year's third quarter. The company's pro rata share of NOI in the third quarter decreased 16% year-over-year to $9.5 million, primarily due to the onetime minimum royalty payment received in last year's third quarter. Excluding last year's onetime payment, adjusted NOI was up $104,000 in this quarter versus last year's third quarter.

I will now turn the call over to our President and Chief Operating Officer, David deVilliers III, for his report on operations. David?

Thank you, Matt, and good morning to those on the call. Allow me to provide additional insight into the third quarter results of the company.

Starting with our Commercial and Industrial segment. This segment currently consists of 10 buildings totaling nearly 810,000 square feet, which are mainly warehouses in the state of Maryland. Total revenues and NOI for the quarter totaled $1.2 million and $904,000, respectively, a decrease of 16% and 25% over the same period last year. The decrease was due to same-store occupancy reducing by 24% or 132,000 square feet and the addition of 258,000 square feet of new development space generated by our Chelsea building in Harford County, Maryland, which was 100% vacant in the quarter. Combined, these vacancies totaled 51% of the business segment and a focus to lease and increase occupancy is a priority.

Moving on to the results of our Mining and Royalty business segment. This division consists of 16 mining locations, predominantly located in Florida and Georgia with 1 mine in Virginia. Total revenues and NOI for the quarter totaled $3.7 million and $3.8 million, respectively, an increase of 15% and a decrease of 26% over the same period last year. The decrease in NOI is the result of a nonrecurring $1.9 million royalty payment in last year's third quarter. The disconnect between revenue and NOI is the result of GAAP accounting with the revenues being straight-lined.

As for our Multifamily segment, this business segment consists of 1,827 apartments and over 125,000 square feet of retail located in Washington, D.C. and Greenville, South Carolina. At quarter end, 91% of the apartments were occupied and 74% of the retail space was occupied. Total revenues and NOI for the quarter were $14.6 million and $8.2 million, respectively. FRP's share of revenues and NOI for the quarter totaled $8.5 million and $8.2 million, respectively, a revenue increase of 2.9% with NOI down 3.2% over the same period last year. The decrease in NOI was a result of higher operating costs, property taxes and increased uncollectible revenue at Maren.

The increase in revenue is the result of GAAP accounting, which again includes straight-line rents and uncollected revenue that is due, but which has not been paid. As stated in previous quarters, new deliveries in the D.C. market will continue to put pressure on vacancies, concessions and revenue growth in the foreseeable future. We continue to have renewal success rates over 55% with renewal rent increases averaging over 2.5%. New lease trade-out rates are generally down to compete with new supply and strike a balance between revenue and occupancy. Management continues to be diligent in tenant retention and rental rates in the market.

Now on to the Development segment. In terms of our commercial industrial development pipeline, our 2 Central and South Florida industrial joint venture projects with Altman Logistics Partners, where FRP was a 90% and 80% owner are under construction. Following our acquisition of Altman Properties, FRP now owns these assets 100%. The projects are in Lakeland and Broward County, Florida, totaling over 382,000 square feet and shell completion is anticipated by summer 2026.

Our Central Florida industrial joint venture with Strategic Real Estate Partners, where FRP is a 95% owner is pending permits for 2 buildings totaling over 375,000 square feet. The buildings are in Lake County, Florida, near Orlando, with options for investment in additional industrial development on adjacent properties in the future. We expect to break ground in Q4 on both buildings with shell building completion expected in Q4 2026. In Cecil County, Maryland, along the I-95 corridor, we are in the middle of predevelopment activities on 170 acres of industrial land that will support a 900,000 square foot distribution center. Off-site road improvements, reforestation codes and obtaining off-site wetland mitigation permits delayed our entitlement process, and we expect permits in early 2026 with a focus on attracting a build-to-suit opportunity.

Finally, we are in the initial permitting stage for our 55-acre tract in Harford County, Maryland. The intent is to obtain permits for 4 buildings totaling some 635,000 square feet of industrial product. Existing land leases for the storage of trailers help to offset our carrying and entitlement costs until we are ready to build. We submitted our initial development plan during the quarter, which puts us on track to have vertical construction permits in late 2026 and the potential to start a 212,000 square foot building pending market conditions in 2027. Completion of these aforementioned industrial projects will add over 1.8 million square feet of additional industrial commercial product to our platform.

Our projects in Florida represent over 750,000 square feet that will be available for lease-up in 2026. When stabilized, these projects alone are expected to generate annual NOI around $9 million with FRP's share of NOI just over $8 million. Subsequent to the quarter end, the company acquired the business operations and development pipeline of Altman Logistics Properties, LLC. As discussed earlier, this allowed FRP to own 100% of the Lakeland and Broward County, Florida projects. The acquisition also included a minority interest in 3 industrial buildings totaling 510,000 square feet in New Jersey and Florida, which are currently in various stages of development and all delivering in 2026. FRP expects to have up to $8 million invested in the 510,000 square feet with expectations of receiving over a 2x multiple on invested capital when the buildings are sold. The acquisition includes future development opportunities with the potential to develop 3 additional buildings totaling 725,000 square feet in Florida.

Turning to our principal capital source strategy or lending ventures. Aberdeen Overlook consists of 344 lots located on 110 acres in Aberdeen, Maryland. We have committed $31.1 million in funding, $27.5 million was drawn as of quarter end and over $24.7 million in preferred interest and principal payments were received to date. A national homebuilder is under contract to purchase all the finished building lots by Q4 2027. 180 of the 344 lots were closed upon, and we expect to generate interest and profits of some $11.2 million, resulting in a 36% profit on funds drawn.

In terms of our multifamily development pipeline, our joint venture with Woodfield Development, known as Woven, is under construction. FRP is the majority owner and the project represents our third multifamily project in Greenville, South Carolina. Total project costs are estimated at $87 million and consists of 214 units and 13,500 square feet of ground floor retail that is eligible to receive both South Carolina textile rehabilitation credits upon substantial completion and special source credits equal to 50% of the real estate taxes for a period of 20 years. The project is expected to be ready for lease-up in Q4 2027.

In addition to Woven, our multifamily joint venture in Estero, Florida, located between Fort Myers and Naples, where FRP holds a 16% minority interest is under construction with Woodfield as well. Total project costs are estimated at $142 million and consist of 296 units and 28,745 square feet of retail. The project is expected to be ready for lease-up in late 2027. These 2 multifamily projects are expected to boost FRP's NOI by over $4 million following stabilization in 2029.

In closing, FRP will have over 1.6 million square feet of industrial space available to lease over the next 12 months, making leasing conditions an important factor now and over the next 12 to 24 months. Currently, the broader backdrop remains mixed. Continued uncertainty around trade policy and macroeconomic direction has extended decision cycles for many occupiers, particularly for larger blocks of space. Even so, on-the-ground activity in our target submarkets is improving. In Maryland, we are seeing increased tour velocity, especially among tenants in the 25,000 square foot range. While demand for over 100,000 square foot product remains selective, mid-bay activity continues to demonstrate meaningful resilience.

Industrial fundamentals remain constructive. Rents are holding firm. New construction has declined below pre-pandemic levels, creating a healthier balance between supply and demand. We expect market vacancy to peak in the fourth quarter of 2025 with improving policy clarity supporting renewed tenant momentum. As we bring new product online in 2026, our pipeline is well positioned to benefit from tightening fundamentals and continued strength in well-located Class A logistics assets.

Across our core markets, we are seeing signs of stabilization and early recovery. New Jersey, vacancy held flat for the first time in 10 quarters with mid-bay product remaining exceptionally tight and the development pipeline near cycle lows. South Florida is among the strongest markets nationally with Broward County vacancy remaining around 5% with rent growth near 5%. Palm Beach is absorbing near-term deliveries, supported by enduring land scarcity and tenant demand. In Central Florida, market strength continues to bifurcate between bulk and mid-bay product. Our focus on mid-bay positions us to outperform.

In Baltimore, leasing accelerated in Q3 with roughly 2.9 million square feet executed and vacancy tightening to 7.4%. Modern logistics and manufacturing users continue to drive activity, supported by disciplined new supply and durable rent levels. Bottom line, we are operating in supply-constrained, high-barrier markets where modern infill logistics space continues to command strong tenant interest. With deliveries aligned to improving fundamentals, we are positioned to capitalize on the next phase of industrial demand.

We are leaning into the strength across our core logistics markets with roughly [ 400,000 ] square feet of vacancy in Maryland and over 1.25 million square feet of Class A products scheduled to deliver in New Jersey and Florida in 2026. The backdrop is constructive. Vacancies are stabilizing and trending lower and rents remain firm to rising. These conditions reinforce our confidence in achieving efficient lease-up across our portfolio and driving strong value realization.

Thank you, and I will now turn the call over to Mark Levy, our new Chief Investment Officer, who we hired in concert with closing on the Altman Logistics portfolio in October. Mark?

Thank you, Dave, and good morning. I'm pleased to join you today. As Matt mentioned, I came to FRP following the company's acquisition of Altman Logistics Properties, where I served as President from the inception of the company in 2001 through closing. My career has been dedicated to institutional industrial investment and development across the Eastern United States, including senior leadership roles at Duke Realty, Prologis and Hilco Redevelopment Partners with a focus on large-scale capital deployment and strategic market expansion.

Our team brings deep expertise across development, acquisitions, entitlements and leasing with a strong track record executing complex projects in high barrier supply-constrained logistics markets. Our strategy is centered on creating durable value and generating superior risk-adjusted returns through targeted investment in infill supply-constrained locations, off-market and creatively structured opportunities, value creation through entitlement, redevelopment and adaptive reuse and disciplined execution and delivery of Class A logistics facilities. Limited new supply in our target markets continues to support pricing power and rent growth. Against this backdrop, our pipeline is positioned to outperform as demand normalizes and absorption improves.

In the Northeast, one of the most competitive industrial regions in the country, our development pipeline includes Logistics Center at Parsippany, which is a 140,000 square foot Class A redevelopment in Morris County and Logistics Center at Hamilton, which is a 170,800 square foot Class A redevelopment in Hamilton Township, New Jersey. Both projects convert obsolete office assets into modern industrial facilities, demonstrating our ability to reposition underutilized real estate in core submarkets.

In Florida, supported by sustained population growth and strong logistics demand, our pipeline spans Central and South Florida. Logistics Center at Lakeland is a 201,000 facility along the I-4 corridor equidistant from Tampa and Orlando and Logistics Center at Delray is a 3-building just under 600,000 square foot logistics campus in Delray Beach, Florida. And finally, Logistics Center at 595 is a 182,773 square foot distribution facility in Southern Broward County that was converted from the legacy hospitality use. This property is located immediately adjacent to Port Everglades and the Hollywood Fort Lauderdale International Airport.

As mentioned, the Altman platform historically operated as a merchant development program, earning fees and promote economics alongside institutional partners. FRP expects to continue this model for projects not wholly owned by the company with property level IRRs in the mid-teens to 20 plus prior to promote participation. In addition, FRP plans to retain full ownership of select assets, including Lakeland and Davie, positioning the company to capture long-term value through stabilized cash flow and NAV growth.

Across the portfolio, our discipline is consistent, invest in locations with immediate transportation connectivity, deep labor pools, significant supply constraints and dense population centers. These fundamentals support resilient demand, attractive development yields and durable long-term value creation. I look forward to working with the FRP leadership team to advance our development pipeline, deepen our market relationships and scale our logistics platform in a disciplined value-accretive manner.

With that, I'll turn it back to John.

Thank you, Mark, and good morning to those on the call. As Matt touched on, third quarter results, though down, are actually better than they appear at first blush. GAAP net income is down 51% for the quarter and 37% for the year. But adjusted for one unusual item, namely the legal costs associated with the Altman acquisition, adjusted net income is up 21% for the quarter and down 5% for the year. Pro rata net operating income was down 16% for the quarter and 2% for the year. But excluding the nonrecurring cash -- nonrecurring catch-up payment in mining royalties in the third quarter of last year, adjusted NOI is up 1% for the quarter and 5% for the year.

This is a very long way of saying that results are where we expected them to be, which is to say more or less flat compared to last year. 2025 was identified by management as a foundational year for future growth, just not necessarily a growth year. In the short term, leasing and occupancy -- leasing and occupying our industrial and commercial vacancies at current market rates is the simplest and fastest way to improve earnings and NOI. Our buildings had real operating costs that are offset by tenant reimbursements, and that's a problem only new leases and tenants will solve. What we don't want to do is be so focused on occupancy that it comes at the expense of leasing these spaces for less than the value they should command. A bad lease will be a headache for us for longer than the short-term pain of the vacancy.

In terms of setting the company up for our next phase of growth, as David mentioned, we have 3 industrial projects in Florida totaling 763,000 square feet in various stages of development, all of which will be substantially complete in 2026. We are working to entitle all of the projects in our in-house development pipeline in Maryland to be shovel-ready in 2026. This does not mean we are starting these projects in 2026, but we want to be fully prepared to move on them if someone approaches us about developing any of these parcels ahead of where they fall in our spec development queue.

Finally, and most importantly, as we laid out in our call last week, the acquisition of Altman Logistics is essential to our growth strategy. As Mark just described, through this acquisition, we are now the general partner in developing industrial assets in some of the best industrial markets in the world. Through promotes and sales, we will generate a not insignificant amount of cash, which we can use to do entirely in-house projects or JVs where we are a larger partner with family offices or institutional money and generate fees or some of both. And we now have a team in place to be opportunistic and flexible with how and where we decide to proceed.

I said this on the call last week announcing the deal, but at the risk of repeating myself, the finances of the deal are attractive, but I think the most important component of this acquisition is the people. Opening a new office and building a separate team would have been a full-time job and a risky one. If you're ever curious about what that's like, you can feel free to call Mark. And any expansion into these industrial markets outside of our traditional Baltimore Sandbox would have to be done by joint ventures, which while effective, is an expensive way to expand because of the development fees and the equity you give up on a successful project.

Through this acquisition, we now have the ability to do these same projects in-house or be the partner generating fees and equity if we so choose. It simultaneously solves the problem of additional hires we would have had to make anyway with people plugged into the markets where we want to be. As I said last week, talent is going to be the only differentiator we can count on to deliver value to our investors. Through this acquisition, we have taken on a team with a proven track record that can identify growth markets, leverage contacts for off-market deals, control construction costs and get a building occupied and stabilized quickly with quality tenants. Combining this team with the additional profits earned from these joint ventures on top of our own projects will be what drives this company's next decade of growth.

I'll now turn the call over to any questions that you might have.

[Operator Instructions] We do have a question. We'll go to the line of Ted Goins with Salem.

Thank you so much for all the discussion this morning and especially for all the energy that you're putting into this endeavor. I would love to talk about the difficult part of the business right now, sorry for this. The Nat Stadium opened in 2008. And -- it just seems to be a problem. You speak of the recovery issues around the Maren. I think maybe this is the same thing that Wall Street Journal was talking about in an article a week or 2 ago with Atlanta as a highlight.

But could you put some color on what you all are seeing in that area and the impediments to development and your thoughts around when that might develop again? And I recollect that the transaction with Vulcan was coming up in 2026, which seems a lot closer today than it was a few years ago. And if you could speak to that as well.

Sure. I will start in terms of the district market conditions. And you've heard us talk about this before, but during the pandemic, a lot of, I would say, tenant protective laws were put in place, where tenants were not allowed to be evicted and you weren't allowed to raise any rents. And that really materialized into an environment where tenants just stopped paying their landlords. And we really had no way of getting them out of our buildings. And there was also laws passed where we really couldn't vet tenants. So we couldn't do our due diligence where tenants paid or not paid historically. And if they didn't pay, we couldn't get them out.

So our delinquency rate was extremely high, not only ours, but across the market. In Class A buildings, we were seeing 10%, 12% of the tenants not paying. So you might have been 95%, 90% occupied, but that building was really only 80%, considering many of your tenants weren't paying. We are seeing that now subside. The district has truly embraced the fact that this is an issue and new laws continue to be passed to help landlords deal with tenants and protect rent-paying tenants as well.

So I think from a legal, eviction tenant landlord relations side, things are changing and evolving. I think crime and security have been a focus as well down in the district, which also is helping to support more people coming out, more people using our ground floor retail. And there are signs that things are changing. There was a number of buildings that were delivered around our buildings, large projects. These projects are over 500 or 1,000 units being delivered. And there's velocity there. They're leasing them. They may not be at the rates that everyone likes, and there's definitely concessions in the market to get these new supply deliveries filled and stabilized.

But the velocity is there, the demand is there. And I think we just need to strike a better balance between supply and demand, which we believe is coming. We need to get more of these, I would say, equal tenant landlord laws in place, and we need to make sure that people feel safe and want to be out in the environment, in the district. And all those things we have seen. We have seen change. We are moving away from the bottom. When it flips to a point where we feel development will pencil, is when we start seeing gains at our existing multifamily buildings. And we're starting to see it. We're starting to see renewal rents move up. Trade-outs, as I mentioned, are still pretty flat negative because it's tough to attract tenants into our buildings when new deliveries are given concessions.

But it is turning. I feel that we are off the bottom of multifamily. But let's see what the next couple of quarters say. And in terms of the Vulcan lease, we are talking with them. We're in active communications with them, and we look forward to keeping them there. They're a great tenant. They provide concrete to our projects. And until we're ready to develop that site, we'd love to have them there.

And how does the development of RFK move things along for you? Or is that just too far down the river?

In my mind, it's too far down the river, but it's great to see government investment. I do think it's a little too far down, but it's always great to have that type of activity in and around where you are.

And part of the notion a few years back was that Amazon was going to move forward in Pentagon City or wherever it is right near there. And that would offer a reverse commute to folks in the district near you. How is that developing?

I would say this. I -- we haven't seen any real impact from that development.

Okay. And could you speak to Bryant Street? It seems to be getting a little bit of momentum and what you might be doing there that's showing some green shoots?

Yes. Bryant Street, again, we're dealing with some delinquency there. It is stable, and we have seen some small gains. We have seen gains in our rental rates, which is great. I think the biggest green shoot that we have seen is that our retail component, which is fairly large at Bryant Street. The tenants are in, they're occupying, they're paying, and we're -- and we see kind of the light at the end of the tunnel. Bryant Street is more or less stabilized now. And with treasuries where they are, I think we will be in a place to get some good financing at some point. Maybe not now, but potentially in the first half of 2026, and we would be able to lower our debt service to a point where our earnings are relevant.

So Bryant Street is a big project. The development of that area really got slowed down because of the pandemic. We're moving away from that. We're seeing rent growth. We're seeing our occupancy tick up. We're seeing delinquencies and concessions burn down. We're in a good, good place from -- we're more stable there than ever. And I think that bodes well with getting the capital stack of equity and debt in a good place and start seeing some meaningful cash flow on the horizon.

Again, I just want to say thanks for all your efforts. The efforts, the intentionality that you guys are putting forth are evident to all of us. And so thank you for that.

[Operator Instructions] It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

We appreciate your continued interest and investment in the company, and this concludes the call. Thank you.

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

Good day, everyone, and welcome to today's FRP Holdings call regarding acquisition of Altman Logistics [Operator Instructions] Please note, today's call will be recorded. [Operator Instructions]

It is now my pleasure to turn the conference over to Chief Financial Officer, Matt McNulty. Please go ahead.

Thank you, and good afternoon, everyone. Thank you for joining the FRP Holdings, Inc. conference call today to review the company's recent announcement of the strategic acquisition of Altman Logistics.

With me on the call is John Baker III, Chief Executive Officer; David deVilliers, III, our Chief Operating Officer; John D. Baker II, our Chairman; David deVilliers, Jr., our Vice Chairman; and John Klopfenstein, our Chief Accounting Officer.

First, let me run through a brief disclosure regarding forward-looking statements and non-GAAP measures used by the company. As a reminder, any statements on this call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These risks and uncertainties are listed in our SEC filings. We have no obligation to revise or update any forward-looking statements except as imposed by law as a result of future events or new information.

To supplement the financial results presented in accordance with generally accepted accounting principles. FRP presents certain non-GAAP financial measures within the meaning of Regulation G. The non-GAAP financial measures referenced in this call are net operating income or NOI and pro rata NOI. FRP uses these non-GAAP financial measures to analyze its operations and to monitor, assess and identify meaningful trends in its operating and financial performance. This measure is not and should not be viewed as a substitute for GAAP financial measures.

To reconcile NOI to GAAP, please refer -- sorry, segment entitled non-GAAP financial matters in our most recent earnings release. Any reference to cap rates, asset values per share values or the analysis of the estimated value of our assets net of debt and liabilities are for illustrative purposes only and as a reflection of how management used 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 cost or tax liability.

I will now turn the call over to our CEO, John Baker III, to discuss the recent announcement. John?

Thanks, Matt, and good afternoon to those on the call. Earlier this week, we announced the completion of an important strategic acquisition that expands FRP's core industrial business development platform. This acquisition, which closed on October 21, 2025, as a number of development projects to our existing and growing portfolio, including raising FRP's ownership interest to 100% and 2 projects in Florida currently under development and scheduled for completion in 2026. This transaction both broadens our exposure to high-quality industrial assets in key markets as well as deepening the bench of our team.

Now let me review the terms of the transaction. FRP acquired minority membership interest in 5 joint ventures and took an assignment of the land sales contract from Altman Logistics LLC for a total purchase price of $23.6 million, plus a requirement to replace a $10 million guarantee fund that serves as collateral for the existing construction loans. At closing, $42.5 million (sic) [ $45.3 million ] of the $121.8 million in total construction financing for the projects had been drawn. With FRP's proportionate share currently at $4.9 million. The company expects to record additional liabilities and expenses between now and the sale of the projects related to employee compensation tied to promote participation for successful projects.

In the release accompanying this announcement, we included a table, which details the projects being purchased with this transaction, inclusive of the 2 projects at FRP already had an existing partnership with Altman and which FRP now owns 100%.

The Altman Logistics Properties model consisted of a developed and sell program, whereby Altman collects development fees from its joint venture partners and holds the rights to promote upon a successful sale of the project at stabilization. Exclusive of the 2 properties at FRP will now own 100% of. The company intends to continue the Altman Logistic Properties model for these other projects, which the company estimates will generate a 15% to 20% IRR at the property level prior to any promotes the company would be entitled to receive.

The Reader's Digest version of what we expect to achieve with this deal is that on stabilization of our 5-year development pipeline, we will be able to execute our stated goal of doubling our NOI, as well as growing FRP at sum of the parts valuation to over $1 billion. The finances of this deal are obviously attractive to us. Through the promotes and sales we expect their team to achieve on these deals in place, we're going to generate a significant amount of cash that will help fuel future development more in line with the traditional FRPH model of in-house development for the purposes of holding and managing assets.

But to me, what pushes this deal from attractive into the realm of necessary is the people. At our Investor Day event earlier this year, we presented a growth plan to more than double our run rate NOI by the end of this decade centered around a substantial investment and growth of our industrial portfolio. We detailed an extensive plan on the pipeline of projects with the goal of delivering 3 new industrial properties every 2 years across the back half of this decade.

In order to make that possible, we knew we needed to bring on at least 3 people who would hold meaningful positions in the company. Those hires would have to be talented, capable people who fit our culture and share our values.

What this deal accomplishes in addition to being financially accretive is to complete this whole process in one step. Rather than hiring, training, mentoring and professional growing a new crop of employees to get us where we need to be. We have acquired [ wholesale ], a talented team that we know and trust with a prudent track record, deep contacts and expertise in markets well outside our current reach. We have broadened our branch and greatly expanded our bandwidth and done it with a known commodity, leapfrogging the lengthy process of professional development and internal growth that might have taken a decade to achieve if done organically.

Over the last 40 years, the long-term movement of interest rates and cap rates have made it difficult to differentiate between the pretty good and the truly talented. In this current environment of interest rate and cap rate uncertainty, talent is going to be the only differentiator we can count on to deliver value to our investors.

The ability to identify growth markets, leverage contacts for off-market deals, control construction costs and get a building occupied and stabilize quickly with quality tenants is going to be everything. In closing this transaction, we now have a deep bench of proven professionals who can do just that and can accomplish in-house what we would have had to pay for through development fees and equity had we pursued a deal via joint venture.

We have, for some time, laid out an ambitious plan for growth, and this certainly adds to it. Now we have the team that can deliver it and then some. At this point, we'll be happy to answer any questions you might have.

[Operator Instructions] And we'll take our first question from Kevin Amirsaleh with Via Mizner Capital LLC.

Sorry, I might have missed this, just joining the call. But could you just speak about if the future direction, is this just an opportunity came your way?

Or is this a strategic fork in the path for FRPH? What is your thinking and sort of the flavor here going forward on development and what you guys going to lean into?

Kevin, this is John Baker. It's really an opportunity that came our way. Altman approached us. They were kind of at an interesting point and the company's trajectory, their overall majority shareholder was looking to wind things down. And we had a relationship with their industrial team, and they approached us about potentially taking their team on and taking on the projects that they have under consideration.

I don't think -- a year ago, if you'd asked us if we'd be in the fee development business, that's not a strategy we would not necessarily would have pursued. What we did know a year ago was that we -- in order to get where we wanted to be, we were going to have to make some serious hires and take on real quality people kind of what, David III was to dad debt when he was President of FRP Development Corp.

So the taking on of additional employees was something we knew we had to do. And when this opportunity presented itself and you had a team of people that we knew, trusted, we knew were really talented and had the opportunity to take them on.

The question was, okay, the fee development business what does that look like? What does that look like for us? And so that was essentially our due diligence. And what I think -- I don't know necessarily that long term, we're going to be in the fee development business, really wonderful muscle to be able to flex if we want to.

And what I do know is that the projects that they have are going to generate serious amount of cash for us. And that's going to be able to fuel kind of our more traditional model of developing things in-house. And the other benefit of this transaction is had we kind of proceeded as planned and made additional hires just assuming that those hires worked out perfectly, which I think anyone who has ever hired anyone that's not a guarantee.

The beauty of the Altman team is that they're in a completely different market. It's essentially like opening up a new office. And they are focused on markets that we really haven't been able to touch and wouldn't have been able to touch unless we've done it in the kind of more expensive form of a JV. So there are market contacts in South Florida, Central Florida, tri-state area really broadens our market outreach. And I think that's kind of the big strategic shift, if anything.

And I'd just add, Kevin, just because you mentioned fork in the road, I just want to -- it's definitely not a fork in the road. I think this is just something that is in place now that will play out with these guys. But the long-term vision is to take this team and meld them into our core vision of building assets for ourselves and owning them long term. And so there'll be a shift out of -- over time, we may do some more fee development projects. But ultimately, they'll roll into our normal development program.

And then to John's point, if we wanted to flex that muscle and do a fee development because it was really attractive, we'd have the capability to do that once in a while.

Got you. And so just a follow-up, if I may. Like you said, this is, what, doubling the size of the employees. This is a pretty substantial growth. This team gives you an ability. You talked about your vision for the company. What ability, ultimately, not necessarily what's in front of you in 6 months, but what ability do they give you?

And what is this -- you envision -- what is it you envision? What is that capability to give you? And what this team will do for FRP in the long run? Kind of what are your ambitions here?

One thing to clarify, and I'll let somebody else steal that call. I think I heard you say doubling the size of the employee base, which is -- if that was heard, that was not right. We've got a little over 20 today, and we added 6 new people with this deal.

6 new people. Okay. So yes, I mean, what does it enable you to do? What part of the puzzle does this fill in, not necessarily for 12 months, but more the vision around what you guys are doing? What have you just unlocked?

I think -- go ahead, David.

I mean, -- I'll touch base on one aspect of this. This team is entrenched in South and Central Florida, an area that we don't have development boots on the ground. We just don't have people down there. We're more concentrated up here in Maryland. So this group of people really opens us up to a new geographic location, in South Florida and also up in New Jersey, New York, Pennsylvania.

The Northeast market and that Southern market are 2 markets that we want to be in. We like the market characteristics. We like the demand drivers. And this team allows us to get into those markets really, really well. They already had traction there, and we're jumping on that traction and looking to scale that. So this team allows us to do that, allows us to do that today. It allows us to do that in a year, 2 years, 10 years. And that's something that's really, really exciting.

Mark Levy, he worked for Prologis. He worked for JLL. He's worked with Hilco. He's been up and down the East Coast for a while. His black book and the amount of people that he knows is wide and deep. So we are going to see a lot more deal flow. We're going to see a lot more opportunities, and we're going to be able to really scour a lot of deals to pick the ones that we really, really like. So those 2 things, more deal flow and access to these geographical markets that are different than the Mid-Atlantic are really, really exciting and something that they bring today and 10 years from now.

We'll take our next question from David Foley with Estabrook.

I guess the previous caller kind of asked a handful of things. But how many -- I guess, 2 parts of this is sort of is there a square footage level that you guys -- I mean I thought a couple of years ago, this might be more than a couple of years ago, you wanted to get back to around 1 million square feet and you used the term doubling your NOI. Is there a number that in your minds of saying, I'd like to get to this level.

And some of that is it seems that a long time ago, you kind of had some industrial space in the Maryland area, and it was probably a little bit smaller in terms of the buildings you were building, and you sort of build one building and get it entirely leased before sort of breaking ground on the next one. And we're obviously in a bit of a different place here.

But is there a is there a sense or a direction that you'd like to go to before you'd say, well, let's catch our breath and generate enough cash here to perhaps give a dividend, which would make some shareholders elated as to where you want to be, I guess?

I don't know if there's a square footage cap exactly that we have in mind. But I think at a certain point in the next basically 5 years and beyond, the projects that we have on hand are going to be developing or generating I think more cash than we feel comfortable employing year in, year out. And that's when you -- essentially not that we'd be a mature company, but when you've got more cash than you have projects to deploy it in, that's when you're returning capital to shareholders.

Yes. And David, just as you know, and I'm sure it's pretty clear, this transaction, we would have ended up buying the extra 10% and 20% of Lakeland and Davie upon stabilization...

At some point.

So that would have added -- that kind of was already in our square footage. We're not really adding any square feet with the other projects in this deal because we'll sell them in the next 3 to 4 years. So they'll just be developed and sold and collect the promotes and generate the cash for future projects.

But I think in my mind, I think we've kind of said that in the next few years, we think we'll be at like $1.2 billion with the projects in the pipeline. And I could see 5 more years after that, some adding another $750,000 million to $1 million (sic) [ billion ], I think, is probably in our program. And so in 10 years around $2 billion.

That the apartment sort of component of the company is sort of on a -- in a holding pattern until that market gets more attractive in what is remaining in the D.C. area and perhaps in some other places where you've made some investments.

I don't know about holding pattern. I think there's still apartment markets that we are excited about and don't want to completely abandon. I think we're really happy with Greenville. We've got a project that we've invested in and right outside of Fort Myers.

But I think as we've said before, I think our focus is industrial. That is going to be the brunt of our CapEx and what equity. But I don't think we're abandoning apartments by any stretch of the imagination.

Yes. We do have an active project right now that just broke ground in South Carolina, the Woven project. So we have 2 multifamily projects that are active, but it's certainly not -- to John's point, it's not the heft of what we're actively doing. It's 25% or something of what we're doing, and we'll just wait and see on D.C. We've got a lot of projects up there to do, but we're not in a hurry to do them until we kind of see the market get better.

We'll move next to Stephen Farrell with Oppenheimer.

I just have a quick question on the impact to the income statement here. What will be the cost of overhead of bringing the team on?

The team is -- well, it's kind of shifted over time, but I think the cost of the team is probably going to be somewhere in the $3.5 million to $4 million range annually. We'll collect each year somewhere around half of that. I'm just going to use round numbers in development fees that will cover that cost. So you're looking at probably a net $1.5 million or so, $2 million.

And you mentioned for now, you're just going to finish these -- the other 3 projects you'll do is develop to sell and focus on your own, the FRP developments. Is there more bandwidth maybe increase the goal was what 3 every 2 years. It seems like now they got 5 going on in the pipeline at one time. So is that pace change at all?

For in-house projects, no. That's still kind of our North Star right now. It's just that we'll have on top of that, these projects that are currently under development. And then there are -- some of the projects have additional phases that we have an obligation to see through. and an opportunity to -- it's probably a much better way of saying that.

And then with the future developments, do you think that -- what you're trying to do to sort of replicate the old structure when you had the prior industrial developments where they have debt and less likely to use JVs?

Yes. I think we're less likely to use JVs at this point. I mean that's sort of the beauty of this team is that the markets we want to be in, which we would have had to JV into, now we don't have to. And so I think beyond what we currently have planned. We expect to see more projects in the South Florida, Central Florida, tri-state, Pennsylvania area. And I think we'll certainly get through this first phase of develop and sell, collect fees, get promotes.

I think what you might see after that is kind of a hybrid of our program with theirs where you might do 2 projects where you're -- maybe bigger projects, certainly different markets where you can bring in institutional capital, you can be the GP on a deal, collect fees, earn a promote and then you probably put debt on those. And from there, you could either sell them, you could buy out your partner, you could own it together. I think this just opens up a lot of possibilities for us.

And I know it's not a pivot, as you said, but there is a bigger focus on the industrial development. Personally, I mean, I feel like with the housing in short supply and lack of new developments coming on, now is a better time to be leaning into that side. Do you envision that at all? Or are we kind of at the pace that we've been going in the last 2 years?

I don't think we're going to ramp up our multifamily development program, but we still have plenty of projects in the hopper. I think that's what we've always considered the beauty of our company and our strategy is -- we have irons in several asset class fires. And if the apartments are kind of where they were 5 years ago, then there's nothing stopping us from moving ahead with Steuart Phase 1, with Anacostia Phase 4, Phase 3. Our goal with any project that we have under development is to be shovel-ready as soon as possible so that when it's time to go, we can go.

Yes. And just again, we do have -- currently, we have a project that's a pretty large project underway. It just broke ground in the last couple of months in South Carolina that we're -- I want to say we're about a 70% owner of. And then we've got a project in Fort Myers, Florida, where we're a much smaller partner. We're 15%, but it's a 2-phase project that's a multi mixed-use project with retail and some other things. So we're still in there. We're -- and actually, if you look at compared to the last couple of years, this is probably more active than we've been in the last couple of years on the apartments.

So -- and then we're still working on entitlements and things up in D.C. as we speak. I think we actually -- David, you can probably speak to this, just got approval for Phase 3 and Phase 4 as apartment buildings the way we wanted them and with a time frame that makes sense. I think it gave us 3 years to start to break ground on the first one. So we're just keeping an eye on that D.C. ball. And if things improve in the market, they're not bad. I mean the rents are fine. We just had a glut of projects kind of come on in our area, 2 or 3 projects in the last few years, and those are starting to lease up. So hopefully, that will get done and rents will increase, and we'll see a good opportunity to jump back in there.

Yes. We're not rooting against multifamily by any stretch of the imagination.

Yes. No, I echo all of that. I mean I think industrial is a pillar of our strategy, but multifamily and other asset classes remain important. I think as everyone has seen, I think we've always taken a diversified approach to investment and development as a strength. Sometimes we lean in on multifamily, sometimes we lean in industrial. And it really has to do with the market and the opportunity that's there.

Multifamily right now in D.C., I don't think it's the right time. Will it be in the future? Probably, and we'll be ready for that. Our project, our multifamily project down in Greenville, South Carolina, we got some tax breaks. We got some textile credit money. And the market is there right now. So we saw that as an opportunity, and we're pursuing it. And we're looking with all of these to make sure that there's a path to long-term value creation. That's kind of our North Star. The things have to pencil. It has to be a good opportunity, and it's got to create value. And if those boxes check, then it's something that we'll pursue.

And the number of opportunities for industrial development in Maryland haven't been as abundant as they once were, and that's what led to the Florida JVs and this gives you optionality on tri-state as well. But how do you view the overall market in those areas and risk of overbuilding and kind of doing this acquisition now? And then if we get into a scenario where we're oversupplied and how are you gauging the risk of this transaction and sort of a market downturn?

Yes, Steve, I think that's a really good question. And obviously, one that we've factored into our investment strategy and kind of what we've seen is that the big box 900,000 square foot buildings and above that have a lot of institutional money behind it, that I think there has been some oversupply in that regard. But the kind of sandbox we play in, your 100,000, 150,000, 250,000 square foot buildings, shallow bay industrial, that's just not at the level of investment required to get institutional capital behind it. And it's kind of a pain to develop. I think when you do see institutional capital come in, it's purchasing a building that's already been built and stabilized. So right now, the asset class that we -- has always been our bread and butter is still relatively undersupplied.

And these buildings are all spread out and they're not -- any of these buildings really are in the same market as the other. So certainly a downturn, I think I heard you say downturn. I mean that's going to affect every market in the country. And it would not be wonderful, obviously. We are mostly a 10% owner in these buildings. And so we would be able to carry our weight assuming -- and our partners in these deals are big player, institutional players. So I think we could weather a downturn. We certainly have room for it. But I think the diversification of locations is helpful in that regard. None of its overlapping.

And just last question. I know you mentioned getting to $1 billion sum of the parts. And at that point, you'd probably have more cash than you'd be willing to redeploy each year. So what is the end game that? Are you building to get to that point and sell? Or building to get to that point and maintain and do one-off and lower level of development after that?

Yes. I think our goal is to just keep getting bigger. We want to grow the value of this company. And so I don't -- everything is for sale, but that's not part of our strategy. We want to invest in quality assets and generate substantial cash flow once we've reached a certain portfolio size. And once we do, it doesn't -- if we double the size of our portfolio, it doesn't mean we're going to necessarily double the size of the investment we put out every year. So that's when you -- when we reach a point where we're generating more money, then we're going to put back into it. That's where you're going to see a return of capital.

Yes, this next 5 years is kind of the cycle that we're going to draw down cash and invest. And then towards the end of that in the plan is when cash starts to grow pretty steadily going forward, using our normal development investment amount, kind of staying flat on CapEx.

So I think to John's point, there's an opportunity there to start looking at returning shareholders, whether it's repurchases or something else. And that's kind of where the kind of the eye on the ball is let's get through these next few years and get this plan stabilized and then take a look at it.

We'll move next to Bill Chen with Rhizome Partners. [Operator Instructions]

Can you help me understand the -- on the purchase price? You explained the $10 million that's -- there's a bank account. How much -- is that really just kind of like dollar for dollar that you took over?

Yes. It was a dollar for dollar. We had -- that was a yes. Yes, it was a $10 million collateral account essentially required by some of the loans under these JVs, and we basically just replaced Altman's $10 million or our $10 million, so that's just our cash.

Okay. Got you. And then on the -- can you give an opinion on the $23.6 million? it seems like you took over a bunch of minority interest. Love to hear your thought on like was that at a discount? How do you feel about the positions 10% of Lakeland, 20% of Davie and then 10% of Delray Beach, which that property seems like it's almost done. So love to hear your thought on that.

I mean, Bill, I'll give an opinion of that. I -- look, we would not have done this if we didn't think it was a good deal, one. Two, I would say that a portion of this purchase price was really about acquiring the team. And that price was sort of based on the fees associated with the projects that they had in the pipeline. So there was a piece of it that kind of -- was the team members.

The other part of the purchase price was really at cost with, let's just say, a 20% premium on the cost. And we're stepping in, to your point, at a time when these buildings are well under development, if not under roof and a lot of the due diligence, legal, all those costs to kind of get it to where it was were done for us. And work that premium and then some.

So the purchase price, I look at as very, very favorable. The proof is going to be in the next couple of years where we get at least stabilized, we value these things and the ones that we're keeping like on Davie, what type of returns, earnings we're getting on those and the other ones, what type of sale price we're getting. But the basis that we have in these things, that purchase price, I feel really good about and look forward to seeing what fruit this bears 2, 3 years down the road when it's stabilized and/or we sold it.

That's helpful. And approximately, what kind of estimated LTV on some of these projects just tapping into?

LTV, I just want to make sure we're talking about the same kind of loan-to-value?

Yes, yes.

I mean I can tell you now that all of these are under a construction loan and all of those are kind of a 55% loan to cost. So they're not highly leveraged. Most of these or all of them are floating to SOFR. And I look forward to seeing what the Fed does. But so far, they're going in a direction that's very helpful to us. Lower construction interest is always better when we're developing these things.

And if we keep them, I think we've always been very prudent with our permanent financing to make sure the loan-to-value makes sense. And if there's a couple of bumps in the road, we're still able to meet the covenants. And if not, if we have to pay something down a couple of bucks, we've got the capacity to do it. So we're excited about the capital stack now in terms of equity and construction and look forward to getting these stabilized and making good decisions for permanent financing.

That's helpful. And I believe you said that these -- the other 90 -- I mean, I know Lakeland and Davie, it's FRP, but the other 4, the other majority investors are institutions and endowment, if I heard that correctly earlier?

They are. Some are institutional. Others are, I call it, family office investments. But I mean, again, we've got Deutsche Bank, PCCP, we've got some good partners. And we're excited to know them. I think that there's going to be some good opportunities based on our equity partner side and also our debt partners. We've met people from Truist and Synovus and City National Bank and Seacoast. And again, just having those contacts and having access to different players in this market is exciting.

There are no further questions at this time. I would now like to turn it back to management for any additional or closing remarks.

Thank you to everyone for your interesting questions and this transaction and your continued investment in the company. This is a deal that we are really, really excited about, and we intend to deliver on that excitement and hope. So thank you again to everyone.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon.