John Baker - Executive Chairman and Chief Executive Officer John Milton - Executive Vice President and Chief Financial Officer John Klopfenstein - Chief Accounting Officer David deVilliers - President

Curtis Jensen - Robotti & Company

Thank you and good afternoon everyone. I am John Baker, Executive Chairman of FRP Holdings.

And with me this afternoon are John Milton, our Executive Vice President and CFO; John Klopfenstein, our Chief Accounting Officer; and David deVilliers, our President who has joined us from Baltimore by phone. Before we begin, let me remind you that 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. As we complete our second full quarter since the sale of our warehouses to Blackstone, I am reminded of how different a company we are these days every time I read our financial statements.

Before the sale, our asset management group, which owned the warehouses, had $187 million of net book value. Today that number is $10.7 million in the 3 remaining office buildings and 1 warehouse, which is classified as a discontinued operation.

While this sounds terribly negative, it is far more than offset by the fact that we have $260 million of cash on the balance sheet, approximately $28 million less debt and the opportunity to redeploy this cash in a higher return business model. No longer will we build and hold buildings.

Our business plan going forward is to play to our strength, which is taking raw land and converting it into developed land or developed projects which have vastly increased value. We are not a NOI play today we are value creation play that opportunistically monetizes our assets.

As we wait to deploy the cash, the goal is to invest the cash in 2-year average bond durations with a yield of about 3.5% today. This enables us to generate income while preserving liquidity.

The next part of our transformation is the redeployment of our cash in projects that we are confident will yield higher returns than our old buy and hold strategy. As of today, we budgeted capital expenditures of $200 million over the next 5 years and while nearly half of this in projects where we have only letters of intent to close, we are optimistic that we can find good opportunities even in a high-priced environment.

Furthermore, having the $8 million royalty stream coming in and actually growing, plus the interest income that we are earning, allows us to maintain a fortress balance sheet throughout the period should the inevitable recession occur. That’s the future we are planning.

Let me now turn it over to David deVilliers to describe the quarter in each of our business groups.

Thank you, John and good day to those on the call this afternoon. As a follow-up to John’s opening remarks, our company may look a little different on paper following the warehouse sale.

But we have certainly been busy initializing the redeployment of cash into potential future opportunities for the business. So relative to our asset management business segment and to reiterate, our entire warehouse portfolio is reclassified to discontinued operations last quarter, including 1 warehouse facility that an affiliate of Blackstone has an option to purchase for $11.7 million, pending the outcome of litigation with the current tenant relative to its right of first refusal option.

Thus, our remaining Asset Management segment consists of 3 office buildings. This being said, total revenues for this business segment were up 1.6% to $568,000, and operating profit were $242,000, an increase of 9% over the same period last year.

As to our other business segments, the mining and royalty segment enjoyed a 19% increase in its revenues for the quarter just ended, increasing $339,000 over the same period last year to $2.1 million. Total operating profit in this segment was $1,933,000, an increase of 18.1% over the same period last year.

I might add this is the third straight quarter of increased revenues for this segment. And what’s more impressive is the fact that this is the most revenue the segment has generated through the first 9 months of any year ever.

With respect to Land Development and Construction, this business segment is the main driver behind value creation. And as we have said before, the segment generates minimal revenues but incurs a significant cost to accomplish its objectives.

So with respect to ongoing and new projects, they include: one, the ongoing construction of a 94,000 square foot spec warehouse in our Hollander Business Park in Baltimore, Maryland. We scheduled completion in the second quarter of 2019.

This new project was updated in its design to include 32 foot clear ceiling heights and a generous supply of exterior drop trailer storage to expand the prospect plate to suit the last mile tenant. Two, the first phase of our joint venture with St.

John Properties, consisting of 4 buildings totaling over 100,000 square feet of single-storey office and small bay retail space in Baltimore County, Maryland is scheduled for shell building completion during the fourth quarter of this year. Marketing and leasing efforts have begun in earnest with stabilization projected for the fourth quarter of 2020.

Historic absorption in this market has been plus or minus 40,000 square feet on an annual basis. Next, we continued our efforts before the appropriate governmental agencies seeking Planned Unit Development entitlements for our 118-acre tract in Carroll County, Maryland, which has been annexed into the town of Hampstead.

The project is now known as Hampstead Overlook. Final development plans call for a combination of 250 single-family and townhouse building lots.

Next, earlier this year, we became the principal capital source in another residential land development venture, this one in Baltimore County, Maryland, now known as Hyde Park, which was previously named Essexshire. We have committed up to $9.2 million with a charged 10% interest rate and a minimum preferred return requirement of 20%, above which a profit-induced waterfall determines the final split of proceeds.

Our plan is to create 125 townhome and 4 single-family building lots that can be sold to national homebuilders, either at record flat finalization or as fully developed lots. We are currently in the process of compiling our response to the appropriate governmental agencies in advance of final development approvals some time in the first quarter of 2019.

Next, in April of this year, construction began on Phase 2 of our RiverFront on the Anacostia project in Washington DC Phase 2 is now known as The Maren. This mixed use development will consist of 264 apartments and 7,900 square feet of first floor retail.

As of September 30, excavation was complete and the garage levels were taking shape. The building is expected to be ready to receive its first resident in mid-2020.

Like we did for Phase 1 or Dock 79 as it’s now known, this is a joint venture with MidAtlantic Realty Partners or MRP in which FRP is the majority part. Next, during the quarter, we entered into a letter of intent for the purchase of a value add class B warehouse park inclusive of 5 buildings totaling 268,000 square feet on a little over 21 acres in Harper county, Maryland.

After a satisfactory study period that will expire at the end of the fourth quarter of this year, our plan contemplates rehabilitation of certain areas that have been somewhat neglected in recent years, making each building extremely functional and competitive in the marketplace the property serves. Next, at the end of the quarter, we executed another Letter of Intent to enter into a joint venture with our partner at Riverfront, MRP, to develop the first phase of a multi-phased mixed-use development that includes residential and retail, adjacent to the Red Line metro station in Northeast Washington, DC.

Currently the project is known as Bryant Street. FRP plans to contribute $35 million in common equity and another $20 million to $25 million in preferred equity to the joint venture.

This property is located in a designated opportunity zone, which allows us to defer the capital gains on some of the pretax profits from the warehouse sale. Phase 1 will consist of 488 apartments and 86,000 square feet of first floor and freestanding retail.

Assuming we move forward, this project will commence in early 2019. Finally, at the end of the quarter, we executed still another letter of intent to purchase several contiguous parcels of raw land, totaling approximately 300 acres near the port of Baltimore.

Our due diligence efforts should be complete prior to year’s end. Upon entitlement, this development could allow us to construct, lease and ultimately sell warehouse facilities totaling over 1 million square feet.

These aforementioned projects will utilize approximately $128 million of equity over the next several years, including $38 million for the committed projects and $90 million for those that are in the letters of intent stage and subject to continued due diligence. We are encouraged that we are finding projects with strong potential for appropriate returns, but are resolute to the fact that spending monies realized from the warehouse sales need to be done carefully and prudently.

I also think it’s important to mention that the investment in these projects does not consume all of the proceeds, which provides us a nice cushion to absorb a potential downturn in the economy while also providing some dry powder should a next extraordinary investment come our way. Finally, it’s also important to mention that while tax deferral acquisitions such as opportunity zone purchases, etcetera, can save us $10 million to $15 million in taxes from the warehouse platform sale we are driven to these projects by the baseline economics of their potential development.

Moving on to our RiverFront on the Anacostia business segment, average occupancy for the quarter just ended at Dock 79 was 94.8%. This past quarter, the retention rate was 50% and at an average rental increase of 2.62%, both of these metrics exceeded our expectations.

Our primary focus on this aspect of the project consists of resident retention, maximizing rental rates and optimizing expenses. The retail component of Dock 79 which totals just a touch over 14,000 feet was 46% occupied and 76% leased as of the end of the quarter.

The third of four retail suites is still in the construction phase and will not be ready to serve the public until the first quarter of 2019. The two restaurants that are opened for business have been well received and are experienced in high levels of traffic and related revenues.

So in conclusion, as we mentioned last quarter, our portfolio of industrial buildings took decades to put together, and the majority of them came from land we purchased, developed and ultimately sold. As the next chapter of your company unfolds, our strategy will consist of a redeployment of proceeds from the May 2018 sale of our warehouse platform into asset classes that allow management to exploit its knowledge and expertise.

So as we are initiating a more opportunistic approach to extracting the highest value from the assets we develop, we will be doing so with a greatly streamlined group, having reduced the employment count in Baltimore from 18 to 9 dedicated employees, resulting in annual savings of over $1 million. So I am sure, you will all agree we have a lot of work to do.

Thank you. And I will now turn the call back to John.

Thank you, David. Good report.

Now, I will open up the floor for questions if any of you have anything you would like to dig in with us.

Good afternoon, fellas.

Good afternoon, Curtis.

Just couple maybe a few questions, John. In the royalty segment, I mean it sounds like there is a pretty good tailwind there.

Is this kind of like one-off things that help the business or is this kind of just improvements in volume price? Did you – some of the quarries had been expanded or a little bit more color would be helpful?

It is really just price improvements at the various quarries, nothing extraordinary, I think just – that point in the cycle where things are hitting on all cylinders.

Okay. And was Hyde Park somewhere in the balance sheet before and...

No, it is not in the balance sheet, it is a piece of property that we are going to finance and develop with a partner.

Okay. And Hampstead Heath was known as Hampstead trade center, I guess is what you guys maybe called it in the past?

Yes, correct.

Alright. I don’t know if John is there.

Do you have a rough idea what the book value of that is, less than $10 million or something?

Yes.

It’s $7 million, about $7 million.

It’s about $7 million, Curtis.

Alright. And then as far as The Maren construction goes, is there anything happening in terms of labor and materials that has caught you by surprise or is there any pressure there?

No.

No, this is David deVilliers. No, we have a guaranteed maximum price from our contractor and a lot of that stuff was pre-bought and we don’t feel too concerned about that.

Okay. And then the last question, I will turn it over in.

Bryant Street, I guess that will be a total of somewhere between $55 million and $60 million of cash, correct and it will go in as common equity in preferred?

Yes, sir.

There is no land or anything you are going to donate or anything contribute to that?

No. But we are going to be – we are buying, the joint venture will buy the land.

Can you say anything more about that kind of piece of property in that area of town and what you see and as you look out sort of 5 years or something?

Well, I guess, Curtis, if you are familiar with DC, it’s just – it’s two stops north of Pen Station on the Red Line and the wave of development has been kind of heading in that direction, west to east. We love the idea that it’s kind of a transit-oriented development if you will.

There are other smaller developments that are cropping up around this area. The thing we like about it is a little bit like what we are hoping to do at Anacostia is to create a sense of place over time.

So, this isn’t a one-off type of development that we kind of create a town within a town. So, it’s a great location.

There is a tremendous move west to east. These rents are going to be a little less expensive than our RiverFront project and we are pretty excited about it.

Great. And maybe going back to The Maren for a minute, I mean, since you did Phase 1 with Dock 79, was there any learning that went on that helps you on the cost side in terms of The Maren and maybe improve the economics a little bit?

Yes, absolutely. I mean, just the design itself is a lot different.

This building was a little bit more efficient from a construction standpoint. It’s a little bit more linear.

Dock 79 almost looks like a reverse C-shape. And this building just by virtue of its design is more efficient and so that’s really helping us, not only in the construction, but also will help in the efficiencies of operating the building as everybody starts to lease it up.

Okay. And then at Dock 79, was all that wonderful retail space leased up as the baseball season finished and the summer was finishing?

Yes. Again, as I said in my report, we have four basic suites there.

The fourth one is not leased and we are kind of happy that we didn’t do what we originally thought which was to try to make that a loss leader, because it’s facing the water, but it was kind of at the far end of the building. Now with Phase 2 under construction when that opens up, all of a sudden, it makes the location of the fourth retail spot a lot more exciting.

So, I don’t think you will see anything for that until Phase 2 gets it up, but the third of the four retail sports is under construction now. They are not – they did fall behind a little bit in their construction activity, which certainly hurts them from a revenue standpoint.

They are out from underneath of the free rent mark, so they are actually paying us a portion of the rent even though they are not open.

Okay. Alright, thanks.

I will leave it there for the moment. Thank you.

Thank you all for joining us. As you can tell by our report, we are enthusiastic about our future.

We think we have got really a good team put together and can deliver very competitive and acceptable returns going forward. We have been – I have been surprised that we have been able to locate the number of projects that I think are really good in the short period of time since the sale.

And we have worn you out with the mantra that we don’t – it was a great time to sell, because prices were high and we didn’t want to be the victim of buying when prices are high. And I think what we have done is we found projects where there is significant value add by developing the land and the buildings, and we are excited.

We think it’s going to go forward quickly and we will be back up to a full operating company before too long. Again thank you so much for your interest in our company and we look forward to talking to you next quarter.