FRP HOLDINGS, INC. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ FORM 10-Q _________________ (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________ to _________ Commission File Number: 001-36769 _____________________ FRP HOLDINGS, INC. (Exact name of registrant as specified in its charter) _____________________ Florida 47-2449198 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 200 W. Forsyth St. , 7th Floor , Jacksonville , FL 32202 (Address of principal executive offices) (Zip Code) 904 - 396-5733 (Registrant’s telephone number, including area code) Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $.10 par value FRPH NASDAQ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [_] Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [x] No [_] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [x] Smaller reporting company [x] Emerging growth company [_] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [x] Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Class Outstanding at November 9, 2023 Common Stock, $.10 par value per share 9,477,104 shares 1 FRP HOLDINGS, INC. FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2023 CONTENTS Page No. Preliminary Note Regarding Forward-Looking Statements 3 Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets 4 Consolidated Statements of Income 5 Consolidated Statements of Comprehensive Income 6 Consolidated Statements of Cash Flows 7 Consolidated Statements of Shareholders’ Equity 8 Condensed Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures about Market Risks 35 Item 4. Controls and Procedures 35 Part II. Other Information Item 1A. Risk Factors 36 Item 2. Purchase of Equity Securities by the Issuer 36 Item 6. Exhibits 36 Signatures 37 Exhibit 31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 39 Exhibit 32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 42 2 Preliminary Note Regarding Forward-Looking Statements. This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by us, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. Such statements reflect management’s current views with respect to financial results related to future events and are based on assumptions and expectations that may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ, perhaps materially, from the results discussed in the forward-looking statements. Risk factors discussed in Item 1A of this Form 10-Q and other factors that might cause differences, some of which could be material, include, but are not limited to: the possibility that we may be unable to find appropriate investment opportunities; levels of construction activity in the markets served by our mining properties; demand for flexible warehouse/office facilities in the Baltimore-Washington-Northern Virginia area; demand for apartments in Washington D.C. and Greenville, South Carolina; our ability to obtain zoning and entitlements necessary for property development; the impact of lending and capital market conditions on our liquidity, our ability to finance projects or repay our debt; general real estate investment and development risks; vacancies in our properties; risks associated with developing and managing properties in partnership with others; competition; our ability to renew leases or re-lease spaces as leases expire; illiquidity of real estate investments; bankruptcy or defaults of tenants; the impact of restrictions imposed by our credit facility; the level and volatility of interest rates; environmental liabilities; inflation risks; cyber security risks; as well as other risks listed from time to time in our SEC filings, including but not limited to, our annual and quarterly reports. We have no obligation to revise or update any forward-looking statements, other than as imposed by law, as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements. Additional information regarding these and other risk factors may be found in the Company’s other filings made from time to time with the Securities and Exchange Commission. 3 PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data) September 30, 2023 December 31, 2022 Assets: Real estate investments at cost: Land $ 141,578 141,579 Buildings and improvements 282,379 270,579 Projects under construction 4,689 12,208 Total investments in properties 428,646 424,366 Less accumulated depreciation and depletion 65,444 57,208 Net investments in properties 363,202 367,158 Real estate held for investment, at cost 10,510 10,182 Investments in joint ventures 154,025 140,525 Net real estate investments 527,737 517,865 Cash and cash equivalents 166,028 177,497 Cash held in escrow 646 797 Accounts receivable, net 1,683 1,166 Unrealized rents 1,452 856 Deferred costs 3,028 2,343 Other assets 583 560 Total assets $ 701,157 701,084 Liabilities: Secured notes payable $ 178,668 178,557 Accounts payable and accrued liabilities 3,689 5,971 Other liabilities 1,886 1,886 Federal and state income taxes payable 704 18 Deferred revenue 1,029 259 Deferred income taxes 67,903 67,960 Deferred compensation 1,395 1,354 Tenant security deposits 889 868 Total liabilities 256,163 256,873 Commitments and contingencies — — Equity: Common stock, $ .10 par value 25,000,000 shares authorized, 9,477,104 and 9,459,686 shares issued and outstanding, respectively 948 946 Capital in excess of par value 67,168 65,158 Retained earnings 343,002 342,317 Accumulated other comprehensive loss, net ( 328 ) ( 1,276 ) Total shareholders’ equity 410,790 407,145 Noncontrolling interest 34,204 37,066 Total equity 444,994 444,211 Total liabilities and equity $ 701,157 701,084 See accompanying notes. 4 FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts) (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2023 2022 2023 2022 Revenues: Lease revenue $ 7,509 6,823 21,773 19,850 Mining lands lease revenue 3,082 2,471 9,628 7,779 Total Revenues 10,591 9,294 31,401 27,629 Cost of operations: Depreciation, depletion and amortization 2,816 2,744 8,415 8,510 Operating expenses 2,012 1,967 5,574 5,316 Property taxes 919 1,034 2,745 3,103 Management company indirect 1,059 966 2,938 2,545 Corporate expenses (Note 4 Related Party) 889 734 3,212 2,876 Total cost of operations 7,695 7,445 22,884 22,350 Total operating profit 2,896 1,849 8,517 5,279 Net investment income 2,700 1,188 8,207 3,206 Interest expense ( 1,116 ) ( 738 ) ( 3,251 ) ( 2,215 ) Equity in loss of joint ventures ( 2,913 ) ( 1,878 ) ( 10,585 ) ( 5,248 ) Gain (loss) on sale of real estate ( 1 ) 141 7 874 Income before income taxes 1,566 562 2,895 1,896 Provision for income taxes 467 178 898 526 Net income 1,099 384 1,997 1,370 Loss attributable to noncontrolling interest ( 160 ) ( 96 ) ( 425 ) ( 439 ) Net income attributable to the Company $ 1,259 480 2,422 1,809 Earnings per common share: Net income attributable to the Company- Basic $ 0.13 0.05 0.26 0.19 Diluted $ 0.13 0.05 0.26 0.19 Number of shares (in thousands) used in computing: -basic earnings per common share 9,423 9,397 9,423 9,382 -diluted earnings per common share 9,460 9,433 9,463 9,423 See accompanying notes. 5 FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands except per share amounts) (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2023 2022 2023 2022 Net income $ 1,099 384 1,997 1,370 Other comprehensive income (loss) net of tax: Unrealized gain/(loss) on investments, net of income tax effect of $ 145 , $ ( 120 ) , $ 360 and $ ( 568 ) 392 ( 324 ) 972 ( 1,533 ) Minimum pension liability, net of income tax effect of $ ( 3 ) , $ 0 , $ ( 8 ) and $ 0 ( 8 ) — ( 24 ) — Comprehensive income (loss) $ 1,483 60 2,945 ( 163 ) Less comp. income (loss) attributable to Noncontrolling interest $ ( 160 ) ( 96 ) ( 425 ) ( 439 ) Comprehensive income attributable to the Company $ 1,643 156 3,370 276 See accompanying notes 6 FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (In thousands) (Unaudited) 2023 2022 Cash flows from operating activities: Net income $ 1,997 1,370 Adjustments to reconcile net income to net cash provided by continuing operating activities: Depreciation, depletion and amortization 8,557 8,696 Deferred income taxes ( 57 ) 133 Equity in loss of joint ventures 10,585 5,248 Gain on sale of equipment and property ( 14 ) ( 901 ) Stock-based compensation 1,472 1,302 Net changes in operating assets and liabilities: Accounts receivable ( 517 ) ( 737 ) Deferred costs and other assets ( 538 ) ( 2,160 ) Accounts payable and accrued liabilities ( 1,512 ) ( 1,440 ) Income taxes payable and receivable 686 1,559 Other long-term liabilities 62 105 Net cash provided by operating activities 20,721 13,175 Cash flows from investing activities: Investments in properties ( 4,634 ) ( 26,137 ) Investments in joint ventures ( 31,648 ) ( 20,838 ) Return of capital from investments in joint ventures 7,559 13,327 Proceeds from sales of investments available for sale — 4,317 Proceeds from the sale of assets 16 952 Cash held in escrow 151 170 Net cash used in investing activities ( 28,556 ) ( 28,209 ) Cash flows from financing activities: Distribution to noncontrolling interest ( 2,437 ) ( 1,937 ) Repurchase of company stock ( 2,000 ) — Exercise of employee stock options 803 233 Net cash used in financing activities ( 3,634 ) ( 1,704 ) Net decrease in cash and cash equivalents ( 11,469 ) ( 16,738 ) Cash and cash equivalents at beginning of year 177,497 161,521 Cash and cash equivalents at end of the period $ 166,028 144,783 Supplemental disclosure of cash flow information: Cash paid (received) during the period for: Interest 3,248 2,212 Income taxes 622 ( 1,734 ) See accompanying notes. 7 FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (In thousands, except share amounts) (Unaudited) Accumulated Other Comp- Total Capital in rehensive Share Non- Common Stock Excess of Retained Income holders’ Controlling Total Shares Amount Par Value Earnings (loss), net Equity Interest Equity Balance at July 1, 2023 9,495,673 $ 950 $ 67,028 $ 342,610 $ ( 712 ) $ 409,876 $ 35,116 $ 444,992 Stock option grant compensation — — 16 — — 16 — 16 Restricted stock compensation — — 255 — — 255 — 255 Shares purchased and cancelled ( 18,569 ) ( 2 ) ( 131 ) ( 867 ) — ( 1,000 ) — ( 1,000 ) Net income — — — 1,259 — 1,259 ( 160 ) 1,099 Distributions to partners — — — — — — ( 752 ) ( 752 ) Minimum pension liability, net — — — — ( 8 ) ( 8 ) — ( 8 ) Unrealized gain on investment, net — — — — 392 392 — 392 Balance at September 30, 2023 9,477,104 $ 948 $ 67,168 $ 343,002 $ ( 328 ) $ 410,790 $ 34,204 $ 444,994 Balance at January 1, 2023 9,459,686 $ 946 $ 65,158 $ 342,317 $ ( 1,276 ) $ 407,145 $ 37,066 $ 444,211 Exercise of stock options 17,735 2 801 — — 803 — 803 Stock option grant compensation — — 49 — — 49 — 49 Restricted stock compensation — — 773 — — 773 — 773 Shares granted to Employees 928 — 50 — — 50 — 50 Restricted stock award 25,284 2 ( 2 ) — — — — — Shares purchased and cancelled ( 36,909 ) ( 3 ) ( 260 ) ( 1,737 ) — ( 2,000 ) — ( 2,000 ) Shares granted to Directors 10,380 1 599 — — 600 — 600 Net income — — — 2,422 — 2,422 ( 425 ) 1,997 Distributions to partners — — — — — — ( 2,437 ) ( 2,437 ) Minimum pension liability, net — — — — ( 24 ) ( 24 ) — ( 24 ) Unrealized gain on investment, net — — — — 972 972 — 972 Balance at September 30, 2023 9,477,104 $ 948 $ 67,168 $ 343,002 $ ( 328 ) $ 410,790 $ 34,204 $ 444,994 Balance at July 1, 2022 9,455,096 $ 945 $ 58,872 $ 339,081 $ ( 1,096 ) $ 397,802 $ 27,135 $ 424,937 Stock option grant compensation — — 18 — — 18 — 18 Restricted stock compensation — — 258 — — 258 — 258 Net income — — — 480 — 480 ( 96 ) 384 Distributions to partners — — — — — — ( 588 ) ( 588 ) Unrealized loss on investment, net — — — — ( 324 ) ( 324 ) — ( 324 ) Balance at September 30, 2022 9,455,096 $ 945 $ 59,148 $ 339,561 $ ( 1,420 ) $ 398,234 $ 26,451 $ 424,685 Balance at January 1, 2022 9,411,028 $ 941 $ 57,617 $ 337,752 $ 113 $ 396,423 $ 28,827 $ 425,250 Stock option grant compensation — — 52 — — 52 — 52 Restricted stock compensation — — 550 — — 550 — 550 Shares granted to Employees 865 — 50 — — 50 — 50 Restricted stock award 21,464 2 ( 2 ) — — — — — Shares granted to Directors 11,232 1 649 — — 650 — 650 Forfeiture of restricted stock award ( 1,363 ) — — — — — — — Exercise of stock options 11,870 1 232 — — 233 — 233 Net income — — — 1,809 — 1,809 ( 439 ) 1,370 Distributions to partners — — — — — — ( 1,937 ) ( 1,937 ) Unrealized loss on investment, net — — — — ( 1,533 ) ( 1,533 ) — ( 1,533 ) Balance at September 30, 2022 9,455,096 $ 945 $ 59,148 $ 339,561 $ ( 1,420 ) $ 398,234 $ 26,451 $ 424,685 See accompanying notes. 8 FRP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (Unaudited) (1) Description of Business and Basis of Presentation . FRP Holdings, Inc. is a holding company engaged in the investment and development of real estate , namely (i) leasing and management of industrial and commercial properties owned by The Company, (ii) leasing and management of mining royalty land owned by The Company, (iii) real property acquisition, entitlement, development and construction primarily for apartment, retail, warehouse, and office, (iv) management of mixed use residential/retail properties owned through our joint ventures. The accompanying consolidated financial statements include the accounts of FRP Holdings, Inc. (the “Company” or “FRP”) inclusive of our operating real estate subsidiaries, FRP Development Corp. (“Development”), Florida Rock Properties, Inc. (“Properties”), Riverfront Investment Partners I, LLC, and Riverfront Investment Partners II, LLC. Our investments accounted for under the equity method of accounting are detailed in Note 11. Our ownership of Riverfront Investment Partners I, LLC and Riverfront Investment Partners II, LLC includes a non-controlling interest representing the ownership of our partner. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair statement of the results for the interim periods have been included. Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The accompanying consolidated financial statements and the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the Company's consolidated financial statements and related notes included in the Company’s Form 10-K for the year ended December 31, 2022. (2) Recently Issued Accounting Standards . In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016 - 13, "Financial Instruments - Credit Losses," which introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments. This standard was effective for the Company as of January 1, 2023. There was no impact on our financial statements at adoption. (3) Business Segments . The Company is reporting its financial performance based on four reportable segments, Asset Management, Mining Royalty Lands, Development and Stabilized Joint Venture, as described below. The Asset Management Segment owns, leases and manages in-service commercial properties wholly owned by the Company. Currently this includes nine warehouses in two business parks, an office building partially occupied by the Company, and two ground leases. Our Mining Royalty Lands segment owns several properties totaling approximately 16,650 acres currently under lease for mining rents or royalties (this does not include the 4,280 acres owned in our Brooksville joint venture with Vulcan Materials). Other than one location in Virginia, all of these properties are located in Florida and Georgia. Through our Development segment, we own and are continuously assessing the highest and best use of several parcels of land that are in various stages of development. Our overall strategy in this segment is to convert all of our non-income producing lands into income production through (i) an orderly process of constructing new buildings for us to 9 own and operate or (ii) a sale to, or joint venture with, third parties. Additionally, our Development segment will form joint ventures on new developments of land not previously owned by the Company. The Stabilized Joint Venture segment includes joint ventures which own, lease and manage buildings that have met our initial lease-up criteria. Two of our joint ventures in the segment, Riverfront Investment Partners I, LLC (“Dock 79”) and Riverfront Investment Partners II, LLC (“The Maren”) are consolidated. The ownership of Dock 79 and The Maren attributable to our partners are reflected on our consolidated balance sheet as a noncontrolling interest. Such noncontrolling interests are reported on the Consolidated Balance Sheets within equity but separately from shareholders' equity. On the Consolidated Statements of Income, all of the revenues and expenses from Dock 79 and The Maren are reported in net income, including both the amounts attributable to the Company and the noncontrolling interest. The amounts of consolidated net income attributable to the noncontrolling interest is clearly identified on the accompanying Consolidated Statements of Income. Operating results and certain other financial data for the Company’s business segments are as follows (in thousands): Three Months ended Nine months ended September 30, September 30, 2023 2022 2023 2022 Revenues: Revenues Asset management $ 1,442 935 3,932 2,686 Revenues Mining royalty lands 3,082 2,471 9,628 7,779 Revenues Development 434 412 1,387 1,203 Revenues Stabilized Joint Venture 5,633 5,476 16,454 15,961 Revenues 10,591 9,294 31,401 27,629 Operating profit (loss): Before corporate expenses: Operating profit before corporate expenses Asset management $ 697 392 1,855 1,103 Operating profit before corporate expenses Mining royalty lands 2,608 2,083 8,391 6,764 Operating profit before corporate expenses Development ( 444 ) ( 865 ) ( 1,377 ) ( 2,164 ) Operating profit before corporate expenses Stabilized Joint Venture 924 973 2,860 2,452 Operating profit before corporate expenses Operating profit before corporate expenses 3,785 2,583 11,729 8,155 Corporate expenses: Corporate expenses Allocated to asset management ( 177 ) ( 127 ) ( 630 ) ( 496 ) Corporate expenses Allocated to mining royalty lands ( 99 ) ( 83 ) ( 360 ) ( 325 ) Corporate expenses Allocated to development ( 529 ) ( 457 ) ( 1,918 ) ( 1,794 ) Corporate expenses Allocated to stabilized joint venture ( 84 ) ( 67 ) ( 304 ) ( 261 ) Corporate expenses Total corporate expenses ( 889 ) ( 734 ) ( 3,212 ) ( 2,876 ) Operating profit $ 2,896 1,849 8,517 5,279 Interest expense Interest expense $ 1,116 738 3,251 2,215 Depreciation, depletion and amortization: Depreciation, depletion and amortization Asset management $ 369 219 1,006 683 Depreciation, depletion and amortization Mining royalty lands 138 172 472 416 Depreciation, depletion and amortization Development 44 47 140 139 Depreciation, depletion and amortization Stabilized Joint Venture 2,265 2,306 6,797 7,272 Depreciation, depletion and amortization $ 2,816 2,744 8,415 8,510 Capital expenditures: Capital expenditures Asset management $ 12 202 557 797 Capital expenditures Mining royalty lands — 1 — 11,218 Capital expenditures Development 2,179 8,548 3,640 13,927 Capital expenditures Stabilized Joint Venture 258 ( 25 ) 437 195 Capital expenditures $ 2,449 8,726 4,634 26,137 10 Identifiable net assets September 30, December 31, Identifiable net assets 2023 2022 Assets Asset management $ 39,155 26,053 Assets Mining royalty lands 48,126 48,494 Assets Development 194,297 188,834 Assets Stabilized Joint Venture 251,677 257,535 Cash Cash items 166,674 178,294 Assets Unallocated corporate assets 1,228 1,874 Assets $ 701,157 701,084 (4) Related Party Transactions . The Company is a party to an Administrative Services Agreement which resulted from our January 30, 2015 spin-off of Patriot Transportation Holding, Inc. (Patriot). The Administrative Services Agreement sets forth the terms on which Patriot will provide to FRP certain services that were shared prior to the Spin-off, including the services of certain shared executive officers. The boards of the respective companies amended and extended this agreement for one year effective April 1, 2023. The consolidated statements of income reflect charges and/or allocation from Patriot for these services of $ 236,000 and $ 223,000 for the three months ended September 30, 2023 and 2022 and $ 687,000 and $ 670,000 for the nine months ended September 30, 2023 and 2022, respectively. These charges are reflected as part of corporate expenses. To determine these allocations between FRP and Patriot as set forth in the Administrative Services Agreement, we employ an allocation method to allocate said expenses and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations, but any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis. (5) Long-Term Debt . The Company’s Outstanding debt , net of unamortized debt issuance costs, consisted of the following (in thousands): September 30, December 31, 2023 2022 Fixed rate mortgage loans, 3.03 % interest only, matures 4/1/2033 $ 180,070 180,070 Unamortized debt issuance costs ( 1,402 ) ( 1,513 ) Credit agreement — — Long term debt $ 178,668 178,557 On February 6, 2019, the Company entered into a First Amendment to the 2015 Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”), effective February 6, 2019. The Credit Agreement modifies the Company’s prior Credit Agreement with Wells Fargo dated January 30, 2015. The Credit Agreement establishes a five -year revolving credit facility with a maximum facility amount of $ 20 million . The interest rate under the Credit Agreement through June 30, 2023 was a maximum of 1.50 % over Daily 1-Month LIBOR, which may be reduced quarterly to 1.25 % or 1.0 % over Daily 1-Month LIBOR if the Company met a specified ratio of consolidated debt to consolidated total capital, as defined which excludes FRP Riverfront. Starting July 1, 2023 the interest rate was .75 % to 1.5 % over the Federal Funds rate depending on the same ratio. A commitment fee of 0.25 % per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.20 % or 0.15 % if the 11 Company meets a specified ratio of consolidated total debt to consolidated total capital. The Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants. As of September 30, 2023, there was no debt outstanding on this revolver, $ 823,000 outstanding under letters of credit and $ 19,177,000 available for borrowing. The letters of credit were issued to guarantee certain obligations to state agencies related to real estate development. Most of the letters of credit are irrevocable for a period of one year and typically are automatically extended for additional one-year periods. The letter of credit fee is 1 % and applicable interest rate would have been 6.1 % on September 30, 2023. The credit agreement contains certain conditions and financial covenants, including a minimum tangible net worth and dividend restriction. As of September 30, 2023, these covenants would have limited our ability to pay dividends to a maximum of $ 249 million combined. On March 19, 2021, the Company refinanced Dock 79 and The Maren pursuant to separate Loan Agreements and Deed of Trust Notes entered into with Teachers Insurance and Annuity Association of America, LLC. Dock 79 and The Maren borrowed principal sums of $ 92,070,000 and $ 88,000,000 respectively, in connection with the refinancing. The loans are separately secured by the Dock 79 and The Maren real property and improvements, bear a fixed interest rate of 3.03 % per annum, and require monthly payments of interest only with the principal in full due April 1, 2033. Either loan may be prepaid subsequent to April 1, 2024, subject to yield maintenance premiums. Either loan may be transferred to a qualified buyer as part of a one-time sale subject to a 60% loan to value, minimum of 7.5% debt yield and a 0.75% transfer fee . Debt cost amortization of $ 37,000 was recorded during the three months ended September 30, 2023 and 2022 and $ 111,000 was recorded during the nine months ended September 30, 2023 and 2022. During the three months ended September 30, 2023 and 2022 the Company capitalized interest costs of $ 297,000 and $ 673,000 , respectively. During the nine months ended September 30, 2023 and September 30, 2022 the Company capitalized interest costs of $ 986,000 and $ 2,019,000 , respectively. The Company was in compliance with all debt covenants as of September 30, 2023. (6) Earnings per Share . The following details the computations of the Basic and diluted earnings per common share (in thousands, except per share amounts): Three Months ended Nine months ended September 30, September 30, 2023 2022 2023 2022 Weighted average common shares outstanding during the period – shares used for basic earnings per common share 9,423 9,397 9,423 9,382 Common shares issuable under share based payment plans which are potentially dilutive 37 36 40 41 Common shares used for diluted earnings per common share 9,460 9,433 9,463 9,423 Net income attributable to the Company $ 1,259 480 2,422 1,809 Earnings per common share: -basic $ 0.13 0.05 0.26 0.19 -diluted $ 0.13 0.05 0.26 0.19 12 For the three and nine months ended September 30, 2023, the Company did not have any outstanding anti-dilutive stock options. For the three and nine months ended September 30, 2022, the Company d id not have any outstanding anti-dilutive stock options. During the first nine months of 2023 the Company repurchased 36,909 shares at an average cost of $ 54.19 . (7) Stock-Based Compensation Plans . The Company has two Stock Option Plans (the 2006 Stock Incentive Plan and the 2016 Equity Incentive Option Plan) under which options for shares of common stock were granted to directors, officers and key employees. The 2016 plan permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, or stock awards. The options awarded under the plans have similar characteristics. All stock options are non-qualified and expire ten years from the date of grant. Stock based compensation awarded to directors, officers and employees are exercisable immediately or become exercisable in cumulative installments of 20% or 25% at the end of each year following the date of grant . When stock options are exercised, the Company issues new shares after receipt of exercise proceeds and taxes due, if any, from the grantee. The Company utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant. The assumptions were no dividend yield, expected volatility between 31.5 % and 41.2 %, risk-free interest rate of 2.0 % to 2.9 % and expected life of 5.0 to 7.0 years. The dividend yield of zero is based on the fact that the Company does not pay cash dividends and has no present intention to pay cash dividends. Expected volatility is estimated based on the Company’s historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees. In January 2023, 7,980 shares of restricted stock were granted to employees that will vest over the next four years. In January 2023, 15,032 shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next five years. In March 2023, 2,272 shares of restricted stock were granted to employees under the terms of the 2021 long-term incentive plan. In January 2022, 7,448 shares of restricted stock were granted to employees that will vest over the next four years. In January 2022, 14,016 shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next five years. In March 2023 and March 2022, 928 and 865 shares of stock, respectively, were granted to employees. The number of common shares available for future issuance was 343,677 at September 30, 2023. The Company recorded the following Stock compensation expense in its consolidated statements of income (in thousands): Three Months ended Nine months ended September 30, September 30, 2023 2022 2023 2022 Stock option grants $ 16 18 49 52 Restricted stock awards 255 258 773 550 Employee stock grant — — 50 50 Annual director stock award — — 600 650 Stock compensation $ 271 276 1,472 1,302 13 A Summary of changes in outstanding options is presented below (in thousands, except share and per share amounts): Weighted Weighted Weighted Number Average Average Average Of Exercise Remaining Grant Date Options Shares Price Term (yrs) Fair Value(000's) Outstanding at January 1, 2023 88,295 $ 40.33 4.4 $ 1,271 Exercised ( 17,735 ) $ 45.27 $ ( 190 ) Outstanding at September 30, 2023 70,560 $ 39.09 3.3 $ 1,081 Exercisable at September 30, 2023 66,570 $ 38.68 3.2 $ 1,015 Vested during nine months ended September 30, 2023 — $ — The aggregate intrinsic value of exercisable in-the-money options was $ 1,018,000 and the aggregate intrinsic value of outstanding in-the-money options was $ 1,050,000 based on the market closing price of $ 53.97 on September 29, 2023 less exercise prices. The unrecognized compensation cost of options granted to FRP employees but not yet vested as of September 30, 2023 was $ 11,000 , which is expected to be recognized over a weighted-average period of two months. A Summary of changes in restricted stock awards is presented below (in thousands, except share and per share amounts): Weighted Weighted Weighted Number Average Average Average Of Grant Date Remaining Grant Date Restricted stock Shares Fair Value Term (yrs) Fair Value(000's) Non-vested at January 1, 2023 50,496 $ 50.42 3.0 $ 2,546 Time-based awards granted 7,980 53.86 430 Performance-based awards granted 17,304 53.92 933 Vested ( 6,211 ) 46.49 ( 289 ) Non-vested at September 30, 2023 69,569 $ 52.03 2.8 $ 3,620 Total unrecognized compensation cost of restricted stock granted but not yet vested as of September 30, 2023 was $ 2,725,000 which is expected to be recognized over a weighted-average period of 3.1 years . (8) Contingent Liabilities . The Company may be involved in litigation on a number of matters and is subject to certain claims which arise in the normal course of business. The Company has retained certain self-insurance risks with respect to losses for third party liability and property damage. In the opinion of management, none of these matters are expected to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows. The Company is subject to numerous environmental laws and regulations. The Company believes that the ultimate disposition of currently known environmental matters will not have a material effect on its financial position, liquidity, or operations. The Company can give no assurance that previous environmental studies with respect to its properties have revealed all potential environmental contaminants; that any previous owner, occupant or tenant did not create any 14 material environmental condition not known to the Company; that the current environmental condition of the properties will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; and that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to the Company. As of September 30, 2023, there was $ 823,000 outstanding under letters of credit. The letters of credit were issued to guarantee certain obligations to state agencies related to real estate development. The Company and MidAtlantic Realty Partners (MRP) guaranteed $ 26 million of the construction loan on the Bryant Street Partnerships in exchange for a 1 % lower interest rate. The Company and MRP have a side agreement limiting the Company’s guarantee to its proportionate ownership. The value of the guarantee was calculated at $ 1.9 million based on the present value of the 1 % interest savings over the anticipated 48 -month term. This amount is included as part of the Company’s investment basis and is amortized to expense over the 48 months. The Company will evaluate the guarantee liability based upon the success of the project and assuming no payments are made under the guarantee the Company will have a gain for $ 1.9 million when the loan is paid in full. Borrower may prepay a portion of the unpaid principal to satisfy such tests. (9) Concentrations . The mining royalty lands segment has a total of five tenants currently leasing mining locations and one lessee that accounted for 24.6 % of the Company’s consolidated revenues during the nine months ended September 30, 2023, and $ 502,000 of accounts receivable at September 30, 2023. The termination of these lessees’ underlying leases could have a material adverse effect on the Company. The Company places its cash and cash equivalents with Wells Fargo Bank and First Horizon Bank. At times, such amounts may exceed FDIC limits. (10) Fair Value Measurements . Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level 3 means the use of inputs are those that are unobservable and significant to the overall fair value measurement. At September 30, 2023, the Company was invested in U.S. Treasury notes valued at $ 148,768,000 maturing in 2023 through early 2024. The unrealized loss on these investments of $ 571,000 was recorded as part of comprehensive income and based on the estimated market value by Wells Fargo Bank, N.A. (Level 1). At September 30, 2023 and December 31, 2022, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents including U.S. Treasury notes was adjusted to fair value as described above. The fair values of the Company’s other mortgage notes payable were estimated based on current rates available to the Company for debt of the same remaining maturities. At September 30, 2023, the carrying amount and fair value of such other long-term debt was $ 180,070,000 and $ 136,928,000 , respectively. At September 30, 2022, the carrying amount and fair value of such other long-term debt was $ 180,070,000 and $ 142,753,000 , respectively. (11) Investments in Joint Ventures . The Company has investments in joint ventures, primarily with other real estate developers. Joint ventures where FRP is not the primary beneficiary are reflected in the line “Investment in joint ventures” on the balance sheet and “Equity in loss of joint ventures” on the income statement. The assets of these joint ventures are restricted to use by the joint ventures and their obligations can only be settled by their assets or additional contributions by the partners. 15 The following table summarizes the Company’s Investments in unconsolidated joint ventures (in thousands): The Company's Share of Profit Common Total Total Assets of Profit (Loss) (Loss) of the Ownership Investment The Partnership Of the Partnership Partnership As of September 30, 2023 Brooksville Quarry, LLC 50.00 % $ 7,486 14,372 ( 62 ) ( 31 ) BC FRP Realty, LLC 50.00 % 5,077 22,164 ( 556 ) ( 278 ) Buzzard Point Sponsor, LLC 50.00 % 2,292 4,584 — — Bryant Street Partnerships 61.36 % 61,140 195,915 ( 7,876 ) ( 4,931 ) Lending ventures 25,084 14,428 — — Estero Partnership 16.00 % 3,600 38,703 — — Verge Partnership 61.37 % 37,535 130,978 ( 7,161 ) ( 4,395 ) Greenville Partnerships 40.00 % 11,811 98,617 ( 2,376 ) ( 950 ) Total $ 154,025 519,761 ( 18,031 ) ( 10,585 ) The Company's Share of Profit Common Total Total Assets of Profit (Loss) (Loss) of the Ownership Investment The Partnership Of the Partnership Partnership As of December 31, 2022 Brooksville Quarry, LLC 50.00 % $ 7,522 14,374 ( 84 ) ( 42 ) BC FRP Realty, LLC 50.00 % 5,453 21,825 ( 358 ) ( 175 ) Buzzard Point Sponsor, LLC 50.00 % 1,453 2,906 — — Bryant Street Partnerships 61.36 % 55,561 199,774 ( 10,339 ) ( 6,829 ) Lending ventures 16,476 5,577 — — DST Hickory Creek 26.65 % — — 10,960 3,164 Estero Partnership 16.00 % 3,600 38,505 — — Verge Partnership 61.37 % 38,471 131,128 ( 1,841 ) ( 1,129 ) Greenville Partnerships 40.00 % 11,989 96,551 ( 1,775 ) ( 710 ) Total $ 140,525 510,640 ( 3,437 ) ( 5,721 ) The major classes of assets, liabilities and equity of the Company’s Investments in Joint Ventures as of September 30, 2023 are summarized in the following two tables (in thousands): Investments in Apartment/Mixed-use as of September 30, 2023 As of September 30, 2023 Total Buzzard Point Bryant Street Estero Verge Greenville Apartment/ Sponsor, LLC Partnership Partnership Partnership Partnership Mixed-Use Investments in real estate, net $ 0 187,693 34,416 129,145 96,834 $ 448,088 Cash and cash equivalents 0 1,661 4,287 1,170 1,595 8,713 Unrealized rents & receivables 0 6,141 0 309 83 6,533 Deferred costs 4,584 420 0 354 105 5,463 Total Assets $ 4,584 195,915 38,703 130,978 98,617 $ 468,797 Secured notes payable $ 0 116,922 16,000 72,402 67,414 $ 272,738 Other liabilities 0 2,786 174 1,102 2,243 6,305 Capital - FRP 2,292 59,132 3,605 35,261 10,858 111,148 Capital – Third Parties 2,292 17,075 18,924 22,213 18,102 78,606 Total Liabilities and Capital $ 4,584 195,915 38,703 130,978 98,617 $ 468,797 16 Investments in Joint Ventures as of September 30, 2023 As of September 30, 2023 Total Brooksville BC FRP Lending Apartment/ Grand Quarry, LLC Realty, LLC Ventures Mixed-Use Total Investments in real estate, net $ 14,343 21,260 14,428 448,088 $ 498,119 Cash and cash equivalents 27 74 0 8,713 8,814 Unrealized rents & receivables 0 457 0 6,533 6,990 Deferred costs 2 373 0 5,463 5,838 Total Assets $ 14,372 22,164 14,428 468,797 $ 519,761 Secured notes payable $ 0 11,856 ( 10,656 ) 272,738 $ 273,938 Other liabilities 64 266 0 6,305 6,635 Capital – FRP 7,487 5,021 25,084 111,148 148,740 Capital - Third Parties 6,821 5,021 0 78,606 90,448 Total Liabilities and Capital $ 14,372 22,164 14,428 468,797 $ 519,761 The Company’s capital recorded by the unconsolidated Joint Ventures is $ 5,285,000 less than the Investment in Joint Ventures reported in the Company’s consolidated balance sheet due primarily to capitalized interest. The major classes of assets, liabilities and equity of the Company’s Investments in Joint Ventures as of December 31, 2022 are summarized in the following two tables (in thousands): Investments in Apartment/Mixed-use as of December 31, 2022 As of December 31, 2022 Total Buzzard Point Bryant Street Estero Verge Greenville Apartment/ Sponsor, LLC Partnership Partnership Partnership Partnership Mixed-Use Investments in real estate, net $ 0 192,904 33,008 130,616 95,883 $ 452,411 Cash and cash equivalents 0 1,349 5,497 359 567 7,772 Unrealized rents & receivables 0 5,128 0 14 13 5,155 Deferred costs 2,906 393 0 139 88 3,526 Total Assets $ 2,906 199,774 38,505 131,128 96,551 $ 468,864 Secured notes payable $ 0 129,263 16,000 66,584 64,954 $ 276,801 Other liabilities 0 2,338 5 5,328 3,014 10,685 Capital - FRP 1,453 53,553 3,600 36,348 11,087 106,041 Capital – Third Parties 1,453 14,620 18,900 22,868 17,496 75,337 Total Liabilities and Capital $ 2,906 199,774 38,505 131,128 96,551 $ 468,864 Investments in Joint Ventures as of December 31, 2022 As of December 31, 2022 Total Brooksville BC FRP Lending Apartment/ Grand Quarry, LLC Realty, LLC Ventures Mixed-Use Total Investments in real estate, net $ 14,307 21,059 5,547 452,411 $ 493,324 Cash and cash equivalents 66 99 0 7,772 7,937 Unrealized rents & receivables 0 422 0 5,155 5,577 Deferred costs 1 245 30 3,526 3,802 Total Assets $ 14,374 21,825 5,577 468,864 $ 510,640 Secured notes payable $ 0 10,899 ( 10,899 ) 276,801 $ 276,801 Other liabilities 0 338 0 10,685 11,023 Capital – FRP 7,522 5,294 16,476 106,041 135,333 Capital - Third Parties 6,852 5,294 0 75,337 87,483 Total Liabilities and Capital $ 14,374 21,825 5,577 468,864 $ 510,640 17 The amount of consolidated retained earnings (accumulated deficit) for these joint ventures was $ ( 20,837,000 ) and $ ( 13,115,000 ) as of September 30, 2023 and December 31, 2022, respectively. The income statements of the Bryant Street Partnerships are as follows (in thousands): Bryant Street Bryant Street Bryant Street Bryant Street Partnerships Partnerships Partnerships Partnerships Total JV Total JV Company Share Company Share Nine months ended Nine months ended Nine months ended Nine months ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Revenues: Rental Revenue $ 9,322 $ 6,718 $ 5,720 $ 4,123 Revenue – other 1,784 1,306 1,095 801 Total Revenues 11,106 8,024 6,815 4,924 Cost of operations: Depreciation and amortization 5,202 4,995 3,192 3,065 Operating expenses 4,384 3,846 2,690 2,360 Property taxes 789 878 484 539 Total cost of operations 10,375 9,719 6,366 5,964 Total operating profit/(loss) 731 ( 1,695 ) 449 ( 1,040 ) Interest expense ( 8,607 ) ( 5,437 ) ( 5,380 ) ( 3,703 ) Net loss before tax $ ( 7,876 ) $ ( 7,132 ) $ ( 4,931 ) $ ( 4,743 ) The income statements of the Greenville Partnerships are as follows (in thousands): Greenville Greenville Greenville Greenville Partnerships Partnerships Partnerships Partnerships Total JV Total JV Company Share Company Share Nine months ended Nine months ended Nine months ended Nine months ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Revenues: Rental Revenue $ 4,875 $ 2,234 $ 1,950 $ 894 Revenue – other 405 125 162 50 Total Revenues 5,280 2,359 2,112 944 Cost of operations: Depreciation and amortization 2,118 1,162 847 465 Operating expenses 1,784 906 714 363 Property taxes 882 476 353 190 Total cost of operations 4,784 2,544 1,914 1,018 Total operating profit/(loss) 496 ( 185 ) 198 ( 74 ) Interest expense ( 2,872 ) ( 697 ) ( 1,148 ) ( 279 ) Net loss before tax $ ( 2,376 ) $ ( 882 ) $ ( 950 ) $ ( 353 ) 18 The income statements of the Verge Partnership are as follows (in thousands): Verge Verge Partnership Partnership Total JV Company Share Nine months ended Nine months ended September 30, September 30, 2023 2023 Revenues: Rental Revenue $ 2,042 $ 1,254 Revenue – other 320 196 Total Revenues 2,362 1,450 Cost of operations: Depreciation and amortization 2,958 1,815 Operating expenses 2,057 1,263 Property taxes 741 455 Total cost of operations 5,756 3,533 Total operating profit ( 3,394 ) ( 2,083 ) Interest expense ( 3,767 ) ( 2,312 ) Net profit before tax $ ( 7,161 ) $ ( 4,395 ) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our annual report on Form 10-K. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties described in “Forward-Looking Statements” below and “Risk Factors” on page 5 of our annual report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this quarterly report on Form 10-Q, unless required by law. The following discussion includes a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission to supplement the financial results as reported in accordance with GAAP. The non-GAAP financial measure discussed is pro-rata net operating income (NOI). The Company uses this metric to analyze its continuing 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. Refer to “Non-GAAP Financial Measure” below in this quarterly report for a more detailed discussion, including 19 reconciliations of this non-GAAP financial measure to its most directly comparable GAAP financial measure. Business Overview - FRP Holdings, Inc. is a real estate development, asset management and operating company businesses. Our properties are located in the Mid-Atlantic and southeastern United States and consist of: Mining royalty lands, some of which will have second lives as development properties; Residential apartments in Washington, D.C. and Greenville, South Carolina; Warehouse or office properties in the Maryland either existing or under development; Mixed use properties under development in Washington, D.C. or Greenville, South Carolina; and Properties held for sale. We believe our present capital structure, liquidity and land provide us with years of opportunities to increase recurring revenue and long-term value for our shareholders. We intend to focus on our core business activity of real estate development, asset management and operations. We are developing a broad range of asset types that we believe will provide acceptable rates of return, grow recurring revenues and support future business. Capital commitments will be funded with cash proceeds from completed projects, existing cash, owned-land, partner capital and financing arrangements. We do not anticipate immediate benefits from investments. Timing of projects may be subject to delays caused by factors beyond our control. Reportable Segments We conduct primarily all of our business in the following four reportable segments: (1) asset management (2) mining royalty lands (3) development and (4) stabilized joint ventures. For more information regarding our reportable segments, see Note 3. Business Segments of our condensed consolidated financial statements included in this quarterly report. Asset Management Segment. The Asset Management segment owns, leases and manages commercial properties. These assets create revenue and cash flows through tenant rental payments, lease management fees and reimbursements for building operating costs. The Company’s industrial warehouses typically lease for terms ranging from 3 – 10 years often with one or two renewal options. All base rent revenue is recognized on a straight-lined basis. All of the commercial warehouse leases are triple net and common area maintenance costs (CAM Revenue) are billed monthly, and insurance and real estate taxes are billed annually. 34 Loveton is the only office product wherein all leases are full service therefore there is no CAM revenue. Office leases are also recognized on a straight-lined basis. The major cash outlays incurred in this segment are for operating expenses, real estate taxes, building repairs, lease commissions and other lease closing costs, construction of tenant improvements, capital to acquire existing operating buildings and closing costs related thereto and personnel costs of our property management team. As of September 30, 2023, the Asset Management Segment includes nine buildings at four commercial properties owned by the Company in fee simple as follows: 1) 34 Loveton Circle in suburban Baltimore County, Maryland consists of one office building totaling 33,708 square feet which is 90.8% occupied (16% of the space is occupied by the Company for use as our Baltimore headquarters). The property is subject to commercial leases with various tenants. 2) 155 E. 21 st Street in Duval County, Florida was an office building property that remains under lease through March 2026. We permitted the tenant to demolish all structures on the property during 2018. 3) Cranberry Run Business Park in Hartford County, Maryland consists of five office buildings totaling 267,737 20 square feet which are 92.1% occupied and 92.1% leased. The property is subject to commercial leases with various tenants. 4) Hollander 95 Business Park in Baltimore City, Maryland consists of three buildings totaling 247,340 square feet that are 100.0% leased and 100.0% occupied. Management focuses on several measures of success on a comparative basis in this segment: (1) net operating income growth, (2) growth in occupancy, (3) average annual occupancy rate (defined as the occupied square feet at the end of each month during a fiscal year divided by the number of months to date in that fiscal year as a percentage of the average number of square feet in the portfolio over that same time period), (4) tenant retention success rate (as a percentage of total square feet to be renewed). Mining Royalty Lands Segment. Our Mining Royalty Lands segment owns several properties totaling approximately 16,650 acres currently under lease for mining rents or royalties (excluding the 4,280 acres owned by our Brooksville joint venture with Vulcan Materials). Other than one location in Virginia, all of these properties are located in Florida and Georgia. The Company leases land under long-term leases that grant the lessee the right to mine and sell reserves from our property in exchange for royalty payments. A typical lease has an option to extend the lease for additional terms. The typical lease in this segment requires the tenant to pay us a royalty based on the number of tons of mined materials sold from our property during a given fiscal year multiplied by a percentage of the average annual sales price per ton sold. As a result of this royalty payment structure, we do not bear the cost risks associated with the mining operations, however, we are subject to the cyclical nature of the construction markets in these states as both volumes and prices tend to fluctuate through those cycles. In certain locations, typically where the reserves on our property have been depleted but the tenant still has a need for the leased land, we collect a minimum annual rental amount. We believe strongly in the potential for future growth in construction in Florida, Georgia, and Virginia which would positively benefit our profitability in this segment. The major expenses in this segment are comprised of collection and accounting for royalties, management’s oversight of the mining leases, land entitlement for post-mining uses and property taxes at our non-leased locations and at our Grandin location which, unlike our other leased mining locations, are not entirely paid by the tenant. As such, our costs in this business are very low as a percentage of revenue, are relatively stable and are not affected by increases in production at our locations. Our current mining tenants include Vulcan Materials, Martin Marietta, Cemex, Argos and The Concrete Company. Additionally, these locations provide us with opportunities for valuable “second lives” for these assets through proper land planning and entitlement. Significant “ Second Life” Mining Lands: Location Acreage Status Brooksville, FL 4,280 +/- Development of Regional of Impact and County Land Use and Master Zoning in place for 5,800 residential unit, mixed-use development Ft. Myers, FL 1,907 +/- Approval in place for 105, one-acre, waterfront residential lots after mining completed. Total 6,187 +/- Development Segment. Through our Development segment, we own and are continuously monitoring the highest and best use of several parcels of land that are in various stages of development. Our overall strategy in this segment is to convert all our non- 21 income producing lands into income production through (i) an orderly process of constructing new commercial and residential buildings for us to own and operate or (ii) a sale to, or joint venture with, third parties. Additionally, our Development segment will purchase or form joint ventures on new developments of land not previously owned by the Company. Revenues in this segment are generated predominately from land sales and interim property rents. The significant cash outlays incurred in this segment are for land acquisition costs, entitlement costs, property taxes, design and permitting, the personnel costs of our in-house management team and horizontal and vertical construction costs. Development Segment – Warehouse/Office Land. At September 30, 2023, this segment owned the following future development parcels: 1) 54 acres of land that can support over 690,000 square feet of industrial product located at 1001 Old Philadelphia Road in Aberdeen, Maryland. 2) 17 acres of land in Harford County, Maryland with a 259,200 square feet speculative warehouse project on Chelsea Road under construction due to be complete in the third quarter of 2024. 3) 170 acres of land in Cecil County, Maryland that can accommodate 900,000 square feet of industrial development. We also have three properties that were either spun-off to us from Florida Rock Industries in 1986 or acquired by us from unrelated third parties. These properties, as a result of our “highest and best use” studies, are being prepared for income generation through sale or joint venture with third parties, and in certain cases we are leasing these properties on an interim basis for an income stream while we wait for the development market to mature. Development Segment - Significant Investment Lands Inventory: Location Approx. Acreage Status NBV Riverfront on the Anacostia Phases III-IV 2.5 Conceptual design program ongoing $6,595,000 Hampstead Trade Center, MD 118 Residential zoning applied for in preparation for sale $10,515,000 Square 664E, on the Anacostia River in DC 2 Under lease to Vulcan Materials as a concrete batch plant through 2026 $7,385,000 Total 122.5 $24,495,000 Development Segment - Investments in Joint Ventures The third leg of our Development Segment consists of investments in joint ventures for properties in development. The Company has investments in joint ventures, primarily with other real estate developers which are summarized below: Property JV Partner Status % Ownership Brooksville Quarry, LLC near Brooksville, Florida Vulcan Materials Company Future planned residential development of 3,500 acres which are currently subject to mining lease 50% BC FRP Realty, LLC for 35 acres in Maryland St John Properties Development of 329,000 square feet multi-building business park in progress 50% 22 Bryant Street Partnerships for 5 acres of land in Washington, D.C. MRP Realty Mixed-use development with 487 residential units and 91,607 square feet of retail is in final stages of lease-up 61.36% Aberdeen Station residential development in Harford County, Maryland $31.1 million in exchange for an interest rate of 10% and a 20% preferred return after which the Company is also entitled to a portion of proceeds from sale Financing Amber Ridge residential development in Prince George’s County, Maryland $18.5 million in exchange for an interest rate of 10% and a preferred return of 20% after which the Company is entitled to a portion of proceeds from sale Financing The Verge at 1800 Half Street property in Buzzard Point area of Washington, D.C. MRP Realty Eleven-story structure with 344 apartments and 8,536 square feet of ground floor retail currently underway with lease-up 61.37% .408 Jackson property in Greenville, SC Woodfield Development Mixed-use project with 227 multifamily units and 4,539 square feet of retail space currently underway with lease-up 40% Estero Woodfield Development Pre-development activities for a mixed-use project with 554 multifamily units, 72,000 square feet of commercial space, 41,000 square feet of office space and a boutique 170-key hotel 16% FRP/MRP Buzzard Point Sponsor, LLC MRP Realty Pre-development activities for phase one of property owned by Steuart Investment Company (SIC) under a Contribution and Pre-Development Agreement between this partnership and SIC 50% Woven property in Greenville, SC Woodfield Development Pre-development activities for an apartment building 50% Joint ventures where FRP is not the primary beneficiary (including those in the Stabilized Joint Venture Segment) are reflected in the line “Investment in joint ventures” on the balance sheet and “Equity in loss of joint ventures” on the income statement. The following table summarizes the Company’s investments in unconsolidated joint ventures (in thousands): The Company's Share of Profit Common Total Total Assets of Profit (Loss) (Loss) of the Ownership Investment The Partnership Of the Partnership Partnership As of September 30, 2023 Brooksville Quarry, LLC 50.00 % $ 7,486 14,372 (62 ) (31 ) BC FRP Realty, LLC 50.00 % 5,077 22,164 (556 ) (278 ) Buzzard Point Sponsor, LLC 50.00 % 2,292 4,584 — — Bryant Street Partnerships 61.36 % 61,140 195,915 (7,876 ) (4,931 ) Lending ventures 25,084 14,428 — — Estero Partnership 16.00 % 3,600 38,703 — — Verge Partnership 61.37 % 37,535 130,978 (7,161 ) (4,395 ) Greenville Partnerships 40.00 % 11,811 98,617 (2,376 ) (950 ) Total $ 154,025 519,761 (18,031 ) (10,585 ) 23 The major classes of assets, liabilities and equity of the Company’s Investments in Joint Ventures as of September 30, 2023 are summarized in the following two tables (in thousands): As of September 30, 2023 Total Buzzard Point Bryant Street Estero Verge Greenville Apartment/ Sponsor, LLC Partnership Partnership Partnership Partnership Mixed-Use Investments in real estate, net $ 0 187,693 34,416 129,145 96,834 $ 448,088 Cash and cash equivalents 0 1,661 4,287 1,170 1,595 8,713 Unrealized rents & receivables 0 6,141 0 309 83 6,533 Deferred costs 4,584 420 0 354 105 5,463 Total Assets $ 4,584 195,915 38,703 130,978 98,617 $ 468,797 Secured notes payable $ 0 116,922 16,000 72,402 67,414 $ 272,738 Other liabilities 0 2,786 174 1,102 2,243 6,305 Capital - FRP 2,292 59,132 3,605 35,261 10,858 111,148 Capital – Third Parties 2,292 17,075 18,924 22,213 18,102 78,606 Total Liabilities and Capital $ 4,584 195,915 38,703 130,978 98,617 $ 468,797 As of September 30, 2023 Total Brooksville BC FRP Lending Apartment/ Grand Quarry, LLC Realty, LLC Ventures Mixed-Use Total Investments in real estate, net $ 14,343 21,260 14,428 448,088 $ 498,119 Cash and cash equivalents 27 74 0 8,713 8,814 Unrealized rents & receivables 0 457 0 6,533 6,990 Deferred costs 2 373 0 5,463 5,838 Total Assets $ 14,372 22,164 14,428 468,797 $ 519,761 Secured notes payable $ 0 11,856 (10,656 ) 272,738 $ 273,938 Other liabilities 64 266 0 6,305 6,635 Capital – FRP 7,487 5,021 25,084 111,148 148,740 Capital - Third Parties 6,821 5,021 0 78,606 90,448 Total Liabilities and Capital $ 14,372 22,164 14,428 468,797 $ 519,761 Stabilized Joint Venture Segment. At quarter end, the segment included three stabilized joint ventures which own, lease and manage apartment buildings. These assets create revenue and cash flows through tenant rental payments, and reimbursements for building operating costs. The Company’s residential spaces generally lease for 12 – 15-month lease terms and 90 days prior to the expiration, as long as there is no balance due, the tenant is offered a renewal. If no notice to move out or renew is made, then the leases go to month to month until notification of termination or renewal is received. Renewal terms are typically 9 – 12 months. The Company also leases retail spaces at apartment/mixed-use properties. The retail leases are typically 10 -15-year leases with options to renew for another five years. Retail leases at these properties also include percentage rents which average 3-6% of annual sales for the tenant that exceed a breakpoint stipulated by each individual lease. All base rent revenue is recognized on a straight-line basis. The major cash outlays incurred in this segment are for property taxes, full service maintenance, property management, utilities and marketing. The three stabilized joint venture properties are as follows: 24 Property and Occupancy JV Partner Method of Accounting % Ownership Dock 79 apartments, Washington, D.C. 305 apartment units and 14,430 square feet of retail MRP Realty Consolidated 52.8% The Maren apartments, Washington, D.C. 264 residential units and 6,811 square feet of retail MRP Realty Consolidated as of March 31, 2021 56.33% Riverside apartments Greenville, SC. 200 residential units with no retail component Woodfield Development Equity Method 40% Third quarter Operational Highlights (compared to the same quarter last year) · 29.5% increase in pro-rata NOI ($8.09 million vs $6.24 million) over third quarter 2022 · Mining royalty revenue increased 24.7%; 19.2% increase in royalties per ton · 54.2% increase in Asset Management revenue; 58.2% increase in Asset Management NOI Comparative Results of Operations for the Three months ended September 30, 2023 and 2022 Consolidated Results (dollars in thousands) Three months ended September 30, 2023 2022 Change % Revenues: Lease Revenue $ 7,509 $ 6,823 $ 686 10.1 % Mining lands lease revenue 3,082 2,471 611 24.7 % Total Revenues 10,591 9,294 1,297 14.0 % Cost of operations: Depreciation/Depletion/Amortization 2,816 2,744 72 2.6 % Operating Expenses 2,012 1,967 45 2.3 % Property Taxes 919 1,034 (115 ) -11.1 % Management company indirect 1,059 966 93 9.6 % Corporate Expense 889 734 155 21.1 % Total cost of operations 7,695 7,445 250 3.4 % Total operating profit 2,896 1,849 1,047 56.6 % Net investment income 2,700 1,188 1,512 127.3 % Interest Expense (1,116 ) (738 ) (378 ) 51.2 % Equity in loss of joint ventures (2,913 ) (1,878 ) (1,035 ) 55.1 % Gain (loss) on sale of real estate (1 ) 141 (142 ) -100.7 % Income before income taxes 1,566 562 1,004 178.6 % Provision for income taxes 467 178 289 162.4 % Net income 1,099 384 715 186.2 % Loss attributable to noncontrolling interest (160 ) (96 ) (64 ) 66.7 % Net income attributable to the Company $ 1,259 $ 480 $ 779 162.3 % 25 Net income for the third quarter of 2023 was $1,259,000 or $.13 per share versus $480,000 or $.05 per share in the same period last year. The third quarter of 2023 was impacted by the following items: · Operating profit increased $1,047,000 compared to the same quarter last year due to improved revenues in all four segments. · Interest income increased $1,512,000 due primarily to an increase in interest earned on cash equivalents ($1,118,000) and increased income from our lending ventures ($349,000). · Interest expense increased $378,000 compared to the same quarter last year due to less capitalized interest. We capitalized less interest because of fewer in-house and joint venture projects under development this quarter compared to last year. · Equity in loss of Joint Ventures increased $1,035,000 primarily due to increased losses during lease up at The Verge ($856,000). Asset Management Segment Results Three months ended September 30 (dollars in thousands) 2023 % 2022 % Change % Lease revenue $ 1,442 100.0 % 935 100.0 % 507 54.2 % Depreciation, depletion and amortization 369 25.5 % 219 23.4 % 150 68.5 % Operating expenses 173 12.0 % 162 17.3 % 11 6.8 % Property taxes 62 4.3 % 53 5.7 % 9 17.0 % Management company indirect 141 9.8 % 109 11.7 % 32 29.4 % Corporate expense 177 12.3 % 127 13.6 % 50 39.4 % Cost of operations 922 63.9 % 670 71.7 % 252 37.6 % Operating profit $ 520 36.1 % 265 28.3 % 255 96.2 % Total revenues in this segment were $1,442,000, up $507,000 or 54.2%, over the same period last year. Operating profit was $520,000, up $255,000 from $265,000 in the same quarter last year. Revenues and operating profit are up because of full occupancy at 1841 62nd Street (compared to 22.7% same period last year) and the addition of 1941 62nd Street to this segment in March 2023. We now have nine buildings in service at three different locations totaling 515,077 square feet of industrial and 33,708 square feet of office. At quarter end, we were 95.6% leased and 95.6% occupied. Net operating income in this segment was $1,096,000, up $403,000 or 58.2% compared to the same quarter last year. Mining Royalty Lands Segment Results Three months ended September 30 (dollars in thousands) 2023 % 2022 % Change % Mining lands lease revenue $ 3,082 100.0 % 2,471 100.0 % 611 24.7 % Depreciation, depletion and amortization 138 4.5 % 172 7.0 % (34 ) -19.8 % Operating expenses 18 0.6 % 18 0.7 % — 0.0 % Property taxes 181 5.9 % 69 2.8 % 112 162.3 % Management company indirect 137 4.4 % 129 5.2 % 8 6.2 % Corporate expense 99 3.2 % 83 3.4 % 16 19.3 % Cost of operations 573 18.6 % 471 19.1 % 102 21.7 % Operating profit $ 2,509 81.4 % 2,000 80.9 % 509 25.5 % 26 Total revenues in this segment were $3,082,000 versus $2,471,000 in the same period last year. Total operating profit in this segment was $2,509,000, an increase of $509,000 versus $2,000,000 in the same period last year. This increase is the result of increases in revenue at nearly every active location. Net Operating Income this quarter for this segment was $2,837,000, up $501,000 or 21.4% compared to the same quarter last year. Development Segment Results Three months ended September 30 (dollars in thousands) 2023 2022 Change Lease revenue $ 434 412 22 Depreciation, depletion and amortization 44 47 (3 ) Operating expenses 48 250 (202 ) Property taxes 121 355 (234 ) Management company indirect 665 625 40 Corporate expense 529 457 72 Cost of operations 1,407 1,734 (327 ) Operating loss $ (973 ) (1,322 ) 349 With respect to ongoing projects: We are the principal capital source of a residential development venture in Prince George’s County, Maryland known as “Amber Ridge.” Of the $18.5 million of committed capital to the project, $17.3 million in principal draws have taken place through quarter end. Through the end of September 30, 2023, 175 of the 187 units have been sold, and we have received $19.6 million in preferred interest and principal to date. Bryant Street is a mixed-use joint venture between the Company and MRP in Washington, DC consisting of three apartment buildings with ground floor retail and one commercial building which is fully leased. At quarter end, Bryant Street’s 487 residential units were 94.5% leased and 94.5% occupied. Its commercial space was 95.9% leased and 79.1% occupied at quarter end. Lease-up is underway at The Verge, and at quarter end, the building was 89.5% leased and 74.1% occupied inclusive of 25 units licensed to Placemaker Management for a short-term corporate rental program. Retail at this location is 45.2% leased. This is our third mixed-use project in the Anacostia waterfront submarket in Washington, DC. .408 Jackson is our second joint venture in Greenville. Leasing began in the fourth quarter of 2022 with residential units 93.4% leased and 86.8% occupied at quarter end. Retail at this location is 100% leased and currently under construction and expected to open this winter. Windlass Run, our suburban office and retail joint venture with St. John Properties, Inc. signed a new office lease for 2,752 square feet bringing the office portion of the project to 82.1% leased and 78.3% occupied. Additional retail space at this site is 38.2% leased and 22.9% occupied. This past quarter we broke ground on a new speculative warehouse project in Aberdeen, Maryland on Chelsea Road. This Class A, 259,200 square foot building is due to be complete in the third quarter of 2024. Stabilized Joint Venture Segment Results Three months ended September 30 (dollars in thousands) 2023 % 2022 % Change % Lease revenue $ 5,633 100.0 % 5,476 100.0 % 157 2.9 % 27 Depreciation, depletion and amortization 2,265 40.2 % 2,306 42.1 % (41 ) -1.8 % Operating expenses 1,773 31.5 % 1,537 28.1 % 236 15.4 % Property taxes 555 9.8 % 557 10.2 % (2 ) -0.4 % Management company indirect 116 2.1 % 103 1.9 % 13 12.6 % Corporate expense 84 1.5 % 67 1.2 % 17 25.4 % Cost of operations 4,793 85.1 % 4,570 83.5 % 223 4.9 % Operating profit $ 840 14.9 % 906 16.5 % (66 ) -7.3 % Total revenues in this segment were $5,633,000, an increase of $157,000 versus $5,476,000 in the same period last year. The Maren’s revenue was $2,670,000 an increase of 2.4% and Dock 79 revenues increased $95,000 to $2,963,000 or 3.3%. Total operating profit in this segment was $840,000, a decrease of $66,000 versus $906,000 in the same period last year. During the quarter we experienced water damage to an elevator that resulted in a $100,000 insurance deductible expense. Pro-rata net operating income this quarter for this segment was $2,038,000, down $665,000 or 24.6% compared to the same quarter last year because of the sale of our 20% Tenancy-In-Common (TIC) interest in both properties to SIC, mitigated by $231,000 in pro-rata NOI from our share of the Riverside joint venture in Greenville, SC. At the end of September, The Maren was 93.18% leased and 93.94% occupied. Average residential occupancy for the quarter was 95.57%, and 59.70% of expiring leases renewed with an average rent increase on renewals of 3.18%. The Maren is a joint venture between the Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 56.3% ownership. Dock 79’s average residential occupancy for the quarter was 95.08%, and at the end of the quarter, Dock 79’s residential units were 93.44% leased and 95.74% occupied. This quarter, 71.43% of expiring leases renewed with an average rent increase on renewals of 2.30%. Dock 79 is a joint venture between the Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 52.8% ownership. During the third quarter of 2022, we achieved stabilization at our Riverside Joint Venture in Greenville, South Carolina. At quarter end, the building was 94.5% leased with 91.5% occupancy. Average occupancy for the quarter was 92.92% with 52.83% of expiring leases renewing with an average rental increase of 8.55%. Riverside is a joint venture with Woodfield Development and the Company owns 40% of the venture. Nine months Operational Highlights · 26.2% increase in pro-rata NOI ($22.69 million vs $17.97 million) · Mining Royalties increased 23.8%; 13% increase in royalties per ton · 46.4% increase in Asset Management revenue; 46.2% increase in Asset Management NOI Comparative Results of Operations for the Nine months ended September 30, 2023 and 2022 Consolidated Results (dollars in thousands) Nine months ended September 30, 2023 2022 Change % Revenues: Lease Revenue $ 21,773 $ 19,850 $ 1,923 9.7 % Mining lands lease revenue 9,628 7,779 1,849 23.8 % Total Revenues 31,401 27,629 3,772 13.7 % 28 Cost of operations: Depreciation/Depletion/Amortization 8,415 8,510 (95 ) -1.1 % Operating Expenses 5,574 5,316 258 4.9 % Property Taxes 2,745 3,103 (358 ) -11.5 % Management company indirect 2,938 2,545 393 15.4 % Corporate Expense 3,212 2,876 336 11.7 % Total cost of operations 22,884 22,350 534 2.4 % Total operating profit 8,517 5,279 3,238 61.3 % Net investment income 8,207 3,206 5,001 156.0 % Interest Expense (3,251 ) (2,215 ) (1,036 ) 46.8 % Equity in loss of joint ventures (10,585 ) (5,248 ) (5,337 ) 101.7 % Gain on sale of real estate 7 874 (867 ) -99.2 % Income before income taxes 2,895 1,896 999 52.7 % Provision for income taxes 898 526 372 70.7 % Net income 1,997 1,370 627 45.8 % Loss attributable to noncontrolling interest (425 ) (439 ) 14 -3.2 % Net income attributable to the Company $ 2,422 $ 1,809 $ 613 33.9 % Net income for the first nine months of 2023 was $2,422,000 or $.26 per share versus $1,809,000 or $.19 per share in the same period last year. The first nine months of 2023 was impacted by the following items: · Operating profit increased $3,238,000 compared to the same period last year due to improved revenues and profits in all four segments. · Management company indirect increased $393,000 due to merit increases and new hires along with recruiting costs. · Interest income increased $5,001,000 due primarily to an increase in interest earned on cash equivalents ($3,637,000) and increased income from our lending ventures ($1,228,000). · Interest expense increased $1,036,000 compared to the same period last year due to less capitalized interest. We capitalized less interest because of fewer in-house and joint venture projects under development compared to last year. · Equity in loss of Joint Ventures increased $5,337,000 primarily due to increased losses during lease up at The Verge ($4,096,000) and .408 Jackson ($642,000). · The first nine months of 2022 included a $874,000 gain on sales of excess property at Brooksville. Asset Management Segment Results Nine months ended September 30 (dollars in thousands) 2023 % 2022 % Change % Lease revenue $ 3,932 100.0 % 2,686 100.0 % 1,246 46.4 % Depreciation, depletion and amortization 1,006 25.6 % 683 25.4 % 323 47.3 % Operating expenses 490 12.4 % 441 16.4 % 49 11.1 % Property taxes 185 4.7 % 158 5.9 % 27 17.1 % Management company indirect 396 10.1 % 301 11.2 % 95 31.6 % Corporate expense 630 16.0 % 496 18.5 % 134 27.0 % Cost of operations 2,707 68.8 % 2,079 77.4 % 628 30.2 % Operating profit $ 1,225 31.2 % 607 22.6 % 618 101.8 % 29 Total revenues in this segment were $3,932,000, up $1,246,000 or 46.4%, over the same period last year. Operating profit was $1,225,000, up $618,000 from $607,000 in the same period last year. Revenues and operating profit are up partly because of rent growth at Cranberry Run, but primarily because of full occupancy at 1865 and 1841 62 nd Street and the addition of 1941 62 nd Street to this segment in March 2023. Net operating income in this segment was $2,726,000, up $862,000 or 46.2% compared to the same period last year. Mining Royalty Lands Segment Results Nine months ended September 30 (dollars in thousands) 2023 % 2022 % Change % Mining lands lease revenue $ 9,628 100.0 % 7,779 100.0 % 1,849 23.8 % Depreciation, depletion and amortization 472 4.9 % 416 5.4 % 56 13.5 % Operating expenses 51 0.5 % 50 0.6 % 1 2.0 % Property taxes 324 3.4 % 203 2.6 % 121 59.6 % Management company indirect 390 4.1 % 346 4.4 % 44 12.7 % Corporate expense 360 3.7 % 325 4.2 % 35 10.8 % Cost of operations 1,597 16.6 % 1,340 17.2 % 257 19.2 % Operating profit $ 8,031 83.4 % 6,439 82.8 % 1,592 24.7 % Total revenues in this segment were $9,628,000 versus $7,779,000 in the same period last year. Total operating profit in this segment was $8,031,000, an increase of $1,592,000 versus $6,439,000 in the same period last year. This increase is the result of the additional royalties from the acquisition in Astatula, Florida, which we completed at the beginning of the second quarter 2022, as well as increases in revenue at nearly every active location. Net Operating Income in this segment was $9,110,000, up $1,737,000 or 24% compared to the same period last year. As reported in a subsequent event note in the 10-Q from the quarter ended June 30, 2023, in August we received notification of an overpayment of $842,000 at a quarry where we share a property line within the pit. The operator incorrectly identified the reserves being mined as belonging to the Company instead of our neighboring landlord. After auditing and confirming the tenant’s findings, the Company has reached a resolution with the tenant to allow the overpayment to be deducted from a portion of future royalties, and we have worked with the tenant to improve processes and controls to prevent an incident of this type and magnitude from occurring in the future. This will impact future royalty revenue and revenue growth until the overpayment is satisfied. Development Segment Results Nine months ended September 30 (dollars in thousands) 2023 2022 Change Lease revenue $ 1,387 1,203 184 Depreciation, depletion and amortization 140 139 1 Operating expenses 215 541 (326 ) Property taxes 587 1,066 (479 ) Management company indirect 1,822 1,621 201 Corporate expense 1,918 1,794 124 Cost of operations 4,682 5,161 (479 ) Operating loss $ (3,295 ) (3,958 ) 663 30 Stabilized Joint Venture Segment Results Nine months ended September 30 (dollars in thousands) 2023 % 2022 % Change % Lease revenue $ 16,454 100.0 % 15,961 100.0 % 493 3.1 % Depreciation, depletion and amortization 6,797 41.3 % 7,272 45.6 % (475 ) -6.5 % Operating expenses 4,818 29.3 % 4,284 26.9 % 534 12.5 % Property taxes 1,649 10.0 % 1,676 10.5 % (27 ) -1.6 % Management company indirect 330 2.0 % 277 1.7 % 53 19.1 % Corporate expense 304 1.9 % 261 1.6 % 43 16.5 % Cost of operations 13,898 84.5 % 13,770 86.3 % 128 0.9 % Operating profit $ 2,556 15.5 % 2,191 13.7 % 365 16.7 % In the fourth quarter of 2022, as part of our new partnership with SIC and MRP, we sold a 20% ownership interest in a tenancy-in-common (TIC) of Dock 79 and The Maren for $65.3 million, $44.5 million attributable to the Company, placing a combined valuation of the two buildings at $326.5 million. Total revenues in this segment were $16,454,000, an increase of $493,000 versus $15,961,000 in the same period last year. The Maren’s revenue was $7,900,000, an increase of 5.7%, and Dock 79 revenues increased $66,000 or .8% to $8,553,000. Total operating profit in this segment was $2,556,000, an increase of $365,000 versus $2,191,000 in the same period last year. Pro-rata net operating income for this segment was $6,212,000, down $1,029,000 or 14.2% compared to the same period last year because of the sale of our 20% TIC interest in both properties to SIC, mitigated by $676,000 in pro-rata NOI from our share of the Riverside joint venture. At the end of September, The Maren was 93.18% leased and 93.94% occupied. Average residential occupancy for the first nine months of 2023 was 96.11%, and 50.66% of expiring leases renewed with an average rent increase on renewals of 4.86%. The Maren is a joint venture between the Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 56.3% ownership. Dock 79’s average residential occupancy for the first nine months of 2023 was 94.21%, and at the end of the quarter, Dock 79’s residential units were 93.44% leased and 95.74% occupied. Through the first nine months of the year, 67.90% of expiring leases renewed with an average rent increase on renewals of 3.11%. Dock 79 is a joint venture between the Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 52.8% ownership. During the third quarter of 2022, we achieved stabilization at our Riverside Joint Venture in Greenville, South Carolina. At end of September, the building was 94.5% leased with 91.5% occupancy. Average occupancy for the first nine months of 2023 was 94.26% with 56.03% of expiring leases renewing with an average rental increase of 10.25%. Riverside is a joint venture with Woodfield Development and the Company owns 40% of the venture. Liquidity and Capital Resources. The growth of the Company’s businesses requires significant cash needs to acquire and develop land or operating buildings and to construct new buildings and tenant improvements. As of September 30, 2023, we had $166,028,000 of cash and cash equivalents. As of September 30, 2023, we had no debt borrowed under our $20 million Wells Fargo revolver, $823,000 outstanding under letters of credit and $19,177,000 available to borrow under the revolver. On March 19, 2021, the Company refinanced Dock 79 and The Maren projects pursuant to separate Loan Agreements and Deed of Trust Notes entered into with Teachers Insurance and Annuity Association of America, LLC. Dock 79 and The Maren borrowed principal sums of $92,070,000 and $88,000,000 respectively, in connection with the refinancing. Cash Flows - The following table summarizes our cash flows from operating, investing and financing activities for each of the periods presented (in thousands of dollars): 31 Nine months Ended September 30, 2023 2022 Total cash provided by (used for): Operating activities $ 20,721 13,175 Investing activities (28,556 ) (28,209 ) Financing activities (3,634 ) (1,704 ) Decrease in cash and cash equivalents $ (11,469 ) (16,738 ) Outstanding debt at the beginning of the period 178,557 178,409 Outstanding debt at the end of the period 178,668 178,520 Operating Activities - Net cash provided by operating activities for the nine months ended September 30, 2023 was $20,721,000 versus $13,175,000 in the same period last year. The increase was primarily due to increases in operating profit and interest income while the increased joint venture losses are reflected in investing activities. At September 30, 2023, the Company was invested in U.S. Treasury notes valued at $148,768,000 maturing in 2023 through early 2024. The unrealized loss on these investments of $571,000 was recorded as part of comprehensive income and was based on the estimated market value by Wells Fargo Bank, N.A. (Level 1). Investing Activities - Net cash used in investing activities for the nine months ended September 30, 2023 was $28,556,000 versus $28,209,000 in the same period last year. Investments in properties was $4.6 million for the 9 months ended September 30, 2023 and included the start of construction on a new speculative warehouse project in Aberdeen, Maryland on Chelsea Road. Investments in properties during the nine months ended September 30, 2022 was $26.1 million which included the $11.6 million purchase of Astatula mining land, $6.7 million for 170 acres in Cecil County Maryland to accommodate 900,000 square feet of industrial development, and the completion of the build-to-suite at 1941 62 nd Street. Investments in joint ventures was $31.6 million for the nine months ended September 30, 2023 and included $8 million for FRP’s share of a $13 million paydown of the loan at Bryant Street, $15.5 million for our Aberdeen Station lending venture, $3.4 million for the impact of higher interest rates at Verge, and $2.1 million for predevelopment activities for our next potential apartment projects in Washington, D.C. and in Greenville. Investments in joint ventures was $20.8 million for the 9 months ended September 30, 2022 and included $12.9 million for the lending ventures including the Windlass loan and $3.6 million for our Estero joint venture. Financing Activities – Net cash required by financing activities was $3,634,000 versus $1,704,000 in the same period last year primarily due to the exercise of employee stock options and the repurchase of company stock in the nine months ended September 30, 2023. Credit Facilities - On February 6, 2019, the Company entered into a First Amendment to the 2015 Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, N.A. (Wells Fargo”). The Credit Agreement modifies the Company’s prior Credit Agreement with Wells Fargo, dated January 30, 2015. The Credit Agreement establishes a five-year revolving credit facility with a maximum facility amount of $20 million. The interest rate under the Credit Agreement will be a maximum of 1.50% over the Federal Funds Rates, which may be reduced quarterly to 1.25% or .75% over the Federal Funds Rate if the Company meets a specified ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.25% per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.20% or 0.15% if the Company meets a specified ratio of consolidated total debt to consolidated total capital. The credit agreement contains certain conditions and financial covenants, including a minimum tangible net worth and dividend restriction. As of September 30, 2023, these covenants would have limited our ability to pay dividends to a maximum of $249 million combined. On March 19, 2021, the Company refinanced Dock 79 and The Maren projects pursuant to separate Loan Agreements and Deed of Trust Notes entered into with Teachers Insurance and Annuity Association of America, LLC. Dock 79 and The Maren borrowed principal sums of $92,070,000 and $88,000,000 respectively, in connection with the 32 refinancing. The loans are separately secured by the Dock 79 and The Maren real property and improvements, bear a fixed interest rate of 3.03% per annum, and require monthly payments of interest only with the principal in full due April 1, 2033. Either loan may be prepaid subsequent to April 1, 2024, subject to yield maintenance premiums. Either loan may be transferred to a qualified buyer as part of a one-time sale subject to a 60% loan to value, minimum of 7.5% debt yield and a 0.75% transfer fee. Cash Requirements – The Company currently expects its capital expenditures for the remainder of 2023 to include approximately $22.3 million for investment into our existing real estate holdings and partnerships as well as new real estate assets and joint ventures, with such capital being funded from cash and investments on hand, cash generated from operations and property sales, or borrowings under our credit facilities. Summary and Outlook . Royalty revenue for this quarter was up 24.7% over the same period last year, and royalty revenue for the first nine months is up 23.8%. The last three quarters have been the three highest revenue quarters in this segment’s history. Mining royalty revenue for the last twelve months is $12.53 million, a 24.7% increase over the same period last year, and the segment’s highest revenue total over any twelve-month period. In the Stabilized Joint Venture segment, pro-rata NOI is down for the segment for both the quarter and the first nine months, which is to be expected after selling 20% of our share of Dock 79 and The Maren to SIC. NOI for the two projects as a whole increased 1.0% ($10,163,000 vs $10,063,000) for the first nine months compared to the same period last year. At Dock 79, average occupancy (95.08%) remains in line with historic expectations, but the high renewal rate (71.43%) with reduced increases (2.30%) is consistent with a post-Covid glut in apartment supply in the DC market as evidenced by the negative trade-outs (-4.60%) we’re seeing at that building. The Maren performed slightly better with strong renewals (59.70%) at higher increases (3.18%) and positive trade-outs (4.60%), but at rates lower than we have experienced in the past prior to the second quarter of this year. Riverside in Greenville (which was added to this segment in the third quarter of 2022) has maintained strong occupancy (93.65% LTM) in its first year post-stabilization. Renewal rates for the quarter (52.83%) and year-to-date (56.03%) are consistent with expected results, and the increase on renewals (8.55% for Q3, 10.25% YTD) remain high. Our pro-rata share of NOI at Riverside this quarter was $231,000 and $676,000 for the first nine months. In our Asset Management Segment, occupancy and our overall square-footage have increased since the third quarter of 2022, leading to a 46.2% increase in NOI for the first nine months compared to the same period last year. We are 95.6% leased and occupied on 548,785 square feet compared to 85.9% occupied on 447,035 square feet at the end of the third quarter of 2022. As mentioned last quarter and in our recent Investor Day presentation, the heady cocktail of inflation, interest rates, increased construction costs, and a softening in the DC market because of an influx of new apartment projects have led us to shift our development strategy away from new developments in DC for the time being. We are shifting towards (relatively) less capital-intensive projects like warehouse construction, where we can use our cash on hand to finance construction on an all equity basis and develop in-demand industrial product while the interest rates on construction loans keep most development on the sidelines. To that end, we are underway on the construction of a $30 million spec warehouse project at our Chelsea site in Aberdeen, MD. We anticipate shell completion on this 259,200 square-foot building in the third quarter of 2024.We will continue to do the predevelopment work required to prepare the first phase of our partnership with SIC and MRP for vertical construction, but we will pause at that point until interest rates and construction costs come back in line with what’s required to make a reasonable return. We still have the utmost confidence in our assets and the markets in which they thrive. To that end, during the first nine months of 2023 we repurchased 36,909 shares at an average cost of $54.19 per share. Non-GAAP Financial Measure. To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. We believe 33 these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes. We provide Pro-rata net operating income (NOI) because we believe it assists investors and analysts in estimating our economic interest in our consolidated and unconsolidated partnerships, when read in conjunction with our reported results under GAAP. This measure is not, and should not be viewed as, a substitute for GAAP financial measures. Pro-rata Net Operating Income Reconciliation Nine months ended 09/30/23 (in thousands) Stabilized Asset Joint Mining Unallocated FRP Management Development Venture Royalties Corporate Holdings Segment Segment Segment Segment Expenses Totals Net Income (loss) $ 892 (7,192 ) (816 ) 5,842 3,270 1,996 Income Tax Allocation 331 (2,667 ) (145 ) 2,168 1,212 899 Income (loss) before income taxes 1,223 (9,859 ) (961 ) 8,010 4,482 2,895 Less: Unrealized rents 531 — — 143 — 674 Gain on sale of real estate — — — 10 — 10 Interest income — 3,692 — — 4,515 8,207 Plus: Unrealized rents — — 117 — — 117 Loss on sale of real estate 2 — 1 — — 3 Equity in loss of Joint Ventures — 10,256 298 31 — 10,585 Professional fees - other — — 59 — — 59 Interest Expense — — 3,218 — 33 3,251 Depreciation/Amortization 1,006 140 6,797 472 — 8,415 Management Co. Indirect 396 1,822 330 390 — 2,938 Allocated Corporate Expenses 630 1,918 304 360 — 3,212 Net Operating Income 2,726 585 10,163 9,110 — 22,584 NOI of noncontrolling interest — — (4,627 ) — — (4,627 ) Pro-rata NOI from unconsolidated joint ventures — 4,054 676 — — 4,730 Pro-rata net operating income $ 2,726 4,639 6,212 9,110 — 22,687 Pro-Rata Net Operating Income Reconciliation Nine months ended 09/30/22 (in thousands) Stabilized Asset Joint Mining Unallocated FRP Management Development Venture Royalties Corporate Holdings Segment Segment Segment Segment Expenses Totals Net income (loss) $ 443 (4,953 ) (166 ) 5,311 735 1,370 Income tax allocation 164 (1,837 ) 101 1,969 129 526 Income (loss) before income taxes 607 (6,790 ) (65 ) 7,280 864 1,896 Less: Unrealized rents 223 — (62 ) 153 — 314 Gain on sale of real estate — — — 874 — 874 Interest income — 2,311 — — 895 3,206 Plus: Equity in loss of joint ventures — 5,143 72 33 — 5,248 Interest expense — — 2,184 — 31 2,215 Depreciation/amortization 683 139 7,272 416 — 8,510 Management company indirect 301 1,621 277 346 — 2,545 Allocated Corporate expenses 496 1,794 261 325 — 2,876 Net operating income (loss) 1,864 (404 ) 10,063 7,373 — 18,896 NOI of noncontrolling interest — — (3,212 ) — — (3,212 ) Pro-rata NOI from unconsolidated joint ventures — 1,896 390 — — 2,286 Pro-rata net operating income $ 1,864 1,492 7,241 7,373 — 17,970 34 The following tables represent the Joint Venture and Development pro-rata NOI by project: Development Segment: FRP Bryant Street BC FRP .408 Verge Total Nine months ended Portfolio Partnership Realty, LLC Jackson Partnership Pro-rata NOI 9/30/2023 585 3,595 251 350 (142 ) 4,639 9/30/2022 (404 ) 1,853 277 (10 ) (224 ) 1,492 Stabilized Joint Venture Segment: Riverside Total Nine months ended Dock 79 The Maren Joint Venture Pro-rata NOI 9/30/2023 2,825 2,711 676 6,212 9/30/2022 3,316 3,535 390 7,241 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Interest Rate Risk - We are exposed to the impact of interest rate changes through our variable-rate borrowings under our Credit Agreement with Wells Fargo. Under the Wells Fargo Credit Agreement, the applicable margin for borrowings at September 30, 2023 was the Federal Funds Rate plus .75%. The applicable margin for such borrowings will be increased in the event that our debt to capitalization ratio as calculated under the Wells Fargo Credit Agreement Facility exceeds a target level. The Company did not have any variable rate debt at September 30, 2023, so a sensitivity analysis was not performed to determine the impact of hypothetical changes in interest rates on the Company’s results of operations and cash flows. ITEM 4. CONTROLS AND PROCEDURES CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. The Company also maintains a system of internal accounting controls over financial reporting that are designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. All control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving the desired control objectives. As of September 30, 2023, the Company, under the supervision and with the participation of the Company's management, including the CEO, CFO and CAO, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Company’s CEO, CFO and CAO concluded that the Company's disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in periodic SEC filings. 35 There have been no changes in the Company’s internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II. OTHER INFORMATION Item 1A. RISK FACTORS In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER Total Number of Shares Purchased Approximate As Part of Dollar Value of Total Publicly Shares that May Number of Average Announced Yet Be Purchased Shares Price Paid Plans or Under the Plans Period Purchased per Share Programs or Programs (1) July 1 through July 31 — $ — — $ 8,363,000 August 1 through August 31 — $ — — $ 8,363,000 September 1 through September 30 18,569 $ 53.85 18,569 $ 7,363,000 Total 18,569 $ 53.85 18,569 (1) On February 4, 2015, the Board of Directors authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time to time as opportunities arise. On December 5, 2018, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On August 5, 2019, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On May 6, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On August 26, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. Item 6. EXHIBITS (a) Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", on page 38. 36 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. FRP Holdings, Inc. Date: November 9, 2023 By JOHN D. BAKER II John D. Baker II Chief Executive Officer (Principal Executive Officer) By JOHN D. BAKER III John D. Baker III. Treasurer and Chief Financial Officer (Principal Financial Officer) By JOHN D. KLOPFENSTEIN John D. Klopfenstein Controller and Chief Accounting Officer (Principal Accounting Officer) 37 FRP HOLDINGS, INC. FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 EXHIBIT INDEX (31)(a) Certification of John D. Baker II . (31)(b) Certification of John D. Baker III . (31)(c) Certification of John D. Klopfenstein . (32) Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer under Section 906 of the Sarbanes-Oxley Act of 2002 . 101.XSD XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 38