Executive Summary / Key Takeaways

• FRP Holdings is strategically pivoting towards aggressive industrial development, particularly through the recent acquisition of Altman Logistics Properties, to drive long-term growth and double its industrial portfolio by 2030.
• The company anticipates flat to slightly negative Net Operating Income (NOI) in 2025, a "foundational year" marked by temporary headwinds from existing industrial vacancies and the non-recurring nature of a significant 2024 mining royalty payment.
• Despite short-term NOI pressures, FRP Holdings is actively deploying approximately $71 million in equity capital in 2025 into new industrial and multifamily projects, with substantial completions expected in 2026 and 2027.
• The Altman Logistics acquisition significantly enhances FRP's talent base and market access in key growth regions like Florida and New Jersey, enabling a more flexible and opportunistic development platform.
• FRP Holdings leverages its diversified real estate portfolio, regional expertise, and disciplined development approach to navigate competitive markets and capitalize on favorable industrial market fundamentals, including declining new construction and stabilizing vacancies.

FRP Holdings: Forging a Path to Industrial Dominance Amidst Market Shifts

FRP Holdings, Inc. (NASDAQ:FRPH) is a real estate investment and development company with a rich history dating back to its incorporation in 2014. The company operates across four distinct segments: Industrial and Commercial, Mining Royalty Lands, Development, and Multifamily. This diversified structure, coupled with a strategic focus on high-growth real estate opportunities, underpins its long-term investment thesis. FRP Holdings has demonstrated a remarkable growth trajectory, achieving a compound annual growth rate in pro rata Net Operating Income (NOI) of 21.8% to 29.5% between 2021 and 2024. This growth was fueled by successful industrial and multifamily lease-ups and consistent performance in its mining segment.

The company's overarching strategy is currently centered on an aggressive expansion into industrial development, a move designed to capitalize on favorable market dynamics and drive its "next decade of growth." This strategic pivot, however, positions 2025 as a "foundational year" rather than one of immediate NOI expansion, as the company invests heavily in its future pipeline. FRP Holdings’ competitive advantages stem primarily from its diversified portfolio, deep regional expertise in the Southeast and Mid-Atlantic, and a disciplined approach to identifying and executing development opportunities. While the company does not highlight proprietary technological differentiators in its core real estate operations, its focus on developing "Class A logistics facilities" and "modern industrial facilities" aligns with industry best practices and positions it to meet evolving market demands.

Strategic Expansion and Competitive Landscape

The real estate industry is currently experiencing significant shifts, with industrial logistics remaining a strong sector. New construction in the industrial segment has declined below pre-pandemic levels, creating a healthier balance between supply and demand. Market vacancy in the industrial sector is expected to peak in the fourth quarter of 2025, with improving policy clarity supporting renewed tenant momentum. FRP Holdings operates in supply-constrained, high-barrier markets where modern infill logistics space continues to command strong tenant interest. This favorable backdrop is a key driver for the company's intensified focus on industrial development.

FRP Holdings competes with a range of real estate players, from large, specialized REITs like Prologis, Inc. (PLD) in industrial, and Equity Residential (EQR) or AvalonBay Communities, Inc. (AVB) in multifamily, to more diversified regional developers. Compared to industrial giants like Prologis, FRP Holdings is a smaller, more regionally focused player. Prologis benefits from its global scale and extensive portfolio, which can lead to greater operational efficiency and market access. However, FRP's diversified portfolio, including its unique mining royalty lands, offers a hedge against sector-specific downturns that pure-play industrial or multifamily REITs might face. In the multifamily sector, while companies like Equity Residential and AvalonBay possess deeper expertise and larger scale in apartment development, FRP's integrated mixed-use developments can offer unique community appeal. Simon Property Group, Inc. (SPG), a major retail REIT, presents a different competitive dynamic, with FRP's commercial properties competing in a broader mixed-use context rather than pure retail.

A transformative move for FRP Holdings occurred on October 21, 2025, with the acquisition of Altman Logistics Properties, LLC. This strategic acquisition, costing $33.50 million (net cash requirement of $23.50 million), is considered "essential to our growth strategy" and significantly expands FRP's development footprint into key growth markets, particularly Florida and New Jersey. The acquisition not only brought 100% ownership of existing industrial projects in Lakeland and Broward County, Florida, but also minority interests in three industrial buildings in New Jersey and Florida, and future development opportunities. Crucially, this transaction integrated a proven team with expertise in identifying growth markets, leveraging contacts for off-market deals, controlling construction costs, and rapidly stabilizing properties with quality tenants. This talent acquisition is viewed by management as a critical differentiator for the company's "next decade of growth," enabling FRP to pursue projects in-house or as a general partner, generating fees and equity.

Financial Performance and Liquidity

FRP Holdings' financial performance in 2025 reflects its transitional "foundational year." For the third quarter ended September 30, 2025, net income decreased 51% to $700,000, or $0.03 per share, compared to $1.4 million, or $0.07 per share, in the same period last year. This decline was largely attributable to $1.3 million in expenses related to the Altman Logistics Properties acquisition. Excluding these one-time acquisition expenses, adjusted net income for Q3 2025 was up $281,000 or 21% over the prior year's third quarter.

The company's pro rata share of NOI in Q3 2025 decreased 16% year-over-year to $9.5 million. This was primarily due to a non-recurring $1.9 million minimum royalty payment received in Q3 2024 in the Mining Royalty Lands segment, which artificially inflated the prior year's figures. Excluding this non-recurring payment, adjusted pro rata NOI for Q3 2025 saw a modest increase of $104,000. For the first nine months of 2025, net income was $2.95 million, or $0.16 per share, down from $4.71 million, or $0.25 per share, in the same period last year. Adjusted for $2 million of Altman acquisition expenses, net income for the nine months was down $231,000. Pro rata NOI for the nine-month period was $28.57 million, a slight decrease from $29.04 million in the prior year, but up $1.40 million when excluding the 2024 non-recurring royalty payment.

Segment-wise, the Industrial and Commercial segment's operating profit declined by $501,000 in Q3 2025, impacted by $207,000 higher depreciation from the Chelsea warehouse completion and reduced occupancy due to a tenant default and non-renewing leases. The consolidated Multifamily segment (Dock/Maren) also saw a $404,000 decrease in operating profit due to increased uncollectable revenue, higher operating expenses, and property taxes. Conversely, the Mining Royalty Lands segment's operating profit increased by $438,000 in Q3 2025, driven by higher royalty tons and revenues. Net investment income increased by $65,000, primarily from lending ventures, while equity in loss of joint ventures improved by $614,000 due to better results at Bryant Street and BC Realty.

FRP Holdings maintains a strong liquidity position, with $134.85 million in cash and cash equivalents as of September 30, 2025. The company's $50 million Wells Fargo revolving credit facility had no outstanding debt, with $49.55 million available for borrowing. Net cash provided by operating activities for the nine months ended September 30, 2025, was $21.25 million. The company plans to invest approximately $31 million into existing real estate holdings and joint ventures for the remainder of 2025, and an additional $161 million beyond 2025 for projects in its pipeline. These capital commitments are expected to be funded by existing cash, operating cash flow, property sales, distributions from joint ventures, or credit facility borrowings.

Outlook and Strategic Initiatives

Management has consistently guided for 2025 to be a "foundational year for future growth," anticipating "flat to slightly negative NOI results overall in 2025." This outlook is a deliberate consequence of the company's aggressive investment in its development pipeline and the temporary headwinds in its existing portfolio. A key assumption is that industrial market vacancies will "peak in the fourth quarter of 2025," with new construction having fallen below pre-pandemic norms, creating a healthier supply-demand balance.

The company's strategic initiatives are heavily focused on its industrial development pipeline. FRP Holdings aims to "doubling the size of our industrial portfolio by 2030," delivering "three new industrial assets every two years." This includes advancing development entitlements in Maryland to ensure projects are "shovel-ready in 2026." In Florida, construction commenced in Q2 2025 on two industrial joint ventures with Altman Logistics Partners in Lakeland and Broward County, totaling over 382,000 square feet, with shell completion anticipated by summer 2026. A new joint venture with Strategic Real Estate Partners in Lake County, Florida, will develop over 375,000 square feet, with shell completion expected in Q4 2026. These Florida industrial projects alone are expected to generate annual NOI of approximately $9 million, with FRP's share just over $8 million, upon stabilization.

In the multifamily segment, despite ongoing pressure from new deliveries in the D.C. market, management observes improving conditions, including subsiding delinquency rates and new landlord-friendly laws. Construction began on the Woven project in Greenville, South Carolina, and the Estero, Florida joint venture, both expected to be ready for lease-up in late 2027. These two multifamily projects are projected to boost FRP's NOI by over $4 million following stabilization in 2029.

Risks and Challenges

FRP Holdings faces several pertinent risks. The Industrial and Commercial segment is currently experiencing significant vacancies, particularly at Cranberry Business Park, where management expects most tenants to vacate, leading to very low occupancy. The newly completed Chelsea warehouse also requires lease-up, and these vacancies will negatively impact NOI until new tenants are secured at market rates. The D.C. multifamily market continues to present challenges with new supply putting pressure on vacancies and concessions, impacting revenue growth.

The Mining Royalty Lands segment, while strong, is subject to the cyclical nature of construction markets and the risk of lease termination by its largest lessee, which accounted for 25.80% of consolidated revenues for the nine months ended September 30, 2025. Furthermore, the non-repeatable $1.9 million royalty payment in Q3 2024 means the segment is unlikely to match its prior year's NOI performance, contributing to the anticipated flat overall NOI in 2025. Broader macroeconomic risks include interest rate volatility, inflation, and the impact of tariffs on construction costs, particularly for steel, lumber, and gypsum, which could affect project timelines and profitability.

Conclusion

FRP Holdings, Inc. is at a pivotal juncture, executing a bold strategic pivot towards aggressive industrial development to unlock its next phase of growth. While 2025 is projected as a "foundational year" with anticipated flat to slightly negative NOI due to temporary vacancies in its existing industrial portfolio and the non-recurring nature of a significant 2024 mining royalty payment, the company is making substantial investments in its future. The acquisition of Altman Logistics Properties is a game-changer, providing not only a robust pipeline of industrial projects in high-growth markets like Florida and New Jersey but also integrating a seasoned team crucial for disciplined execution and value creation.

The company's disciplined capital deployment, coupled with its diversified asset base and regional expertise, positions it to capitalize on favorable industrial market fundamentals, including declining new construction and stabilizing vacancies. As new industrial and multifamily projects come online in 2026 and 2027, FRP Holdings is laying the groundwork for significant NOI expansion and long-term value creation for shareholders. While challenges remain in leasing existing vacancies and navigating competitive multifamily markets, management's clear strategic roadmap and focus on high-quality, modern logistics assets underscore a compelling investment thesis for the patient investor.