FRPH

• Core Strategic Shift

  • Disciplined capital allocation targeting highest long-term risk-adjusted returns remains the central company philosophy
  • Management reaffirms that industrial real estate (logistics, manufacturing, distribution, service-oriented uses) offers the most attractive long-term risk-adjusted returns across the firm's markets
  • Most future discretionary growth capital will be allocated to expanding the industrial portfolio; the firm will retain and maximize value from its existing multifamily and mining royalty businesses
  • The company's goal is to grow industrial into a larger contributor to overall NOI and FFO over time

• Financial Position

  • Ended the quarter with $130 million in total liquidity, including $101 million in cash
  • Balance sheet remains conservatively leveraged, with 2.82x debt service coverage and net debt equal to just 19% of fair market value, which management identifies as a key competitive advantage
  • The firm has already deployed nearly all equity capital for its current development pipeline, with only ~$8 million in remaining vertical construction capital scheduled for disbursement over the next two quarters

• Operational Updates

  • Industrial leasing transaction timelines remain longer than historical underwriting, but overall tenant activity (property tours, proposals, negotiations) is materially stronger than one year ago
  • Nationally, the industrial construction pipeline has contracted ~60% from the 2022-2023 peak, while absorption is strengthening, creating a more favorable supply-demand dynamic for near-term deliveries
  • Management has revamped its industrial leasing and marketing playbook, leveraging long-standing relationships with tenants and brokerages as a competitive advantage, and has expanded the internal leasing team
  • For multifamily, management is focused on improving tenant screening to reduce delinquency, operating the existing portfolio well, and completing in-progress developments

• Full year 2026 NOI guidance was revised downward to $36.2 million, from the original guidance of $37.1 million, a net reduction of ~$900,000
• The downward revision reflects a $800,000 impact from delayed industrial lease-up and $1 million of operating headwinds from the Washington D.C. multifamily portfolio, partially offset by an $850,000 upward adjustment from stronger-than-expected mining royalty performance
• Near-term FFO will continue to be pressured by lease-up timing, elevated platform expansion costs, and higher interest expense; management expects operating leverage to improve as industrial occupancy rises
• There are no near-term plans to develop speculative industrial space at the firm's shovel-ready Krause and Mechanics Valley sites; development will only proceed if market fundamentals justify it, with current focus on marketing these sites for build-to-suit opportunities
• There are no near-term plans to start new development at the FRP Riverfront sites in Washington D.C.; management will hold the low-basis land and monitor market conditions before advancing new multifamily development there
• Management noted that share buybacks will only be pursued opportunistically in the near term; a meaningful dividend or share buyback program will only be implemented once the firm has excess cash flow beyond what is needed for its in-progress development pipeline

1. Industrial: Generated pro-rata NOI of $5.3 million for the quarter, contributing approximately 56% of total pro-rata NOI. The portfolio will grow from ~800,000 square feet at end-2025 to ~2.1 million square feet after the current development pipeline delivers in Q1 2027. As of Q2 2026, 20,700 square feet has been signed, with 97,500 square feet in active negotiations. Same-store industrial in Maryland fell from 92% occupancy in Q1 2025 to 70.6% in Q2 2026 following the loss of several government tenants and one bankruptcy.
2. Mining Royalties: Generated $4.1 million of NOI in the quarter, a 12% year-over-year increase, contributing approximately 44% of total pro-rata NOI. It operates with very low incremental capital requirements, produces durable recurring cash flow, and provides funding and balance sheet flexibility for the firm's development strategy. Performance was $850,000 stronger than original full-year guidance.
3. Multifamily: The current portfolio holds 1,827 units, with 510 additional units scheduled for delivery in Q1 2028 that will expand the portfolio to 2,337 units. Operating performance is mixed: assets in Greenville, South Carolina perform well, but the Washington D.C. portfolio faces material headwinds from elevated new supply, high tenant delinquency, and unfavorable local regulatory policies. D.C. multifamily contributed $1 million of negative operating variance to full-year guidance.

• Washington D.C. multifamily faces persistent structural headwinds: local regulatory policies dramatically slow the eviction process for delinquent tenants, allowing delinquent occupants to stay for 12-18 months without paying rent, and bad actors have exploited this system for rent scams that increase vacancy loss
• Elevated new supply in Washington D.C. (particularly the Anacostia submarket) has pushed down re-leasing rates for trade-outs by 10% compared to expiring rates, pressuring multifamily NOI
• Maryland northern Baltimore industrial markets face competition from larger, lower-cost logistics markets in southern New Jersey and Pennsylvania that offer economic development incentives and better positioning for regional distribution, slowing lease-up of the Chelsea development
• The local tenant pool for smaller industrial space in Harford County, Maryland is shallow and reliant on organic growth tied to larger area employers, which has slowed leasing at the Cranberry Business Park
• Near-term performance is dependent on converting increased tenant activity to signed leases, which has yet to materialize at the pace management expects
• Blue state markets like D.C. and Maryland carry elevated political and regulatory risk that limits landlord rights and increases operating losses

Q: Why is FRP's D.C. multifamily delinquency and performance worse than peer operators like Camden in the same market? / A: Headwinds are consistent across all of FRP's D.C. multifamily properties, driven by two core factors: 1) oversupply of new units that pushes down re-leasing rates for departing tenants, and 2) local eviction policies that leave the firm carrying uncollectible rent for 12-18 months after a tenant stops paying, a system bad actors actively exploit for free rent. Management agrees that improved tenant screening can reduce delinquency, and has already implemented new screening protocols over the past 18 months to address the issue.

Q: What is driving weak performance at FRP's Maryland industrial properties, and what is the strategy for future development at these sites? / A: The Maryland Baltimore-north market is squeezed between larger regional logistics hubs, and large tenants have increasingly consolidated distribution operations in New Jersey and Pennsylvania, which offer lower costs and economic incentives that Maryland sites cannot match. The 70.6% current occupancy rate reflects recent losses of government and bankrupt tenants, but leasing activity has picked up and management expects improvement in coming quarters. There are no near-term plans for new speculative development; the firm will focus on marketing entitled, shovel-ready sites for build-to-suit opportunities only.

Q: When will FRP implement capital return programs like dividends or share buybacks, given the large discount to NAV that makes buybacks highly accretive? / A: Management's current priority is to allocate available capital to in-progress, high-return development projects over capital returns. The firm will maintain a strong cash position for both defensive and offensive flexibility in uncertain economic conditions. A meaningful dividend or share buyback program will only be implemented once the firm generates more cash flow than it can deploy to attractive development opportunities. Near-term buybacks will only be pursued opportunistically.

Q: What is the long-term plan for FRP's undeveloped riverfront land in D.C.'s Anacostia submarket? / A: Management does not see office development as viable for the site, and plans to hold the low-basis land for future multifamily development, aligned with the area's waterfront residential growth trajectory. The firm will not break ground on new development in the near term given current market headwinds, and will continue to monitor supply, delinquency, construction costs and debt market conditions before advancing new projects. A current long-term tenant occupies the bulkhead parcel, and negotiations are ongoing to retain the tenant until development is ready to proceed.