Stephen Farrell

Stephen Farrell asked for details on the geographic markets where the $102 million in criticized REBL loans were concentrated during the quarter. He then inquired about the recapitalization of some REBL limited partnerships (LPs) and whether the principal loan balance remained consistent during refinancing.

Answer

CEO Damian Kozlowski stated there was no single concentration for criticized REBL loans, with loans spread across 'red and purple states' like Texas, Florida, and Georgia, chosen for their growing markets and advantageous legal environments, noting the issues were portfolio-wide. Regarding recapitalizations, CEO Damian Kozlowski described a robust marketplace for new capital to take over properties from 'tapped out' investors, often infusing more capital. He explained that The Bancorp's high exit debt yields and low loan-to-values facilitated finding new sponsors to stabilize loans and achieve full stabilization, often with government entity takeouts.

Stephen Farrell inquired about the geographic markets and concentrations of the $102 million in criticized REBL loans this quarter. He also asked for confirmation that the principal loan balance remained the same in recapitalized limited partnerships (LPs).

Answer

CEO Damian Kozlowski explained there was no single concentration in the criticized REBL loans, with a focus on the Southeast, Texas, Florida, and Georgia, where the legal structural environment is advantageous. He and Andres Viroslav clarified that a robust marketplace exists for taking out sponsors, often involving new capital infusions, and that Bancorp's high exit debt yields and low loan-to-values allowed them to find additional sponsors with liquidity to stabilize loans and achieve full take-outs.

Stephen Farrell from Oppenheimer & Co. Inc. asked about the current age of the rental fleet relative to pre-pandemic levels and questioned if the current dynamic of high depreciation outpacing maintenance savings represents a "new normal."

Answer

Chairman & CEO Edward Joe Shoen explained the fleet is steadily improving and is likely above 90% of pre-COVID levels in terms of "unused miles." He strongly refuted that high depreciation is a "new normal," expressing optimism that as automakers refocus on ICE vehicles, pricing will improve and the cost structure will normalize.

Stephen Farrell of Oppenheimer & Co. Inc. inquired about FRP Holdings' acquisition strategy, specifically its geographic focus in the Southeast versus Maryland, the appeal of distressed assets versus development, and the potential impact of tariffs on its industrial portfolio.

Answer

President and COO David deVilliers explained that the company's acquisition focus is primarily on the Southeast due to a more favorable business environment, although they remain opportunistic in their home market of Maryland. He noted that current cap rates for stabilized assets are unattractive, but they are monitoring the market for distressed opportunities. DeVilliers also opined that potential tariffs would likely impact multifamily construction more significantly than their planned industrial projects.