FRP HOLDINGS, INC. (FRPH) FY 2023 MD&A

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 annual report for a more detailed discussion, including reconciliations of this non-GAAP financial measure to its most directly
comparable GAAP financial measure.

Executive Overview

FRP Holdings, Inc. (“FRP” or the “Company”)
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, SC;

Warehouse or office properties
in Maryland either existing or under development;

Mixed-use properties under development
in Washington, D.C. or Greenville, SC; 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 all of our business in the following four
reportable segments: (1) industrial and commercial (2) mining royalty lands (3) development and (4) multifamily. For more
information regarding our reportable segments, see Note 10. Business Segments of our consolidated financial statements included
in this annual report.

Highlights of 2023.

Industrial and Commercial Segment.

The Industrial and Commercial 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

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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 December 31, 2023, the Industrial and Commercial
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,
MD 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. 21st Street in Duval County,
FL 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 Harford County,
MD consists of five industrial buildings totaling 267,737 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, MD
consists of three industrial buildings totaling 247,340 square feet that are 100.0% leased and 100.0% occupied.

Management focuses on several factors to measure our
success on a comparative basis in this segment. The major factors we focus on are (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), (5) building and refurbishing assets to meet Class
A and Class B institutional grade classifications, and (6) reducing complexities and deferred capital expenditures to maximize sale price.

Mining Royalty Lands Segment.

Our Mining Royalty Lands segment owns several properties
comprising 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 sand and stone deposits 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 sand and stone deposits
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. In the fiscal year ended December 31, 2023, a total of 9.6 million tons were mined.

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 are Vulcan Materials, Martin Marietta, Cemex, Argos and The Concrete
Company.

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Additionally, these locations provide us with opportunities
for valuable “second lives” for these assets through proper land planning and entitlement.

Significant “2nd life” Mining
Lands:

Development Segment.

Through our Development segment, we own and are continuously
monitoring for their “highest and best use” several parcels of land that are in various stages of development. Our overall
strategy in this segment is to convert all our non-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 – Industrial and Commercial
Land.

At December 31, 2023, this segment owned the following
future development parcels:

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:

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Development Segment - Investments in Joint Ventures

The third leg of our Development Segment consists
of investments in joint venture for properties in development. The Company has investments in joint ventures, primarily with other real
estate developers which are summarized below:

Joint ventures where FRP is not the primary beneficiary
(including those in the Multifamily 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):

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The major classes of assets, liabilities and equity
of the Company’s Investments in Joint Ventures as of December 31, 2023, are summarized in the following two tables (in thousands):

Multifamily Segment.

At year end, the segment included three stabilized
multifamily joint ventures which own, lease and manage 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,

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then the leases go to month-to-month until notification
of termination or renewal is received. Renewal terms are typically 9 – 12 months. From March 2020 through the end of 2021,
we were prohibited from increasing rent on renewals by emergency measures in Washington, DC designed to ease the burden of the pandemic
on its citizens. These measures expired at the end of 2021. 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 multifamily properties are as follows:

COMPARATIVE RESULTS OF OPERATIONS

Consolidated Results

Net income for 2023 was $5,302,000 or $.56 per share
versus $4,565,000 or $.48 per share in the same period last year. The calendar year 2023 was impacted by the following items:

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Operating profit increased $3,704,000 compared to
the same period last year due to improved revenues and profits in all four segments.

Management company indirect increased $553,000 due
to merit increases and new hires along with recruiting costs.

Interest income increased $5,424,000 primarily due
to an increase in interest earned on cash equivalents ($4,307,000) and increased income from our lending ventures ($1,202,000).

Interest expense increased $1,270,000 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 $6,216,000
primarily due to increased losses during lease up at The Verge ($4,418,000) and .408 Jackson ($799,000), a gain on the sale of DST Hickory
Creek ($2,832,000) last year mitigated by a gain of $1,886,000 on our guarantee liability for the refinanced Bryant Street loan.

Calendar year 2022 included an $874,000 gain on sales
of excess property at Brooksville.

Industrial and Commercial Segment Results

Total revenues in this segment were $5,354,000, up
$1,673,000 or 45.4%, over the same period last year. Operating profit was $1,764,000, up $804,000 from $960,000 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 62nd Street and the addition of 1941 62nd Street to this segment in March 2023. Net operating income
in this segment was $3,898,000, up $1,232,000 or 46.2% compared to the same period last year.

Mining Royalty Lands Segment Results

Total revenues in this segment were $12,527,000 versus
$10,683,000 in the same period last year. Total operating profit in this segment was $10,560,000, an increase of $1,669,000 versus $8,891,000
in the same period last year. This increase is the result of the additional royalties from the acquisition in Astatula, FL, which we completed
at the beginning of the

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second quarter 2022, as well as increases in revenue
at nearly every active location. Net Operating Income in this segment was $11,720,000, up $1,568,000 or 15.4% compared to the same period
last year.

Development Segment Results

The Development segment is responsible for (i) seeking
out and identifying opportunistic purchases of income producing industrial and commercial buildings, and (ii) developing our non-income
producing properties into income production.

With respect to ongoing projects:

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Multifamily Segment Results

In the fourth quarter of 2022, as part of our new
partnership with Steuart Investment Company and MidAtlantic Realty Partners, 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 $21,824,000, an
increase of $381,000 versus $21,443,000 in the same period last year. The Maren’s revenue was $10,477,000, an increase of 4.3%,
and Dock 79 revenues decreased $51,000 or .4% to $11,398,000. Total operating profit in this segment was $3,717,000, an increase of $497,000
versus $3,220,000 in the same period last year. Pro-rata net operating income for this segment was $8,077,000, down $1,392,000 or 14.7%
compared to the same period last year because of the sale of our 20% TIC interest in both properties to SIC, mitigated by $800,000 in
pro-rata NOI from our share of the Riverside joint venture.

At the end of December, The Maren was 93.94% leased
and 94.70% occupied. Average residential occupancy for calendar year 2023 was 95.60%, and 53.23% of expiring leases renewed with an average
rent increase on renewals of 4.21%. 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
calendar year 2023 was 94.36%, and at the end of the year, Dock 79’s residential units were 95.08% leased and 96.39% occupied. Through
the year, 68.29% of expiring leases renewed with an average rent increase on renewals of 2.80%. 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, SC. At the end of December, the building was 95.50% leased with 94.50% occupancy. Average
occupancy for calendar year 2023 was 94.51% with 55.41% of expiring leases renewing with an average rental increase of 8.46%. Riverside
is a joint venture with Woodfield Development and the Company owns 40% of the venture.

Summary and Outlook

Royalty revenue was up 17.3% over 2022 in what had
previously been the highest revenue year for this segment. This kind of revenue growth is all the more remarkable when tons sold decreased
by .76%. We are fortunate in both the locations of our mining assets, but also in the ability of our operators to push price aggressively.
State and national infrastructure spending is expected to increase in 2024 creating further demand for aggregates products.

In our Multifamily Segment, we are starting to feel
the effects of a softening DC market. Revenues are more or less flat between Dock 79 and the Maren and did not keep pace with expenses.
Pro-rata NOI is down which is to be expected after selling 20% of our share of Dock 79 and The Maren to SIC. But NOI for the two projects
as a whole decreased 1.3% ($13,358,000 vs $13,529,000) compared to 2022. We should expect the market to remain slack until all the new
supply has been absorbed. 2023 was the first full calendar year of operation for our Riverside multifamily joint venture in

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Greenville, SC. Average annual occupancy (94.51%),
renewals on expiring leases (55.41%), and rent increases on renewals (8.46%) were all strong. NOI this quarter compared to each of the
first three quarters fell off because of increased taxes as the project was annexed into the city of Greenville. We remain excited about
the Greenville market and look forward to adding .408 Jackson to this segment when it stabilizes in early 2024.

In our Industrial and Commercial segment, occupancy
and our overall square-footage have increased since the end of 2022, leading to a 46.2% increase in NOI in 2023 compared to the previous
year. We are 95.6% leased and occupied on 548,785 square feet compared to 84.3% occupied on 447,035 square feet at the end of 2022.

As we have stated on a number of occasions in the
recent past, we have shifted our development focus away from multifamily in the DC market and towards industrial projects. We are underway
on the construction of a $30 million spec warehouse project at our Chelsea site in Aberdeen, MD, which we plan to deliver in the third
quarter of 2024. We are also in preliminary discussions on two industrial joint ventures in Florida. 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 that’s as far as we
will take that project until the partnership feels macroeconomic and market conditions are right. The same is true for two other mixed-use
projects with Woodfield Development (our JV partner in Riverside and .408 Jackson) that are currently in pre-development in Greenville,
SC and Estero, FL. We are pursuing entitlements for these joint ventures and they will be ready for vertical development by the second
half of 2024. But we will only move forward when market conditions warrant it. Along with our balance sheet, we consider our development
strategy and the ability to shift our focus and capital among asset classes to be our biggest strength. We will pursue our current development
strategy aggressively, while allowing for a healthy capital cushion to protect our assets and opportunistically repurchase shares. To
that end, in 2023, we repurchased 36,909 shares at an average cost of $54.19 per share.

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
December 31, 2023, we had $157,555,000 of cash and cash equivalents. As of December 31, 2023, we had no debt borrowed under our $35 million
Wells Fargo revolver, $823,000 outstanding under letters of credit and $34,177,000 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):

Operating Activities - Net cash provided by
operating activities in 2023 was $32,971,000 versus $22,338,000 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 December 31, 2023, the Company was invested in
U.S. Treasury notes valued at $128,795,000 maturing through mid-2024. The unrealized gain on these investments of $1,000 was recorded
as part of comprehensive income and was based on the estimated market value by Wells Fargo Bank, N.A. (Level 1).

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Net cash provided by operating activities in 2022
was $22,338,000 versus $22,242,000 in 2021. The Gain on remeasurement of investment in real estate partnership and related deferred income
taxes were both non-cash adjustments to net income to arrive at net cash provided by operating activities in 2021.

At December 31, 2022, the Company was invested in
U.S. Treasury notes valued at $161,585,000 maturing in late 2023. The unrealized loss on these investments of $1,903,000 was recorded
as part of comprehensive income and was based on the estimated market value by Wells Fargo Bank, N.A. (Level 1).

As of December 31, 2023 the company had
deferred taxes of approximately $35 million associated with $143 million of gains on sales reinvested through Opportunity Zone investments.
These taxes are deferred until the earlier of the sale of the related investments or April 15, 2027 and 10% of gains are excluded from
tax once the investments are held five years plus an additional 5% is excluded at seven years.

Investing Activities – Net
cash used in investing activities in 2023 was $48,747,000 versus $23,196,000 in 2022. Investments in properties was $11.2 million for
the twelve months ended December 31, 2023 and included the start of construction on a new speculative warehouse project in Aberdeen, MD
on Chelsea Road. Investments in properties during the twelve months ended December 31, 2022 was $27.6 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 62nd Street. Investments in joint ventures was $46.7 million for
the twelve months ended December 31, 2023 and included $12 million for FRP’s share of a $20 million paydown of the loan at Bryant
Street, $19.6 million for our Aberdeen Overlook lending venture, $3.7 million for the impact of higher interest rates at Verge, and $2.5
million for predevelopment activities for our next potential apartment projects in Washington, D.C. and in Greenville. Investments in
joint ventures was $21.6 million for the twelve months ended December 31, 2022 and included $13.8 million for the lending ventures including
the Windlass loan and $3.6 million for our Estero joint venture.

Net cash used in investing activities in 2022 was
$23,196,000 versus cash provided by investing activities of $66,601,000 in 2021. The decrease was due primarily due to increased investment
in properties of $11 million, increased investments in joint ventures of $8 million and reduced proceeds from sales of corporate bonds
of $65.6 million. In 2022 the Company invested $11 million in mining land and $11 million to pay off debt in our BC Realty, LLC joint
venture.

Financing Activities – Net
cash used in financing activities in 2023 was $4,166,000 versus net cash provided by financing activities of $16,834,000 in the same period
last year primarily due the repurchase of Company stock, exercise of employee stock options and prior year $27.9 million contribution
for 20% ownership of Dock & Maren by our new limited partner (less $9.3 million distributed to MRP).

Net cash provided by financing activities
was $16,834,000 in 2022 versus cash used in financing activities of $1,231,000 in 2021 primarily due to the $27.9 million contribution
for 20% ownership of Dock & Maren by our new limited partner (less $9.3 million distributed to MRP) and prior year refinancing of
Dock 79 for $1.4 million more net of debt issuance costs than the amount matured.

Credit Facilities - On December 22,
2023, the Company entered into a 2023 Amended and Restated 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 three-year revolving credit facility with a maximum facility amount of $35 million. The interest
rate under the Credit Agreement will be 2.25% over the Daily Simple SOFR in effect. A commitment fee of 0.35% per annum is payable quarterly
on the unused portion of the commitment. The credit agreement contains certain conditions and financial covenants, including a minimum
tangible net worth and dividend restriction. As of December 31, 2023, these covenants would have limited our ability to pay dividends
to a maximum of $94 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 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

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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. Effective March 31, 2021, the
Company consolidated the assets (at current fair value), liabilities and operating results of our Riverfront Investment Partners II, LLC
partnership (The Maren) which was previously accounted for under the equity method. As such the full amount of our mortgage loan was recorded
in the consolidated financial statements.

Cash Requirements – The Company expended
capital of $57,910,000 during 2023 for real estate development including investments in joint ventures. These capital expenditures were
funded from cash and investments on hand and cash generated from operations. The Company expects to invest $87 million into our existing
real estate holdings and joint ventures as well as new real estate assets and joint ventures during 2024, with such capital being funded
from cash and investments on hand, cash generated from operations, property sales, distributions from joint ventures, or borrowings under
our credit facilities.

Non-GAAP Financial Measures.

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 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 analysis, 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 analysis 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.

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The following tables represent the Joint Venture and
Development pro-rata NOI by project:

OFF-BALANCE SHEET ARRANGEMENTS

The Company has outstanding letters of credit described
above under “Liquidity and Capital Resources.” The Company has guaranteed debt as described above under Note 12 Contingent
Liabilities. The Company unconsolidated Joint Ventures have debt as scheduled under “Investments in Joint Ventures”. The Company
does not have any other off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future material
effect on its financial condition.

CRITICAL ACCOUNTING POLICIES

Management of the Company considers the following
accounting policies critical to the reported operations of the Company:

Accounts Receivable and Unrealized Rents Valuation.
The Company is subject to customer credit risk that could affect the collection of outstanding accounts receivable and unrealized rents,
that is rents recorded on a straight-lined basis. To mitigate these risks, the Company performs credit reviews on all new customers and
periodic credit reviews on existing customers. A detailed analysis of late and slow pay customers is prepared monthly and reviewed by
senior management. The overall collectability of outstanding receivables and straight-lined rents is evaluated and allowances are recorded
as appropriate. Significant changes in customer credit could require increased allowances and affect cash flows.

Net Real Estate Investments and Impairment
of Assets. Net real estate investments are recorded at cost less accumulated depreciation and depletion. Provision for depreciation
of Net real estate investments is computed using the straight-line method based on the following estimated useful lives:

Depletion expense of is computed on the
basis of units of production in relation to estimated sand and stone deposits.

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The Company periodically reviews net real estate investments
for potential impairment whenever events or circumstances indicate the carrying amount of a long-lived asset may not be recoverable. This
review consists of comparing cap rates on recent cash flows and market value estimates to the carrying values of each asset group. If
this review indicates the carrying value might exceed fair value then an estimate of future cash flows for the remaining useful life of
each property is prepared considering anticipated vacancy, lease rates, and any future capital expenditures. Changes in estimates or assumptions
could have an impact on the Company’s financials.

All direct and indirect costs, including interest
and real estate taxes, associated with the development, construction, leasing or expansion of real estate investments are capitalized
as a development cost of the property. Included in indirect costs is an estimate of internal costs associated with development and rental
of real estate investments. Changes in estimates or assumptions could have an impact on the Company’s financials.

Accounting for Real Estate Investments. The
Company accounts for its real estate investments which are not wholly owned using either the cost method, the equity method or by consolidation
with related non-controlling interest. Consolidation is required if the Company controls an investment and is the primary beneficiary.
Equity method is required when the Company has significant influence over the operating and financial policies of the investment but is
not in control or not the primary beneficiary. Cost method applies when the Company does not have significant influence of the operating
and financial policies. Significant judgment is required and regular review as the facts change.

Income Taxes. The Company accounts
for income taxes under the asset-and-liability method. Deferred tax assets and liabilities represent items that will result in taxable
income or a tax deduction in future years for which the related tax expense or benefit has already been recorded in our statement of earnings.
Deferred tax accounts arise as a result of timing differences between when items are recognized in the Consolidated Financial Statements
compared with when they are recognized in the tax returns. The Company assesses the likelihood that deferred tax assets will be recovered
from future taxable income. To the extent recovery is not probable, a valuation allowance is established and included as an expense as
part of our income tax provision. No valuation allowance was recorded at December 31, 2023, as all deferred tax assets are considered
more likely than not to be realized. Significant judgment is required in determining and assessing the impact of complex tax laws and
certain tax-related contingencies on the provision for income taxes. As part of the calculation of the provision for income taxes, we
assess whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical
merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, we accrue the largest amount
of the benefit that is more likely than not of being sustained in our consolidated financial statements. Such accruals require estimates
and judgments, whereby actual results could vary materially from these estimates. Further, a number of years may elapse before a particular
matter, for which an established accrual was made, is audited and resolved.

INFLATION

Most of the Company’s operating expenses
are inflation-sensitive, with inflation generally producing increased costs of operations. Substantially all of the Company’s royalty
agreements are based on a percentage of the sales price of the related mined items. Substantially all lease agreements provide escalation
provisions.

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CONSOLIDATED STATEMENTS OF INCOME
– Years ended December 31

(in thousands, except per share amounts)

See accompanying notes.

52

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – Years
ended December 31

(In thousands)

See accompanying notes.

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CONSOLIDATED BALANCE SHEETS – As of December
31

(In thousands, except share data)

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS –
Years ended December 31

(In thousands)

See accompanying notes.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)

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