Item 1.01 Entry into a Material Definitive Agreement
On March 22, 2018, FRP Holdings, Inc.
(the “
Company
” or “
FRP
”) and certain of its subsidiaries (collectively, “
Seller
”)
entered into an agreement of purchase and sale (the “
Sale Agreement
”) with BRE Foxtrot Parent, LLC (“
Purchaser
”),
an affiliate of Blackstone Real Estate Partners VIII, L.P., pursuant to which FRP and Seller agreed to sell to Purchaser its portfolio
of 41 warehouse properties and two additional land parcels (collectively, the “
Properties
”) for a purchase price of $358.9 million (the “
Sale Transaction
”), subject to the terms and conditions of the
Sale Agreement.
The closing of the Sale Transaction
shall take place on the later of (i) sixty (60) days after entering into the Sale Agreement and (ii) three (3) business days after
the date on which the shareholders of FRP approve the Sale Transaction, subject to the terms and conditions of the Sale Agreement.
Following the closing of the Sale Transaction, FRP will continue to be a public company operating under the name FRP Holdings,
Inc., and to own the assets in its Riverfront on the Anacostia Segment and the Mining Royalty Lands Segment, its other Washington,
D.C. properties, its Brooksville and Windlass office park joint venture interests, three office buildings, four land parcels in
business parks and its large parcel in Hampstead, Maryland (the “
Retained Business
”). FRP will maintain the
same corporate functions, the same board of directors and a majority of the same senior executives as it had prior to the completion
of the Sale Transaction and, immediately after the consummation of the Sale Transaction, all of FRP’s revenues will be generated
by its Retained Businesses.
The proceeds from the Sale Transaction
will be received by FRP and not by its shareholders. FRP expects to use a portion of the proceeds to pay for transaction costs
associated with the Sale Transaction, to pay off at closing of the Sale Transaction all indebtedness encumbering the Properties
and for general working capital purposes. At present, FRP also plans to reinvest a portion of the proceeds into its other business
segments, possibly in tax deferred like-kind exchanges under Section 1031 of the Internal Revenue Code.
Several of the Properties are subject
to certain rights of first refusal, rights of first offer, purchase options or similar rights relating to such Property in favor
of the tenants (each, an “
Option
”). Should any counterparty to an Option exercise its right to purchase the
applicable Property (an “
Excluded Option Property
”), Seller must notify Purchaser of the same, in which event
the Sale Agreement will terminate as to only such Excluded Option Property. Notwithstanding the foregoing, at any time after entering
into the Sale Agreement and prior to the date twelve (12) months after the closing date, if such tenant subsequently defaults on
its obligation to purchase such Excluded Option Property or such Excluded Option Property otherwise becomes available for sale,
Purchaser will have the right to cause the Seller to sell such Excluded Option Property to Purchaser.
Purchaser has also deposited $14,356,000
with an escrow agent (the “
Earnest Money
”). The Earnest Money is to be applied at closing against payment of
the purchase price and is non-refundable to Purchaser except as expressly provided in the Sale Agreement. The Sale Agreement provides
that the Earnest Money shall be disbursed to Seller if Seller terminates the Sale Agreement due a material breach or default by
Purchaser to pay the purchase price and purchase the Properties under the Sale Agreement on the closing date.
The Sale Agreement contains customary
representations, warranties and covenants, including, among others, covenants by Seller to operate and maintain the Properties
in accordance with Seller’s past practices, subject to certain exceptions, during the period between execution of the Sale
Agreement and the consummation of the Sale Transaction.
The consummation of the Sale Transaction
is also subject to certain customary closing conditions, including, among others, (i) approval of the Sale Transaction and other
transactions contemplated by the Sale Agreement by the affirmative vote of the majority of all the votes entitled to be cast on
the transaction (the “
Shareholder Approval
”), (ii) receipt of certain estoppel letters with respect to the Properties
and (ii) subject to certain permitted exceptions, fee simple title being vested in the Seller.
The Sale Agreement requires FRP to convene
a meeting of FRP shareholders for the purposes of obtaining the Shareholder Approval and to prepare and file a proxy statement
with the U.S. Securities and Exchange Commission (“
SEC
”) with respect to the meeting as promptly as reasonably
practicable after the date of the Sale Agreement (and, in any event, no more than five (5) Business Days following such date),
which proxy statement shall contain, subject to certain exceptions, the FRP Board’s recommendation that FRP shareholders
vote in favor of the Sale Agreement, including the transactions contemplated by it.
FRP has agreed not to solicit or enter
into an agreement regarding any proposal, offer or inquiry regarding an Acquisition Proposal (as defined in the Sale Agreement),
and, subject to certain exceptions, is not permitted to enter into discussions or negotiations concerning, or provide non-public
information to a third party in connection with, any Acquisition Proposal. However, FRP may, prior to obtaining the Shareholder
Approval, participate in negotiations and provide non-public information to a third party which has made an unsolicited bona fide
written Acquisition Proposal if the FRP Board in good faith, after consultation with outside legal counsel and financial advisors,
determines that such Acquisition Proposal constitutes, or could reasonably be expected to lead to, a Superior Proposal (as defined
in the Sale Agreement).
Prior to the approval of the Sale Transaction
by FRP shareholders, the FRP Board may in certain circumstances effect an Adverse Recommendation Change (as defined in the Sale
Agreement), subject to complying with the specified notice and other conditions set forth in the Sale Agreement.
Under certain circumstances, and after
following certain procedures and adhering to certain restrictions, FRP is permitted to terminate the Sale Agreement, prior to obtaining
the Shareholder Approval, if the FRP Board enters into an Alternative Acquisition Agreement (as defined in the Sale Agreement)
with respect to a Superior Proposal. In addition, Purchaser may terminate the Sale Agreement under certain circumstances and subject
to certain restrictions, including if the FRP Board effects an Adverse Recommendation Change.
Upon a termination of the Sale
Agreement, under certain circumstances, FRP will be required to pay a termination fee to Purchaser of $22,500,000. FRP will
also be required to pay to Purchaser an amount equal to all out-of-pocket costs and expenses incurred by Purchaser and its
affiliates in connection with the Sale Transaction (i) in the event that the Shareholder Approval is not obtained before the
Outside Closing Date (as defined in the Sale Agreement), (ii) if Purchaser elects to terminate the Sale Agreement due to a
failure to obtain the Shareholder Approval, (iii) if Purchaser elects to terminate the Sale Agreement due to a material
breach or default by Seller in the performance of its obligations under the Sale Agreement or (iv) if the Sale Agreement is
terminated and the termination fee is payable.
The foregoing description of the Sale
Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the Sale Agreement,
a copy of which is filed as Exhibit 2.1 hereto, and is incorporated herein by reference. The Sale Agreement has been attached
as an exhibit to provide shareholders with information regarding its terms. It is not intended to provide any other factual or
financial information about the Company, Seller, the Purchaser or any of their respective affiliates or businesses. The representations,
warranties, covenants and agreements contained in the Sale Agreement were made only for the purposes of such agreement and as
of specified dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon
by the contracting parties. The representations and warranties have been qualified by confidential disclosures made for the purposes
of allocating contractual risk between the parties to the Sale Agreement instead of establishing these matters as facts, and may
be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Shareholders
should not rely on the representations, warranties, covenants and agreements contained in the Sale Agreement or any descriptions
thereof as characterizations of the actual state of facts or condition of the Company, Seller, the Purchaser or any of their respective
affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change
after the date of the Sale Agreement, which subsequent information may or may not be fully reflected in the Company’s public
disclosures. The Sale Agreement should not be read alone, but should instead be read in conjunction with the other information
regarding the Company, Seller, the Purchaser and their respective affiliates and the transactions contemplated by the Sale Agreement
that will be contained in or attached as an annex to the proxy statement that the Company will file in connection with the transactions
contemplated by the Sale Agreement as well as in the other filings that the Company will make with the SEC.
Voting and Support Agreement
Concurrently with the execution of the
Sale Agreement, our Executive Chairman John D. Baker II and certain members of his family and their affiliated trusts (the “
Baker
Shareholders
”) entered into a voting and support agreement (the “
Support Agreement
”) with Purchaser,
pursuant to which the Baker Shareholders have agreed to vote all of their shares of FRP common stock (representing approximately
32.4% of the outstanding shares of FRP common stock as of March 15, 2018) in favor of, among other things, the adoption of the
Sale Agreement and approval of the transactions contemplated thereby.
The foregoing description of the Support
Agreement and the transactions contemplated thereby is only a summary, does not purport to be complete, and is qualified in its
entirety by reference to the Voting Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Important Information
The shareholders of the Company will
be asked to approve the sale of these properties to BRE Foxtrot Parent, LLC; In order to solicit this approval, the Company will
file documents with the SEC, including a definitive proxy statement relating to the proposed sale. The definitive proxy statement
will also be mailed to the Company’s shareholders in connection with the proposed sale. Investors and security holders are
urged to read these documents when they become available because they will obtain important information about the Company and the
proposed sale. Investors may obtain free copies of these documents when they are filed with the SEC at the SEC’s website
at http://www.sec.gov or by directing a request to FRP Holdings, Inc. Attn: Corporate Secretary, 200 W. Forsyth Street, 7
th
Floor, Jacksonville, Florida 32202.
The Company and its directors and executive
officers may be deemed participants in the solicitation of proxies in connection with the proposed sale. Information regarding
the interests of these directors and executive officers in the proposed transaction will be included in the definitive proxy statement
when it is file with the SEC. Additional information regarding the directors and executive officers of the Company is also included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 16,
2018, and the definitive proxy statement relating to the Company’s 2017 Annual Meeting of Shareholders, which was filed with
the SEC on December 22, 2016. The documents are available free of charge at the SEC’s website at http://www.sec.gov and from
the Corporate Secretary of the Company as described above.