FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the Second Quarter and Six Months Ended June 30, 2019

FRP Holdings, Inc. (NASDAQ-FRPH) –

Second Quarter Consolidated Results of Operations

Net income for the second quarter of 2019 was $9,825,000 or $.99 per share versus $119,982,000 or $11.87 per share in the same period last year. Income from discontinued operations for the second quarter of 2019 was $6,776,000 or $.68 per share versus $120,465,000 or $11.92 per share in the same period last year. Second quarter of 2019 includes $536,000 in pretax profit related to the sale of our office building at 7030 Dorsey Road. Second quarter of 2018 loss from continuing operations of $879,000 included $1,085,000 in stock compensation expense ($682,800 for the 2018 director stock grant and $402,000 for vesting of option grants from 2016 and 2017 due to the asset disposition). The income from discontinued operations in the current year and the prior year is related to the sale of the Company’s industrial warehouse properties in May 2018. The current year income from discontinued operations includes the sale to the same buyer of our property at 1502 Quarry Drive for $11.7 million. This asset was excluded from the original sale due to the tenant potentially exercising its right of first refusal to purchase the property.

Second Quarter Segment Operating Results

Asset Management Segment:

Most of the Asset Management Segment was reclassified to discontinued operations leaving two commercial properties as well as Cranberry Run, which we purchased first quarter, and 1801 62nd Street which joined Asset Management on April 1. Cranberry Run is a five-building industrial park in Harford County, MD totaling 268,010 square feet of industrial/ flex space and at quarter end was 32.8% leased and occupied. 1801 62nd Street is our most recent spec building in Hollander Business Park and is our first warehouse with a 32-foot clear. We completed construction on this building earlier this year and are in the process of leasing it up. This quarter we completed the sale of 7030 Dorsey Road in Anne Arundel County for $8,850,000. It was one of the three commercial properties remaining from the asset sale last May. Total revenues in this segment were $662,000, up $94,000 or 16.5%, over the same period last year. Operating loss was ($11,000), down $160,000 compared to the same quarter last year due to higher allocation of corporate expenses as well as increased operating expenses associated with the Cranberry Run acquisition and the addition of 1801 62nd Street to Asset Management this quarter.

Mining Royalty Lands Segment:

Total revenues in this segment were $2,633,000 versus $2,055,000 in the same period last year. Total operating profit in this segment was $2,422,000, an increase of $556,000 versus $1,866,000 in the same period last year. Among the reasons for this increase in revenue and operating profit is the contribution from our Ft. Myers quarry, the revenue from which, now that mining has begun in earnest, was nearly double the minimum royalty we have been receiving until recently.

Development Segment:

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

With respect to ongoing projects:

We are fully engaged in the formal process of seeking PUD entitlements for our 118-acre tract in Hampstead, Maryland, now known as “Hampstead Overlook.” Hampstead Overlook received non-appealable rezoning from industrial to residential during the first quarter this year.
We finished shell construction in December 2018 on the two office buildings in the first phase of our joint venture with St. John Properties. Shell construction of the two retail buildings was completed in January. We are now in the process of leasing these four single-story buildings totaling 100,030 square feet of office and retail space. At quarter end, Phase I was 44% leased and 8% occupied.
We are the principal capital source of a residential development venture in Essexshire known as “Hyde Park.” We have committed up to $9.2 million in exchange for an interest rate of 10% and a preferred return of 20% after which a “waterfall” determines the split of proceeds from sale. Hyde Park will hold 122 town homes and four single-family lots and received a non-appealable Plan Approval during the first quarter. We are currently pursuing entitlements and have a home builder under contract to purchase the land upon government approval to begin development.
In April 2018, we began construction on Phase II of our RiverFront on the Anacostia project, now known as “The Maren.” We expect to deliver the building in the first half of 2020.
In December 2018, the Company entered into a joint venture agreement with MidAtlantic Realty Partners (MRP) for the development of the first phase of a multifamily, mixed-use development in northeast Washington, DC known as “Bryant Street.” FRP contributed $32 million for common equity and another $23 million for preferred equity to the joint venture. Construction began in February 2019 and should be finished in 2021. This project is located in an opportunity zone and could defer a significant tax liability associated with last year’s asset sale.

Stabilized Joint Venture Segment:

Average occupancy for the quarter was 96.37%, and at the end of the quarter Dock 79 was 94.44% leased and 97.38% occupied. Net Operating Income this quarter for this segment was $1,866,000, up $200,000 or 12.00% compared to the same quarter last year. Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 66% ownership.

Six Months Consolidated Results of Operations.

Net income for first half of 2019 was $11,723,000 or $1.17 per share versus $121,542,000 or $12.04 per share in the same period last year. Income from discontinued operations for the first half of 2019 was $6,862,000 or $.69 per share versus $122,187,000 or $12.10 per share in the same period last year. The first half of 2018 loss from continuing operations of $1,572,000 included $1,085,000 in stock compensation expense ($682,800 for the 2018 director stock grant and $402,000 for vesting of option grants from 2016 and 2017 due to the asset disposition).

Six Months Segment Operating Results

Asset Management Segment:

Most of the Asset Management Segment was reclassified to discontinued operations leaving one recent industrial acquisition, Cranberry Run, which we purchased first quarter, 1801 62nd Street which joined Asset Management on April 1, and two commercial properties after the sale this past quarter of our office property at 7030 Dorsey Road. Cranberry Run is a five-building industrial park in Harford County, MD totaling 268,010 square feet of industrial/ flex space. It is our plan to make $1,455,000 in improvements in order to re-lease the property for a total investment of $29.35 per square foot. 1801 62nd Street is our most recent spec building in Hollander Business Park and is our first warehouse with a 32-foot clear. We completed construction on this building earlier this year and are in the process of leasing it up. Total revenues in this segment were $1,303,000, up $154,000 or 13.4%, over the same period last year. Operating loss was ($77,000), down $472,000 compared to the same period last year due to higher allocation of corporate expenses and operating expenses associated with the Cranberry Run acquisition and the addition of 1801 62nd Street to Asset Management this quarter.

Mining Royalty Lands Segment:

Total revenues in this segment were $4,862,000 versus $3,827,000 in the same period last year. Total operating profit in this segment was $4,423,000, an increase of $1,016,000 versus $3,407,000 in the same period last year. Among the reasons for this increase in revenue and operating profit is the contribution from our Ft. Myers quarry, the revenue from which, now that mining has begun in earnest, was more than double the minimum royalty we have been receiving until recently.

Development Segment:

With respect to ongoing projects:

We are fully engaged in the formal process of seeking PUD entitlements for our 118-acre tract in Hampstead, Maryland, now known as “Hampstead Overlook.” Hampstead Overlook received non-appealable rezoning from industrial to residential during the first quarter this year.
We finished shell construction in December 2018 on the two office buildings in the first phase of our joint venture with St. John Properties. Shell construction of the two retail buildings was completed in January. We are now in the process of leasing these four single-story buildings totaling 100,030 square feet of office and retail space. At quarter end, Phase I was 44% leased and 8% occupied.
We are the principal capital source of a residential development venture in Essexshire known as “Hyde Park.” We have committed up to $9.2 million in exchange for an interest rate of 10% and a preferred return of 20% after which a “waterfall” determines the split of proceeds from sale. Hyde Park will hold 122 town homes and four single-family lots and received a non-appealable Plan Approval during the first quarter. We are currently pursuing entitlements and have a home builder under contract to purchase the land upon government approval to begin development.
In April 2018, we began construction on Phase II of our RiverFront on the Anacostia project, now known as “The Maren.” We expect to deliver the building in the first half of 2020.
In December 2018, the Company entered into a joint venture agreement with MidAtlantic Realty Partners (MRP) for the development of the first phase of a multifamily, mixed-use development in northeast Washington, DC known as “Bryant Street.” FRP contributed $32 million for common equity and another $23 million for preferred equity to the joint venture. Construction began in February 2019 and should be finished in 2021. This project is located in an opportunity zone and could defer a significant tax liability associated with last year’s asset sale.

Stabilized Joint Venture Segment:

Average occupancy for the first six months was 94.88%, and at the end of the second quarter Dock 79 was 94.44% leased and 97.38% occupied. Net Operating Income for this segment was $3,497,000, up $346,000 or 10.98% compared to the same quarter last year, primarily due to substantial increases in NOI from our retail tenants compared to this period last year. Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 66% ownership.

Summary and Outlook

With this past quarter’s dispositions of our assets at 1502 Quarry Drive and 7020 Dorsey Road for $11.7 million and $8.85 million respectively, the Company continued and has nearly completed the liquidation of its “heritage” properties. Of the 43 buildings owned and operated by the Company at the start of 2018, all that remains is the Company’s home office building in Sparks, MD and the vacant lot in Jacksonville still under lease to Vulcan that used to house Florida Rock Industries’ home office. We are trying to find a home for the proceeds from these recent sales in both opportunity zone and like-kind exchange opportunities.

This quarter marked the fifth consecutive quarter of increases in mining royalty revenue compared to the same period the year before and represents the segment’s best ever six-month start to a fiscal year. To add some further perspective, the royalties collected through the first six months are more than what we collected in any year from 2009 through 2014.

Construction remains on schedule for The Maren and Bryant Street, with delivery expected at The Maren in the first half of 2020. While construction should be complete at Bryant St in 2021, the first residential unit should be delivered by the end of 2020. These assets represent an investment of over $80 million and will more than triple the number of residential units and square feet of mixed use we have in our existing portfolio.

This quarter Dock 79 reached its highest occupancy rate since this same quarter last year. Given the growing supply of multi-family in that submarket, the ability to continue to renew more than half our tenants during the construction of The Maren next door, while also growing rents speaks to the premium the market places on this asset’s quality and waterfront location.

Finally, in regards to the proceeds from last year’s asset sale, we are actively pursuing different projects in which to put the money to use while remaining cautious and perhaps conservative in terms of the standard of quality of any project we consider. We do not expect that our investors will have unlimited patience as to when this money is put to work, and no one is more anxious than our management team to return the money to our shareholders in the form of new investments. However, it must be an investment worth making. To that end, we have been repurchasing shares of the Company when we believe it is underpriced. As of June 30, we have repurchased 110,527 shares in 2019 at an average cost of $48.06 per share, and we have received additional authorization from the board effective today to make a further $10,000,000 in share repurchases.

Subsequent Events

Subsequent to the end of the quarter, on July 9, we were informed by Cemex that Lake County issued Cemex a Mine Operating Permit (MOP) for its “4 Corners Mine” on the property it leases from the Company in Lake Louisa. This is the last of the permits required to begin mining this property. In addition to completing all the work necessary to prepare the site to become an active sand mine, as a condition to begin operations, Cemex will need to complete construction on a road adjacent to the property within the next 30 months but can begin selling when the road is halfway completed. Cemex expects to begin mining in earnest and selling by first quarter of 2021. This permit is the final regulatory hurdle to a process that began with the purchase of this land in 2012. Once mining begins, Cemex’s ability to realize these reserves should positively impact revenue and income over the term of the lease as it creates an opportunity to collect more than the minimums from this location.

Conference Call

The Company will host a conference call on Monday, August 5, 2019 at 1:00 p.m. (EDT). Analysts, stockholders and other interested parties may access the teleconference live by calling 1-800-311-9406 (passcode 939063) within the United States. International callers may dial 1-334-323-7224 (passcode 939063). Computer audio live streaming is available via the Internet through the Company’s website at www.frpholdings.com. You may also click on this link for the live streaming http://stream.conferenceamerica.com/frp080519. For the archived audio via the internet, click on the following link http://archive.conferenceamerica.com/archivestream/frp080519.mp3. If using the Company’s website, click on the Investor Relations tab, then select the earnings conference stream. An audio replay will be available for sixty days following the conference call. To listen to the audio replay, dial toll free 1-877-919-4059, international callers dial 1-334-323-0140. The passcode of the audio replay is 44184782. Replay options: “1” begins playback, “4” rewind 30 seconds, “5” pause, “6” fast forward 30 seconds, “0” instructions, and “9” exits recording. There may be a 30-40 minute delay until the archive is available following the conclusion of the conference call.

Investors are cautioned that any statements in this press release which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These include, but are not limited to: the possibility that we may be unable to find appropriate reinvestment opportunities for the proceeds from the Sale Transaction; levels of construction activity in the markets served by our mining properties; demand for flexible warehouse/office facilities in the Baltimore-Washington-Northern Virginia area demand for apartments in Washington D.C.; our ability to obtain zoning and entitlements necessary for property development; the impact of lending and capital market conditions on our liquidity; our ability to finance projects or repay our debt; general real estate investment and development risks; vacancies in our properties; risks associated with developing and managing properties in partnership with others; competition; our ability to renew leases or re-lease spaces as leases expire; illiquidity of real estate investments; bankruptcy or defaults of tenants; the impact of restrictions imposed by our credit facility; the level and volatility of interest rates; environmental liabilities; inflation risks; cybersecurity risks; as well as other risks listed from time to time in our SEC filings; including but not limited to; our annual and quarterly reports. We have no obligation to revise or update any forward-looking statements, other than as imposed by law, as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements.

FRP Holdings, Inc. is a holding company engaged in the real estate business, namely (i) leasing and management of commercial properties owned by the Company, (ii) leasing and management of mining royalty land owned by the Company, (iii) real property acquisition, entitlement, development and construction primarily for apartment, retail, warehouse, and office, (iv) leasing and management of a residential apartment building.

FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts) (Unaudited)

	THREE MONTHS ENDED					SIX MONTHS ENDED
	JUNE 30,					JUNE 30,
	2019			2018		2019		2018
Revenues:
Lease revenue	$	3,730		3,498		7,215		6,801
Mining lands lease revenue		2,633		2,055		4,862		3,827
Total Revenues		6,363		5,553		12,077		10,628

Cost of operations:
Depreciation, depletion and amortization		1,472		2,131		2,959		4,529
Operating expenses		910		1,103		1,792		1,968
Property taxes		713		611		1,466		1,286
Management company indirect		610		455		1,202		816
Corporate expenses		551		1,709		1,196		2,388
Total cost of operations		4,256		6,009		8,615		10,987

Total operating profit (loss)		2,107		(456	)	3,462		(359	)

Net investment income, including realized gains of $328, $0, $447 and $0, respectively		1,984		216		3,794		221
Interest expense		(272	)	(807	)	(860	)	(1,650	)
Equity in loss of joint ventures		(272	)	(11	)	(536	)	(23	)
Gain on real estate investments		536		—		536		—

Income (loss) from continuing operations before income taxes		4,083		(1,058	)	6,396		(1,811	)
Provision for (benefit from) income taxes		1,131		(179	)	1,803		(239	)
Income (loss) from continuing operations		2,952		(879	)	4,593		(1,572	)

Income from discontinued operations, net		6,776		120,465		6,862		122,187

Net income		9,728		119,586		11,455		120,615
Loss attributable to noncontrolling interest		(97	)	(396	)	(268	)	(927	)
Net income attributable to the Company	$	9,825		119,982		11,723		121,542

Earnings per common share:
Income (loss) from continuing operations-
Basic	$	0.30		(0.09	)	0.46		(0.16	)
Diluted	$	0.30		(0.09	)	0.46		(0.16	)
Discontinued operations-
Basic	$	0.68		12.01		0.69		12.19
Diluted	$	0.68		11.92		0.69		12.10
Net income attributable to the Company-
Basic	$	0.99		11.96		1.18		12.13
Diluted	$	0.99		11.87		1.17		12.04

Number of shares (in thousands) used in computing:
-basic earnings per common share		9,915		10,033		9,933		10,024
-diluted earnings per common share		9,960		10,109		9,978		10,099

FRP HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share data)(Unaudited)

	June 30		December 31
Assets:	2019		2018
Real estate investments at cost:
Land	$	84,383		83,721
Buildings and improvements		144,779		144,543
Projects under construction		2,508		6,683
Total investments in properties		231,670		234,947
Less accumulated depreciation and depletion		27,472		28,394
Net investments in properties		204,198		206,553

Real estate held for investment, at cost		7,167		7,167
Investments in joint ventures		94,937		88,884
Net real estate investments		306,302		302,604

Cash and cash equivalents		56,169		22,547
Cash held in escrow		20,066		202
Accounts receivable, net		783		564
Investments available for sale at fair value		122,183		165,212
Federal and state income taxes receivable		27,206		9,854
Unrealized rents		459		53
Deferred costs		645		773
Other assets		463		455
Assets of discontinued operations		871		3,224
Total assets	$	535,147		505,488

Liabilities:
Secured notes payable	$	88,857		88,789
Accounts payable and accrued liabilities		2,044		3,545
Environmental remediation liability		92		100
Deferred revenue		858		27
Deferred income taxes		50,439		27,981
Deferred compensation		1,446		1,450
Tenant security deposits		252		53
Liabilities of discontinued operations		158		288
Total liabilities		144,146		122,233

Commitments and contingencies

Equity:
Common stock, $.10 par value25,000,000 shares authorized,9,863,451 and 9,969,174 shares issuedand outstanding, respectively		986		997
Capital in excess of par value		57,562		58,004
Retained earnings		313,373		306,307
Accumulated other comprehensive income, net		1,210		(701	)
Total shareholders’ equity		373,131		364,607
Noncontrolling interest MRP		17,870		18,648
Total equity		391,001		383,255
Total liabilities and shareholders’ equity	$	535,147		505,488

Asset Management Segment:

	Three months ended June 30
(dollars in thousands)	2019			%			2018		%			Change			%

Lease revenue	$	662			100.0	%		568		100.0	%		94			16.5	%

Depreciation, depletion and amortization		196			29.6	%		129		22.7	%		67			51.9	%
Operating expenses		175			26.5	%		91		16.0	%		84			92.3	%
Property taxes		90			13.6	%		40		7.1	%		50			125.0	%
Management company indirect		73			11.0	%		50		8.8	%		23			46.0	%
Corporate expense		139			21.0	%		109		19.2	%		30			27.5	%

Cost of operations		673			101.7	%		419		73.8	%		254			60.6	%

Operating profit	$	(11	)		-1.7	%		149		26.2	%		(160	)		-107.4	%

Mining Royalty Lands Segment:

	Three months ended June 30
(dollars in thousands)	2019		%			2018		%			Change			%

Mining lands lease revenue	$	2,633		100.0	%		2,055		100.0	%		578			28.1	%

Depreciation, depletion and amortization		42		1.6	%		36		1.8	%		6			16.7	%
Operating expenses		15		0.6	%		40		1.9	%		(25	)		-62.5	%
Property taxes		69		2.6	%		61		3.0	%		8			13.1	%
Management company indirect		49		1.8	%		—		0.0	%		49			0.0	%
Corporate expense		36		1.4	%		52		2.5	%		(16	)		-30.8	%

Cost of operations		211		8.0	%		189		9.2	%		22			11.6	%

Operating profit	$	2,422		92.0	%		1,866		90.8	%		556			29.8	%

Development Segment:

	Three months ended June 30
(dollars in thousands)	2019			2018			Change

Lease revenue	$	316			317			(1	)

Depreciation, depletion and amortization		49			57			(8	)
Operating expenses		95			367			(272	)
Property taxes		295			231			64
Management company indirect		442			292			150
Corporate expense		341			283			58

Cost of operations		1,222			1,230			(8	)

Operating loss	$	(906	)		(913	)		7

Stabilized Joint Venture Segment:

	Three months ended June 30
(dollars in thousands)	2019		%			2018			%			Change			%

Lease revenue	$	2,752		100.0	%		2,613			100.0	%		139			5.3	%

Depreciation, depletion and amortization		1,185		43.0	%		1,909			73.1	%		(724	)		-37.9	%
Operating expenses		625		22.7	%		605			23.1	%		20			3.3	%
Property taxes		259		9.4	%		279			10.7	%		(20	)		-7.2	%
Management company indirect		46		1.7	%		113			4.3	%		(67	)		-59.3	%
Corporate expense		35		1.3	%		95			3.6	%		(60	)		-63.2	%

Cost of operations		2,150		78.1	%		3,001			114.8	%		(851	)		-28.4	%

Operating profit	$	602		21.9	%		(388	)		-14.8	%		990			-255.2	%

Asset Management Segment:

	Six months ended June 30
(dollars in thousands)	2019			%			2018		%			Change			%

Lease revenue	$	1,303			100.0	%		1,149		100.0	%		154			13.4	%

Depreciation, depletion and amortization		373			28.6	%		260		22.6	%		113			43.5	%
Operating expenses		384			29.5	%		229		19.9	%		155			67.7	%
Property taxes		146			11.2	%		79		6.9	%		67			84.8	%
Management company indirect		175			13.4	%		74		6.5	%		101			136.5	%
Corporate expense		302			23.2	%		112		9.7	%		190			169.6	%

Cost of operations		1,380			105.9	%		754		65.6	%		626			83.0	%

Operating profit	$	(77	)		-5.9	%		395		34.4	%		(472	)		-119.5	%

Mining Royalty Lands Segment:

	Six months ended June 30
(dollars in thousands)	2019		%			2018		%			Change			%

Mining lands lease revenue	$	4,862		100.0	%		3,827		100.0	%		1,035			27.0	%

Depreciation, depletion and amortization		94		1.9	%		90		2.4	%		4			4.4	%
Operating expenses		31		0.7	%		80		2.1	%		(49	)		-61.3	%
Property taxes		137		2.8	%		121		3.2	%		16			13.2	%
Management company indirect		98		2.0	%		—		0.0	%		98			0.0	%
Corporate expense		79		1.6	%		129		3.3	%		(50	)		-38.8	%

Cost of operations		439		9.0	%		420		11.0	%		19			4.5	%

Operating profit	$	4,423		91.0	%		3,407		89.0	%		1,016			29.8	%

Development Segment:

	Six months ended June 30
(dollars in thousands)	2019			2018			Change

Lease revenue	$	585			614			(29	)

Depreciation, depletion and amortization		107			114			(7	)
Operating expenses		141			475			(334	)
Property taxes		618			499			119
Management company indirect		837			533			304
Corporate expense		740			702			38

Cost of operations		2,443			2,323			120

Operating loss	$	(1,858	)		(1,709	)		(149	)

Stabilized Joint Venture Segment:

	Six months ended June 30
(dollars in thousands)	2019		%			2018			%			Change			%

Lease revenue	$	5,327		100.0	%		5,038			100.0	%		289			5.7	%

Depreciation, depletion and amortization		2,385		44.8	%		4,065			80.7	%		(1,680	)		-41.3	%
Operating expenses		1,236		23.2	%		1,184			23.5	%		52			4.4	%
Property taxes		565		10.6	%		587			11.7	%		(22	)		-3.7	%
Management company indirect		92		1.7	%		209			4.1	%		(117	)		-56.0	%
Corporate expense		75		1.4	%		237			4.7	%		(162	)		-68.4	%

Cost of operations		4,353		81.7	%		6,282			124.7	%		(1,929	)		-30.7	%

Operating profit	$	974		18.3	%		(1,244	)		-24.7	%		2,218			-178.3	%

Discontinued Operations:

	Three months ended					Six months ended
	June 30,					June 30,
	2019		2018			2019		2018
Lease Revenue		222		4,110			460		11,657

Cost of operations:
Depreciation, depletion and amortization		12		1,217			41		3,102
Operating expenses		139		464			234		1,642
Property taxes		26		449			46		1,247
Management company indirect		—		812			—		990
Corporate expenses		—		655			—		1,402
Total cost of operations		177		3,597			321		8,383

Total operating profit		45		513			139		3,274

Interest expense		—		(187	)		—		(587	)
Gain on sale of buildings		9,245		164,807			9,268		164,807

Income before income taxes		9,290		165,133			9,407		167,494
Provision for income taxes		2,514		44,668			2,545		45,307

Income from discontinued operations	$	6,776		120,465			6,862		122,187

Earnings per common share:
Income from discontinued operations-
Basic		0.68		12.01			0.69		12.19
Diluted		0.68		11.92			0.69		12.10

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. The non-GAAP financial measure included in this quarterly report is net operating income (NOI). FRP uses this non-GAAP financial measure 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.

Net Operating Income Reconciliation
Six months ended 06/30/19 (in thousands)
						Stabilized
	Asset					Joint		Mining		Unallocated		FRP
	Management		Development			Venture		Royalties		Corporate		Holdings
	Segment		Segment			Segment		Segment		Expenses		Totals
Income (loss) from continuing operations		335		(1,347	)		25		3,211		2,369		4,593
Income Tax Allocation		124		(499	)		109		1,190		879		1,803
Income (loss) from continuing operations before income taxes		459		(1,846	)		134		4,401		3,248		6,396

Less:
Gains on sale of buildings		536		—			—		—		—		536
Unrealized rents		—		—			29		—		—		29
Interest income		—		526			—		—		3,268		3,794
Plus:
Unrealized rents		3		—			—		228		—		231
Equity in loss of Joint Venture		—		514			—		22		—		536
Interest Expense		—		—			840		—		20		860
Depreciation/Amortization		373		107			2,385		94		—		2,959
Management Co. Indirect		175		837			92		98		—		1,202
Allocated Corporate Expenses		302		740			75		79		—		1,196

Net Operating Income		776		(174	)		3,497		4,922		—		9,021

Net Operating Income Reconciliation
Six months ended 06/30/18 (in thousands)
						Stabilized
	Asset					Joint			Mining		Unallocated			FRP
	Management		Development			Venture			Royalties		Corporate			Holdings
	Segment		Segment			Segment			Segment		Expenses			Totals
Income from continuing operations		288		(1,247	)		(2,362	)		2,469		(720	)		(1,572	)
Income Tax Allocation		107		(462	)		(532	)		915		(267	)		(239	)
Income from continuing operations before income taxes		395		(1,709	)		(2,894	)		3,384		(987	)		(1,811	)

Less:
Unrealized rents		—		—			116			—		—			116
Interest income		—		—			—			—		221			221
Plus:
Unrealized rents		29		—			—			241		—			270
Equity in loss of Joint Venture		—		—			—			23		—			23
Interest Expense		—		—			1,650			—		—			1,650
Depreciation/Amortization		260		114			4,065			90		—			4,529
Management Co. Indirect		74		533			209			—		—			816
Allocated Corporate Expenses		112		702			237			129		1,208			2,388

Net Operating Income (loss)		870		(360	)		3,151			3,867		—			7,528