FRPH FRP Holdings Inc

FRP Holdings, Inc. (NASDAQ-FRPH) 

First Quarter Operational Highlights

• 34.9% increase in pro-rata NOI ($6.99 million vs $5.18 million) over first quarter 2022
• Mining Royalties had its highest revenue quarter ever for the second quarter in a row; 10.77% increase in royalties per ton
• 27.5% increase in Asset Management revenue versus same period last year; 60.6% increase in Asset Management NOI versus first quarter 2022

First Quarter Consolidated Results of Operations

Net income for the first quarter of 2023 was $565,000 or $.06 per share versus $672,000 or $.07 per share in the same period last year. The first quarter of 2023 was impacted by the following items:

• Operating profit increased $1,490,000 compared to the same quarter last year due to improved revenues and profits in all four segments.
• Interest expense increased $268,000 compared to the same quarter last year due to less capitalized interest. We capitalized less interest because of fewer in-house and joint venture projects under development this quarter compared to last year.
• Interest income increased $1,484,000 due primarily to an increase in interest earned on cash equivalents.
• Equity in loss of Joint Ventures increased $2,021,000 due to losses during lease up at The Verge and .408 Jackson.
• First quarter last year included a $733,000 gain on sales of excess property at Brooksville.

First Quarter Segment Operating Results

Asset Management Segment:

Total revenues in this segment were $1,070,000, up $231,000 or 27.5%, over the same period last year. Operating profit was $295,000, up $147,000 from $148,000 in the same quarter last year. Revenues and operating profit are up because of rent growth at Cranberry Run, full occupancy at 1865 62nd Street which was placed into service in the fourth quarter of 2021. We now have nine buildings in service at three different locations totaling 548,785 square feet of office and industrial. At quarter end, we were 99.4% leased and 91.4% occupied. Net operating income in this segment was $787,000, up $297,000 or 60.6% compared to the same quarter last year.

Mining Royalty Lands Segment:

Total revenues in this segment were $3,282,000 versus $2,425,000 in the same period last year. Total operating profit in this segment was $2,790,000, an increase of $701,000 versus $2,089,000 in the same period last year. This increase is the result of the additional royalties from the acquisition in Astatula, Florida, which we completed at the beginning of the second quarter 2022, as well as increases in revenue at nearly every active location. Net Operating Income this quarter for this segment was $3,148,000, up $856,000 or 37% compared to the same quarter last year.

Development Segment:

With respect to ongoing projects:

• We are the principal capital source of a residential development venture in Prince George’s County, Maryland known as “Amber Ridge.” Of the $18.5 million in committed capital to the project, $17.1 million in principal draws have taken place through quarter end. Through the end of March 31, 2023, 144 of the 187 units have been sold, and we have received $17.5 million in preferred interest and principal to date.
• Bryant Street is a mixed-use joint venture between the Company and MRP in Washington, DC consisting of four buildings: The Coda, The Chase 1A, The Chase 1B, and one commercial building 90% leased to an Alamo Draft House movie theater. At quarter end, the Coda was 93.51% leased and 92.86% occupied, The Chase 1B was 89.44% leased and 85.71% occupied, and The Chase 1A was 89.53% leased and 93.60% occupied. In total, at quarter end, Bryant Street’s 487 residential units were 90.8% leased and occupied. Its commercial space was 84.2% leased and 79.0% occupied at quarter end.
• Lease-up is now underway at The Verge, and at quarter end, the building was 32.0% leased and 23.6% occupied. Retail at this location is 45.0% leased. The Verge received its final certificate of occupancy this past quarter. This is our third mixed-use project in the Anacostia waterfront submarket in Washington, DC.
• .408 Jackson is our second joint venture project in Greenville. Leasing began in the fourth quarter of 2022 with residential units 52.9% leased and 29.1% occupied at quarter end. Retail at this location is 100% leased and currently under construction and expected to open during the fourth quarter of this year. The building received its final certificate of occupancy this past quarter.
• Final vertical construction at the Hollander Business Park was completed in the quarter with delivery of 1941 62nd Street, a 101,750 square foot build-to-suit warehouse. Subsequent to quarter end, the park was fully leased and occupied.
• Grading permits for a 258,545 square-foot warehouse building on Chelsea Road in Aberdeen, Maryland were submitted to the governing agencies for approval. Subsequent to the end of the quarter, Harford County issued a moratorium on any future industrial development with the exception of projects that had already received preliminary site plan approval. Because this project qualified for the exception, it is not subject to the moratorium and can proceed as planned.  

Stabilized Joint Venture Segment:

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 $5,276,000, an increase of $216,000 versus $5,060,000 in the same period last year. The Maren’s revenue was $2,591,000 an increase of 7.5% and Dock 79 revenues increased $34,000 to $2,685,000 or 1.3%. Total operating profit in this segment was $804,000, an increase of $438,000 versus $366,000 in the same period last year. Pro-rata net operating income this quarter for this segment was $2,022,000, down $116,000 or 5.4% compared to the same quarter last year because of the sale of our 20% TIC interest in both properties to SIC, mitigated by $222,000 in NOI from our pro-rata share Riverside.

At the end of March, The Maren was 96.59% leased and 93.18% occupied. Average residential occupancy for the quarter was 95.54%, and 50% of expiring leases renewed with an average rent increase on renewals of 7.98%. 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 the quarter was 92.79%, and at the end of the quarter, Dock 79’s residential units were 92.46% leased and 93.44% occupied. This quarter, 65.12% of expiring leases renewed with an average rent increase on renewals of 4.52%. 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, South Carolina. At quarter end, the building was 96.5% leased with 95.0% occupancy. Average occupancy for the quarter was 94.42% with 55.17% of expiring leases renewing with an average rental increase of 11.40%. Riverside is a joint venture with Woodfield Development and the Company owns 40% of the venture.

Summary and Outlook

Royalty revenue for this quarter was up 35.35% over the same period last year. This marks the third year in a row we have begun the year with the best first quarter of revenue in segment history. It also marks the second quarter in a row with the highest revenue quarter for any period ever. Revenue for the last twelve months was $11,540,000, an increase of 20.51% over the same period last year. This is the first time we have achieved revenues in this segment surpassing $11 million in any twelve-month period.

In Stabilized Joint Ventures, both The Maren and Dock 79 enjoyed renewal rates in line with expectations (50.00% and 65.12% respectively) and strong increases in rents on those renewals (7.98% and 4.52% respectively). Pro-rata NOI is down for the segment, which is to be expected after selling 20% of our share to SIC. NOI for the two projects as a whole increased 5.3% compared to the same period last year ($3,302,000 vs $3,137,000).   Riverside in Greenville (which was added to this segment in the third quarter of last year) has maintained strong occupancy (94.42% this quarter) post stabilization. The renewal rate on expiring leases (55.17%) is in line with expectations, but the increase on renewals of 11.40% speaks to the attractiveness of the asset and the strength of this market. Our pro-rata share of NOI at Riverside this quarter was $222,000.

In our Asset Management Segment, overall leasing and occupancy increased compared to the same period last year leading to a 60.6% increase in Net Operating Income. We are currently 100% leased, and 91.4% occupied at our industrial assets. When the final tenant takes occupancy at 1841 62nd Street in the second quarter of 2023, we will be 100% leased and occupied at all 515,077 square feet of our industrial compared to 75.0% leased and 52.5% occupied on 413,327 square feet at the end of 2021.

We will continue to monitor how inflation and interest rates affect our plans moving forward. We have a long-term vision for the future of the Company, but we are not going to rush into anything if the cost of material and debt prevent us from making a reasonable risk adjusted return. As we mentioned in our shareholder letter, we have no plans to institute a major share buyback plan or special dividend, but if we feel like we can repurchase shares at a meaningful discount to net asset value, we will continue to nibble around the edges. We have excellent assets in place; our cash is generating a reasonable return; and we can afford to be patient about putting our plan in place.

Conference Call

The Company will host a conference call on Thursday, May 11, 2023 at 10:00 a.m. (EDT). Analysts, stockholders and other interested parties may access the teleconference live by calling 1- 800-245-3047 (passcode 57458) within the United States. International callers may dial 1-203-518-9783 (passcode 57548). Audio replay will be available until May 25, 2023 by dialing 1-888-566-0825 (no passcode required) within the United States. International callers may dial 1-402-220-0427. An audio replay will also be available on the Company’s investor relations page (https://www.frpdev.com/investor-relations/) following the 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 impact of the Covid-19 Pandemic on our operations and financial results; the possibility that we may be unable to find appropriate investment opportunities; 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. and Greenville, South Carolina; 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
		MARCH 31,
		2023				2022
Revenues:
Lease revenue		$	6,832				6,282
Mining lands lease revenue			3,282				2,425
Total revenues			10,114				8,707
Cost of operations:
Depreciation, depletion and amortization			2,780				2,898
Operating expenses			1,740				1,808
Property taxes			947				1,028
Management company indirect			839				774
Corporate expenses			954				835
Total cost of operations			7,260				7,343
Total operating profit			2,854				1,364
Net investment income			2,382				898
Interest expense			(1,006	)			(738	)
Equity in loss of joint ventures			(3,625	)			(1,604	)
Gain on sale of real estate			10				733
Income before income taxes			615				653
Provision for income taxes			209				249
Net income			406				404
Gain (loss) attributable to noncontrolling interest			(159	)			(268	)
Net income attributable to the Company		$	565				672
Earnings per common share:
Net income attributable to the Company-
Basic		$	0.06				0.07
Diluted		$	0.06				0.07
Number of shares (in thousands) used in computing:
-basic earnings per common share			9,416				9,366
-diluted earnings per common share			9,456				9,417

FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
		March 31				December 31
Assets:		2023				2022
Real estate investments at cost:
Land		$	141,578				141,579
Buildings and improvements			281,193				270,579
Projects under construction			2,663				12,208
Total investments in properties			425,434				424,366
Less accumulated depreciation and depletion			59,940				57,208
Net investments in properties			365,494				367,158
Real estate held for investment, at cost			10,298				10,182
Investments in joint ventures			144,677				140,525
Net real estate investments			520,469				517,865
Cash and cash equivalents			173,299				177,497
Cash held in escrow			585				797
Accounts receivable, net			1,333				1,166
Unrealized rents			937				856
Deferred costs			2,410				2,343
Other assets			566				560
Total assets		$	699,599				701,084
Liabilities:
Secured notes payable		$	178,594				178,557
Accounts payable and accrued liabilities			3,169				5,971
Other liabilities			1,886				1,886
Federal and state income taxes payable			313				18
Deferred revenue			201				259
Deferred income taxes			68,013				67,960
Deferred compensation			1,357				1,354
Tenant security deposits			881				868
Total liabilities			254,414				256,873
Commitments and contingencies
Equity:
Common stock, $.10 par value25,000,000 shares authorized,9,503,633 and 9,459,686 shares issuedand outstanding, respectively			950				946
Capital in excess of par value			66,281				65,158
Retained earnings			342,882				342,317
Accumulated other comprehensive income (loss), net			(902	)			(1,276	)
Total shareholders’ equity			409,211				407,145
Noncontrolling interest			35,974				37,066
Total equity			445,185				444,211
Total liabilities and equity		$	699,599				701,084

Asset Management Segment:

		Three months ended March 31
(dollars in thousands)		2023				%				2022				%				Change				%
Lease revenue		$	1,070				100.0	%			839				100.0	%			231				27.5	%
Depreciation, depletion and amortization			278				26.0	%			234				27.9	%			44				18.8	%
Operating expenses			141				13.2	%			168				20.0	%			(27	)			-16.1	%
Property taxes			60				5.6	%			53				6.3	%			7				13.2	%
Management company indirect			114				10.6	%			92				11.0	%			22				23.9	%
Corporate expense			182				17.0	%			144				17.2	%			38				26.4	%
Cost of operations			775				72.4	%			691				82.4	%			84				12.2	%
Operating profit		$	295				27.6	%			148				17.6	%			147				99.3	%

Mining Royalty Lands Segment:

		Three months ended March 31
(dollars in thousands)		2023				%				2022				%				Change				%
Mining lands lease revenue		$	3,282				100.0	%			2,425				100.0	%			857				35.3	%
Depreciation, depletion and amortization			183				5.6	%			55				2.3	%			128				232.7	%
Operating expenses			17				0.5	%			15				0.6	%			2				13.3	%
Property taxes			69				2.1	%			65				2.7	%			4				6.2	%
Management company indirect			116				3.5	%			107				4.4	%			9				8.4	%
Corporate expense			107				3.3	%			94				3.9	%			13				13.8	%
Cost of operations			492				15.0	%			336				13.9	%			156				46.4	%
Operating profit		$	2,790				85.0	%			2,089				86.1	%			701				33.6	%

Development Segment:

		Three months ended March 31
(dollars in thousands)		2023				2022				Change
Lease revenue		$	486				383				103
Depreciation, depletion and amortization			55				45				10
Operating expenses			94				211				(117	)
Property taxes			287				355				(68	)
Management company indirect			511				490				21
Corporate expense			574				521				53
Cost of operations			1,521				1,622				(101	)
Operating loss		$	(1,035	)			(1,239	)			204

Stabilized Joint Venture Segment:

		Three months ended March 31
(dollars in thousands)		2023				%				2022				%				Change				%
Lease revenue		$	5,276				100.0	%			5,060				100.0	%			216				4.3	%
Depreciation, depletion and amortization			2,264				42.9	%			2,564				50.7	%			(300	)			-11.7	%
Operating expenses			1,488				28.2	%			1,414				27.9	%			74				5.2	%
Property taxes			531				10.1	%			555				11.0	%			(24	)			-4.3	%
Management company indirect			98				1.9	%			85				1.7	%			13				15.3	%
Corporate expense			91				1.7	%			76				1.5	%			15				19.7	%
Cost of operations			4,472				84.8	%			4,694				92.8	%			(222	)			-4.7	%
Operating profit		$	804				15.2	%			366				7.2	%			438				119.7	%

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 analyses, 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 analysts 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.

Pro-rata Net Operating Income Reconciliation
Three months ended 03/31/23 (in thousands)
									Stabilized
	Asset								Joint				Mining				Unallocated				FRP
	Management				Development				Venture				Royalties				Corporate				Holdings
	Segment				Segment				Segment				Segment				Expenses				Totals
Net Income (loss)		215				(2,608	)			(255	)			2,034				1,020				406
Income Tax Allocation		80				(967	)			(36	)			754				378				209
Income (loss) before income taxes		295				(3,575	)			(291	)			2,788				1,398				615
Less:
Unrealized rents		82				—				—				48				—				130
Gain on sale of real estate		—				—				—				10				—				10
Interest income		—				972				—				—				1,410				2,382
Plus:
Unrealized rents		—				—				45				—				—				45
Equity in loss of Joint Ventures		—				3,512				101				12				—				3,625
Interest Expense		—				—				994				—				12				1,006
Depreciation/Amortization		278				55				2,264				183				—				2,780
Management Co. Indirect		114				511				98				116				—				839
Allocated Corporate Expenses		182				574				91				107				—				954
Net Operating Income (loss)		787				105				3,302				3,148				—				7,342
NOI of noncontrolling interest		—				—				(1,502	)			—				—				(1,502	)
Pro-rata NOI from unconsolidated joint ventures		—				926				222				—				—				1,148
Pro-rata net operating income	$	787				1,031				2,022				3,148				—				6,988

Pro-rata Net Operating Income Reconciliation
Three months ended 03/31/22 (in thousands)
									Stabilized
	Asset								Joint				Mining				Unallocated				FRP
	Management				Development				Venture				Royalties				Corporate				Holdings
	Segment				Segment				Segment				Segment				Expenses				Totals
Net Income (loss)		108				(1,541	)			(274	)			2,050				61				404
Income Tax Allocation		40				(572	)			(2	)			760				23				249
Income (loss) before income taxes		148				(2,113	)			(276	)			2,810				84				653
Less:
Unrealized rents		128				—				—				53				—				181
Gain on sale of real estate		—				—				—				733				—				733
Equity in gain of Joint Ventures		—				—				85				—				—				85
Interest income		—				803				—				—				95				898
Plus:
Unrealized rents		—				—				46				—				—				46
Equity in loss of Joint Ventures		—				1,677				—				12				—				1,689
Interest Expense		—				—				727				—				11				738
Depreciation/Amortization		234				45				2,564				55				—				2,898
Management Co. Indirect		92				490				85				107				—				774
Allocated Corporate Expenses		144				521				76				94				—				835
Net Operating Income (loss)		490				(183	)			3,137				2,292				—				5,736
NOI of noncontrolling interest		—				—				(999	)			—				—				(999	)
Pro-rata NOI from unconsolidated joint ventures		—				441				—				—				—				441
Pro-rata net operating income	$	490				258				2,138				2,292				—				5,178

 

Contact: 
John D. Baker III
Chief Financial Officer 
904/858-9100