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FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the First Quarter Ended March 31, 2024
Source: Nasdaq GlobeNewswire / 08 May 2024 16:50:37 America/New_York
JACKSONVILLE, Fla., May 08, 2024 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ-FRPH) —
First Quarter Highlights and Recent Developments
- 130% increase in Net Income ($1.3 million vs $565,000)
- 22% increase in pro-rata NOI ($8.53 million vs $6.99 million)
- 92% increase in the Multifamily segment’s NOI
- 36% increase in Industrial and Commercial revenue and 47% increase in that segment’s NOI
Executive Summary and Analysis
This quarter represented another meaningful step in the growth of this Company. The brisk pace at which we grew pro-rata NOI in 2023 continued into the first quarter of this year as we saw a 22% increase over the same period last year. The primary driver for this increase was our Multifamily Segment, due in part to the stabilization of .408 Jackson and Bryant Street. The addition of these two assets to this business segment, as well as the improved performance of Dock 79 and Maren drove the segment’s 92% increase in pro-rata NOI over the same period last year.
As we have communicated on a number of occasions recently, we have shifted our development focus primarily towards industrial projects. The returns are currently better than most multifamily projects, and are less capital intensive and less reliant on debt. Industrial development has always been our core competency and we are excited to flex that muscle in markets both familiar and new.
The Company is in predevelopment work to get shovel ready on two projects in Maryland: the first is on 170 acres of land in Cecil County, MD that can accommodate 900,000 square feet of industrial development; and the second is on 54 acres of land in Aberdeen, MD capable of supporting up to 650,000 square feet of industrial product. We expect both projects to be ready to go vertical in the next eighteen months. We are also underway on the construction of a $30 million, 259,200 square-foot spec warehouse project at our Chelsea site in Aberdeen, MD, which we plan to deliver in the third quarter of 2024.
Finally, this quarter, we entered into two separate joint venture agreements to develop industrial product in Florida. These projects represent our first industrial developments outside of the Mid-Atlantic. In entering Broward County and the I-4 corridor in Lakeland, we are expanding into two of the best growth markets in the United States. Our share of the industrial projects we have in development represents $191 million in capex, a portion which will be financed with debt. $27 million of that has been spent already, but we anticipate putting the remainder to use in the next two to three years if market conditions are right. We have underwritten these projects with a 6-7% NOI yield on cost.
First Quarter Consolidated Results of Operations
Net income for the first quarter of 2024 was $1,301,000 or $.07 per share versus $565,000 or $.03 per share in the same period last year. These earnings per share are adjusted to reflect the 2 for 1 stock split that was effective April 12, 2024. The first quarter of 2024 was impacted by the following items:
- Operating profit increased slightly as favorable results in Multifamily and Industrial and Commercial were offset by lower Mining royalties and higher Development Segment losses.
- Interest expense decreased $95,000 compared to the same quarter last year due to $127,000 more capitalized interest and increased costs related to our credit agreement. More interest was capitalized due to increased in-house and joint venture projects under development this quarter compared to last year.
- Interest income increased $401,000 due to an increase in interest earned on cash equivalents ($552,000), increased income from our lending ventures ($449,000), partially offset by decreased preferred interest ($600,000).
- Equity in loss of Joint Ventures decreased $606,000 primarily due to lease-up of The Verge.
First Quarter Segment Operating Results
Multifamily Segment:
Our Multifamily Segment consists of two consolidated joint ventures (Dock 79 and The Maren) and three unconsolidated joint ventures (Bryant Street, Riverside, and .408 Jackson). Riverside achieved stabilization in 2022 while the other two moved from our Development Segment to this segment upon stabilization as of the beginning of 2024.
Total revenues for our two consolidated joint ventures were $5,414,000, an increase of $138,000 versus $5,276,000 in the same period last year. Total operating profit in this segment was $1,212,000, an increase of $408,000, or 51% versus $804,000 in the same period last year.
For our three unconsolidated joint ventures pro-rata revenues were $3,713,000, an increase of $1,007,000 or 37% compared to $2,706,000 the same period last year. Pro-rata operating profit was $409,000, an increase of $199,000 or 95% versus $210,000 in the same period last year. For the purposes of these comparisons, results from the Development Segment for the three joint ventures stabilized at the beginning of 2024 are included in the same quarter last year.
Apartment Building Units Pro-rata
NOI
Q1 2024%
Occupied
3/31/24Avg.
Occupancy
Q1 2024Avg.
Occupancy
CY 2023Renewal
Success
Rate
Q1 2024Renewal
%
increase
Q1 2024Dock 79 Anacostia DC 305 $946,000 94.8% 94.8% 94.4% 71.1% 2.6% Maren Anacostia DC 264 924,000 95.1% 93.8% 95.6% 50.0% 2.5% Bryant Street DC 487 1,496,000 92.8% 93.0% 93.0% 56.5% 5.7% Riverside Greenville 200 224,000 94.0% 93.7% 94.5% 65.7% 1.6% .408 Jackson Greenville 227 293,000 94.7% 93.0% 59.9% 36.4% 3.5% Multifamily Segment 1,483 $3,883,000 94.1% 93.5% 87.7% The combined consolidated and unconsolidated pro-rata net operating income this quarter for this segment was $3,883,000, up $1,861,000 or 92% compared to $2,022,000 in the same quarter last year. During the same quarter last year, Bryant Street and .408 Jackson were in the Development segment and contributed $869,000 of pro-rata NOI.
Industrial and Commercial Segment:
Total revenues in this segment were $1,453,000, up $383,000 or 36%, over the same period last year. Operating profit was $562,000, up $267,000 or 91% from $295,000 in the same quarter last year. Revenues and operating profit are up because of full occupancy at 1841 62nd Street (which had only $11,000 of revenue in the same period last year) and the addition of 1941 62nd Street to this segment in March 2023. We now have nine buildings in service at three different locations totaling 515,077 square feet of industrial and 33,708 square feet of office. We were 95.6% leased and occupied during the entire quarter. Net operating income in this segment was $1,159,000, up $372,000 or 47% compared to the same quarter last year.
Mining Royalty Lands Segment:
Total revenues in this segment were $2,963,000, a decrease of $319,000 or 9.7% versus $3,282,000 in the same period last year. Royalty tons were down 14%. Total operating profit in this segment was $2,446,000, a decrease of $344,000 versus $2,790,000 in the same period last year. Net Operating Income this quarter for this segment was $2,760,000, down $388,000 or 12% compared to the same quarter last year. Among the reasons for this decrease is a shift in production off our land in Manassas and a decrease in production at our Ft. Myers quarry because of weather-related delays and slowdowns. There was also a large beach restoration project completed early last year from our Keuka location. This individual project accounted for over 82,000 tons in sales in the first quarter of last year and there was no need to repeat it this year. The primary reason for the decrease, however, is the deduction of royalties to resolve an $842,000 overpayment, as referenced in our 10-Q from the quarter ended June 30, 2023. Through a temporary amendment to our mining lease, the tenant deducted $289,000 in royalties otherwise due the Company this quarter. The outstanding balance on this overpayment is $335,000. Excluding that adjustment, royalties per ton increased 13%.
Development Segment:
With respect to ongoing Development Segment projects:
- We entered into two new joint venture agreements this quarter with BBX Logistics. The first joint venture is a 200,000 square-foot warehouse development project in Lakeland, FL, and the second joint venture is a 160,000 square-foot warehouse redevelopment project in Broward County, FL.
- Last summer we broke ground on a new speculative warehouse project in Aberdeen, MD on Chelsea Road. Vertical construction is underway. This Class A, 259,200 square foot building is due to be complete in the 4th quarter of 2024.
- Lease-up is nearing completion at The Verge. At quarter end, the building was 94.2% leased and 91.6% occupied. Retail at this location is 45.2% leased. This is our third mixed-use project in the Anacostia waterfront submarket in Washington, DC.
- We are the principal capital source for a residential development venture in Harford County, MD known as Aberdeen Overlook. The project includes 110 acres and 344 residential building lots. We have committed $31.1 million to the project with $23.1 million currently drawn. A national homebuilder is under contract to purchase all 222 townhomes and 122 single family dwelling lots. As of quarter-end 23 lots had been sold and $5.8 million of preferred interest and principal has been returned to the company.
Subsequent Event - Appointment of Officers
Subsequent to the end of the quarter, on May 8, 2024 the Board of Directors appointed John D. Baker III as Chief Executive Officer, David deVilliers III as Chief Operating Officer, and Matt McNulty as Chief Financial Officer and Treasurer. Mr. Baker III had previously served as the CFO and Treasurer of the Company and Mr. deVilliers III had served as its Executive Vice President. Prior to the spinoff of Patriot Transportation Holding, Inc. from FRP Holdings, Inc., Mr. McNulty had previously worked for the combined companies as its Director of Southern Lands. Post spinoff, Mr. McNulty was the CFO and COO of Patriot Transportation.
John D. Baker II will remain the Company’s Chairman of the Board of Directors. David deVilliers, Jr. will remain the Company’s President and Vice Chairman of the Board of Directors.
Conference Call
The Company will host a conference call on Thursday, May 9, 2024 at 10:00 a.m. (EDT). Analysts, stockholders and other interested parties may access the teleconference live by calling 1-877-876-9177 (passcode 62742) within the United States. International callers may dial 1-785-424-1672 (passcode 62742). Audio replay will be available until May 23, 2024 by dialing 1-888-567-0057 within the United States. International callers may dial 1-402-220-6960. No passcode needed. 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 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 residential apartment buildings.
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)THREE MONTHS ENDED MARCH 31, 2024 2023 Revenues: Lease revenue $ 7,170 6,832 Mining royalty and rents 2,963 3,282 Total revenues 10,133 10,114 Cost of operations: Depreciation, depletion and amortization 2,535 2,780 Operating expenses 1,867 1,740 Property taxes 807 947 General and administrative 2,042 1,793 Total cost of operations 7,251 7,260 Total operating profit 2,882 2,854 Net investment income 2,783 2,382 Interest expense (911 ) (1,006 ) Equity in loss of joint ventures (3,019 ) (3,625 ) Gain on sale of real estate — 10 Income before income taxes 1,735 615 Provision for income taxes 400 209 Net income 1,335 406 Income (loss) attributable to noncontrolling interest 34 (159 ) Net income attributable to the Company $ 1,301 565 Earnings per common share (1): Net income attributable to the Company- Basic $ 0.07 0.03 Diluted $ 0.07 0.03 Number of shares (in thousands) used in computing (1): -basic earnings per common share 18,859 18,832 -diluted earnings per common share 18,944 18,912
(1) adjusted for the 2 for 1 stock split that occurred in April 2024FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)March 31 December 31 Assets: 2024 2023 Real estate investments at cost: Land $ 141,602 141,602 Buildings and improvements 282,780 282,631 Projects under construction 16,730 10,845 Total investments in properties 441,112 435,078 Less accumulated depreciation and depletion 70,241 67,758 Net investments in properties 370,871 367,320 Real estate held for investment, at cost 10,832 10,662 Investments in joint ventures 164,271 166,066 Net real estate investments 545,974 544,048 Cash and cash equivalents 152,484 157,555 Cash held in escrow 655 860 Accounts receivable, net 1,397 1,046 Federal and state income taxes receivable — 337 Unrealized rents 1,770 1,640 Deferred costs 2,798 3,091 Other assets 595 589 Total assets $ 705,673 709,166 Liabilities: Secured notes payable $ 178,742 178,705 Accounts payable and accrued liabilities 3,829 8,333 Other liabilities 1,487 1,487 Federal and state income taxes payable 60 — Deferred revenue 920 925 Deferred income taxes 69,456 69,456 Deferred compensation 1,423 1,409 Tenant security deposits 885 875 Total liabilities 256,802 261,190 Commitments and contingencies Equity: Common stock, $.10 par value
25,000,000 shares authorized,
19,000,600 and 18,968,448 shares issued
and outstanding, respectively1,900 1,897 Capital in excess of par value 67,023 66,706 Retained earnings 347,183 345,882 Accumulated other comprehensive income, net 27 35 Total shareholders’ equity 416,133 414,520 Noncontrolling interest 32,738 33,456 Total equity 448,871 447,976 Total liabilities and equity $ 705,673 709,166 Multifamily Segment (Consolidated): Three months ended March 31 (dollars in thousands) 2024 % 2023 % Change % Lease revenue $ 5,414 100.0 % 5,276 100.0 % 138 2.6 % Depreciation, depletion and amortization 1,981 36.6 % 2,264 42.9 % (283 ) -12.5 % Operating expenses 1,461 27.0 % 1,488 28.2 % (27 ) -1.8 % Property taxes 524 9.7 % 531 10.1 % (7 ) -1.3 % General and administrative 236 4.3 % 189 3.6 % 47 24.9 % Cost of operations 4,202 77.6 % 4,472 84.8 % (270 ) -6.0 % Operating profit $ 1,212 22.4 % 804 15.2 % 408 50.7 % Multifamily Segment (Pro-rata Unconsolidated): Three months ended March 31 (dollars in thousands) 2024 % 2023 % Change % Lease revenue $ 3,713 100.0 % 2,706 100.0 % 1,007 37.2 % Depreciation, depletion and amortization 1,562 42.1 % 1,265 46.7 % 297 23.5 % Operating expenses 1,281 34.5 % 1,056 39.0 % 225 21.3 % Property taxes 461 12.4 % 175 6.5 % 286 163.4 % Cost of operations 3,304 89.0 % 2,496 92.2 % 808 32.4 % Operating profit $ 409 11.0 % 210 7.8 % 199 94.8 % Industrial and Commercial Segment: Three months ended March 31 (dollars in thousands) 2024 % 2023 % Change % Lease revenue $ 1,453 100.0 % 1,070 100.0 % 383 35.8 % Depreciation, depletion and amortization 363 25.0 % 278 26.0 % 85 30.6 % Operating expenses 215 14.8 % 141 13.2 % 74 52.5 % Property taxes 63 4.3 % 60 5.6 % 3 5.0 % General and administrative 250 17.2 % 296 27.6 % (46 ) -15.5 % Cost of operations 891 61.3 % 775 72.4 % 116 15.0 % Operating profit $ 562 38.7 % 295 27.6 % 267 90.5 % Mining Royalty Lands Segment: Three months ended March 31 (dollars in thousands) 2024 % 2023 % Change % Mining royalty and rent revenue $ 2,963 100.0 % 3,282 100.0 % (319 ) -9.7 % Depreciation, depletion and amortization 149 5.0 % 183 5.6 % (34 ) -18.6 % Operating expenses 17 0.6 % 17 0.5 % — — Property taxes 73 2.4 % 69 2.1 % 4 5.8 % General and administrative 278 9.4 % 223 6.8 % 55 24.7 % Cost of operations 517 17.4 % 492 15.0 % 25 5.1 % Operating profit $ 2,446 82.6 % 2,790 85.0 % (344 ) -12.3 % Development Segment: Three months ended March 31 (dollars in thousands) 2024 2023 Change Lease revenue $ 303 486 (183 ) Depreciation, depletion and amortization 42 55 (13 ) Operating expenses 174 94 80 Property taxes 147 287 (140 ) General and administrative 1,278 1,085 193 Cost of operations 1,641 1,521 120 Operating loss $ (1,338 ) (1,035 ) (303 ) 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 03/31/24 (in thousands) Industrial and Mining Unallocated FRP Commercial Development Multifamily Royalties Corporate Holdings Segment Segment Segment Segment Expenses Totals Net income (loss) $ 430 (1,186 ) (1,254 ) 1,862 1,483 1,335 Income tax allocation 132 (364 ) (396 ) 572 456 400 Income (loss) before income taxes 562 (1,550 ) (1,650 ) 2,434 1,939 1,735 Less: Unrealized rents 16 — 9 113 — 138 Interest income — 802 — — 1,981 2,783 Plus: Professional fees — — 12 — — 12 Equity in loss of joint ventures — 1,014 1,993 12 — 3,019 Interest expense — — 869 — 42 911 Depreciation/amortization 363 42 1,981 149 — 2,535 General and administrative 250 1,278 236 278 — 2,042 Net operating income (loss) 1,159 (18 ) 3,432 2,760 — 7,333 NOI of noncontrolling interest — — (1,562 ) — — (1,562 ) Pro-rata NOI from unconsolidated joint ventures — 750 2,013 — — 2,763 Pro-rata net operating income $ 1,159 732 3,883 2,760 — 8,534 Pro-rata Net Operating Income Reconciliation Three months ended 03/31/23 (in thousands) Industrial and Mining Unallocated FRP Commercial Development Multifamily 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 General and administrative 296 1,085 189 223 — 1,793 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 The following tables detail the Development and Multifamily Segment pro-rata NOI by project:
Development Segment: FRP Bryant BC FRP .408 The Total Three months ended Portfolio Street Realty, LLC Jackson Verge Pro-rata NOI 3/31/2024 $ (18 ) — 144 — 606 732 3/31/2023 $ 104 1,255 80 (22 ) (386 ) 1,031 Multifamily Segment: Dock .408 Bryant Total Three months ended 79 The Maren Riverside Jackson Street Pro-rata NOI 3/31/2024 $ 946 924 224 293 1,496 3,883 3/31/2023 $ 887 913 222 — — 2,022 
