FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the First Quarter Ended March 31, 2024

Published

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 BuildingUnitsPro-rataNOI Q1 2024%Occupied3/31/24Avg.OccupancyQ1 2024Avg.OccupancyCY 2023RenewalSuccessRateQ1 2024Renewal%increaseQ1 2024
        
Dock 79 Anacostia DC305 $946,000 94.8% 94.8% 94.4% 71.1% 2.6% 
Maren Anacostia DC264 924,000 95.1% 93.8% 95.6% 50.0% 2.5% 
Bryant Street DC487 1,496,000 92.8% 93.0% 93.0% 56.5% 5.7% 
Riverside Greenville200 224,000 94.0% 93.7% 94.5% 65.7% 1.6% 
.408 Jackson Greenville227 293,000 94.7% 93.0% 59.9% 36.4% 3.5% 
             
Multifamily Segment1,483 $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 2024

     
FRP HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED 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 value25,000,000 shares authorized,19,000,600 and 18,968,448 shares issuedand outstanding, respectively  1,900   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 

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Source: FRP Holdings, Inc.

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