FRPH FRP Holdings Inc

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-rataNOI Q1 2024			%Occupied3/31/24		Avg.OccupancyQ1 2024		Avg.OccupancyCY 2023		RenewalSuccessRateQ1 2024		Renewal%increaseQ1 2024
Dock 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 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