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CST: 15/09/2019 21:27:26   

FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the First Quarter Ended March 31, 2019

132 Days ago

JACKSONVILLE, Fla., May 06, 2019 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ-FRPH)

First Quarter Consolidated Results of Operations

Net income for the first quarter of 2019 was $1,898,000 or $.19 per share versus $1,560,000 or $.15 per share in the same period last year.  Income from discontinued operations for the first quarter of 2019 was $86,000 or $.01 per share versus $1,722,000 or $.17 per share in the same period last year.

First Quarter Segment Operating Results

Asset Management Segment:

Most of the Asset Management Segment was reclassified to discontinued operations leaving only three commercial properties and one recent industrial acquisition, Cranberry Run, which we purchased this quarter for $6,411,000.  Cranberry Run is a five-building industrial park in Harford County, MD totaling 268,010 square feet of industrial/ flex space.  The park is currently 26% leased and occupied, and 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.  This past quarter, we entered into a Purchase and Sale Agreement to sell 7030 Dorsey Road in Anne Arundel County, one of the three commercial properties remaining from the asset sale last May, for $8,823,000.  The study period for the purchaser expired April 15, 2019 and we expect to close in the second quarter of 2019.  Total revenues in this segment were $641,000, up $60,000 or 10.3%, over the same period last year.  Operating loss was ($66,000), down $322,000 compared to the same quarter last year due to higher allocation of corporate expenses and operating losses associated with the Cranberry Run acquisition.

Mining Royalty Lands Segment:

Total revenues in this segment were $2,229,000 versus $1,772,000 in the same period last year.  Total operating profit in this segment was $2,001,000, an increase of $460,000 versus $1,541,000 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:

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.”  This past quarter, Hampstead Overlook received non-appealable rezoning from industrial to residential. 
  • We finished shell construction in December 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.  Phase I is currently 44% leased.
  • 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 4 single family lots and received a non-appealable Plan Approval this past quarter.  We are now in the process of obtaining record plat and construction drawing approval as well as seeking proposals from residential home builders. 
  • During the second quarter of 2018, we began construction on a 94,350-square foot spec building at Hollander Business Park.  This Class “A” facility is our first building with a 32-foot clear.  Shell construction was completed subsequent to the end of the quarter and we are now in the process of leasing up the building.
  • In April, 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.   

Stabilized Joint Venture Segment:

Average occupancy for the quarter was 93.49%, and at the end of the quarter Dock 79 was 94.75% leased and 93.11% occupied.  During the first quarter, 61.70% of expiring leases renewed with an average increase in rent of 3.14%.  Net Operating Income for this segment was $1,630,679, up $145,282 or 9.78% 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.

Summary and Outlook 

We began this year a very different company than we were at the start of 2018.  The asset sale of nearly a year ago has dramatically reshaped the landscape of our business and our direction forward.  The disposition of over 40 buildings, the infrastructure required to support it, and the cash we retained from that disposition has shifted our focus towards development as the number of ongoing projects in our development segment demonstrates.  Despite or maybe because of the lack of consensus regarding economic forecasts, indicators, and the volatility of markets, we believe we are in an enviable financial position given our current liquidity.  Though we, like any other company, would stand to benefit from the rising tide of this nearly unprecedented stretch of economic growth, the cash and investments on our balance sheet allow us to play defense and protect our assets should a downturn present itself as our projects are coming online, while also allowing us to play offense should that same downturn create opportunities to grow our business segments via attractively priced acquisitions.  It is because we prize this liquidity so much, that we remain steadfast in our commitment to redeploy these proceeds as carefully as we possibly can.  The substantial amount of dry powder retained from the sale affords this company an amazing opportunity that we are loath to squander.  We have some of the best assets in the business segments in which we compete, as demonstrated by another amazing quarter from our mining royalties segment and the continued ability to grow rents at Dock 79, and we will not make any further investments unless they fall in line with the quality of assets and opportunities of your company as it is situated presently.  This past quarter we repurchased 35,932 shares at an average cost of $47.71 per share.

Conference Call

The Company will also host a conference call on Monday, May 6, 2019 at 2:00 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/frp050619.  For the archived audio via the internet, click on the following link http://archive.conferenceamerica.com/archivestream/frp050619.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 54972211.  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.

Contact: John D. Milton, Jr.  
  Chief Financial Officer 904/858-9100


FRP HOLDINGS, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)

    THREE MONTHS ENDED
    MARCH 31,
    2019   2018
Revenues:        
Lease revenue   $ 3,485       3,303  
Mining lands lease revenue     2,229       1,772  
Total Revenues     5,714       5,075  
                 
Cost of operations:                
Depreciation, depletion and amortization     1,487       2,398  
Operating expenses     882       865  
Property taxes     753       675  
Management company indirect     592       361  
Corporate expenses      645       679  
Total cost of operations     4,359       4,978  
                 
Total operating profit     1,355       97  
                 
Net investment income, including realized gains of $119 and $0     1,810       5  
Interest expense     (588 )     (843 )
Equity in loss of joint ventures     (264 )     (12 )
                 
Income (loss) from continuing operations before income taxes     2,313       (753 )
Provision for (benefit from) income taxes     672       (60 )
Income (loss) from continuing operations     1,641       (693 )
                 
Income from discontinued operations, net of tax     86       1,722  
                 
Net income     1,727       1,029  
Income (loss) attributable to noncontrolling interest     (171 )     (531 )
Net income attributable to the Company   $ 1,898       1,560  
                 
Earnings per common share:                
Income (loss) from continuing operations-                
Basic   $ 0.16       (0.07 )
Diluted   $ 0.16       (0.07 )
Discontinued operations-                
Basic   $ 0.01       0.17  
Diluted   $ 0.01       0.17  
Net income attributable to the Company-                
Basic   $ 0.19       0.16  
Diluted   $ 0.19       0.15  
                 
Number of shares (in thousands) used in computing:                
-basic earnings per common share     9,952       10,015  
-diluted earnings per common share     9,996       10,085  
                 

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

    March 31   December 31
Assets:   2019   2018
Real estate investments at cost:                
Land   $ 85,072       83,721  
Buildings and improvements     149,505       144,543  
Projects under construction     7,086       6,683  
Total investments in properties     241,663       234,947  
Less accumulated depreciation and depletion     29,847       28,394  
Net investments in properties     211,816       206,553  
                 
Real estate held for investment, at cost     7,167       7,167  
Investments in joint ventures     94,294       88,884  
Net real estate investments     313,277       302,604  
                 
Cash and cash equivalents     29,641       22,547  
Cash held in escrow     185       202  
Accounts receivable, net     688       564  
Investments available for sale at fair value     148,778       165,212  
Federal and state income taxes receivable     8,349       9,854  
Unrealized rents     665       53  
Deferred costs     990       773  
Other assets     459       455  
Assets of discontinued operations     3,091       3,224  
Total assets   $ 506,123       505,488  
                 
Liabilities:                
Secured notes payable   $ 88,823       88,789  
Accounts payable and accrued liabilities     1,851       3,545  
Environmental remediation liability     100       100  
Deferred revenue     831       27  
Deferred income taxes     27,981       27,981  
Deferred compensation     1,448       1,450  
Tenant security deposits     244       53  
Liabilities of discontinued operations     243       288  
Total liabilities     121,521       122,233  
                 
Commitments and contingencies                
                 
Equity:                
Common stock, $.10 par value 25,000,000 shares authorized, 9,933,242 and 9,969,174 shares issued and outstanding, respectively     993       997  
Capital in excess of par value     57,824       58,004  
Retained earnings     306,704       306,307  
Accumulated other comprehensive income, net     859       (701 )
Total shareholders’ equity     366,380       364,607  
Noncontrolling interest MRP     18,222       18,648  
Total equity     384,602       383,255  
Total liabilities and shareholders’ equity   $ 506,123       505,488  
                 

Asset Management Segment:

    Three months ended March 31        
(dollars in thousands)   2019   %   2018   %   Change   %
                         
Lease revenue   $ 641       100.0 %     581       100.0 %     60       10.3 %
                                                 
Depreciation, depletion and amortization     177       27.6 %     131       22.6 %     46       35.1 %
Operating expenses     209       32.6 %     128       22.0 %     81       63.3 %
Property taxes     56       8.8 %     39       6.7 %     17       43.6 %
Management company indirect     102       15.9 %     24       4.1 %     78       325.0 %
Corporate expense     163       25.4 %     3       0.5 %     160       5333.3 %
                                                 
Cost of operations     707       110.3 %     325       55.9 %     382       117.5 %
                                                 
Operating profit   $ (66 )     -10.3 %     256       44.1 %     (322 )     -125.8 %
                                                 

Mining Royalty Lands Segment:

    Three months ended March 31        
(dollars in thousands)   2019   %   2018   %   Change   %
                         
Mining lands lease revenue   $ 2,229       100.0 %     1,772       100.0 %     457       25.8 %
                                                 
Depreciation, depletion and amortization     52       2.3 %     54       3.0 %     (2 )     -3.7 %
Operating expenses     16       0.7 %     40       2.3 %     (24 )     -60.0 %
Property taxes     68       3.1 %     60       3.4 %     8       13.3 %
Management company indirect     49       2.2 %           0.0 %     49       0.0 %
Corporate expense     43       1.9 %     77       4.3 %     (34 )     -44.2 %
                                                 
Cost of operations     228       10.2 %     231       13.0 %     (3 )     -1.3 %
                                                 
Operating profit   $ 2,001       89.8 %     1,541       87.0 %     460       29.9 %
                                                 

Development Segment :

    Three months ended March 31
(dollars in thousands)   2019   2018   Change
             
Lease revenue   $ 269       297       (28 )
                         
Depreciation, depletion and amortization     58       57       1  
Operating expenses     46       118       (72 )
Property taxes     323       268       55  
Management company indirect     395       241       154  
Corporate expense     399       419       (20 )
                         
Cost of operations     1,221       1,103       118  
                         
Operating loss   $ (952 )     (806 )     (146 )
                         

Stabilized Joint Venture Segment:

    Three months ended March 31        
(dollars in thousands)   2019   %   2018   %   Change   %
                         
Lease revenue   $ 2,575       100.0 %     2,425       100.0 %     150       6.2 %
                                                 
Depreciation, depletion and amortization     1,200       46.6 %     2,156       88.9 %     (956 )     -44.3 %
Operating expenses     611       23.7 %     579       23.9 %     32       5.5 %
Property taxes     306       11.9 %     308       12.7 %     (2 )     -0.6 %
Management company indirect     46       1.8 %     96       3.9 %     (50 )     -52.1 %
Corporate expense     40       1.6 %     142       5.9 %     (102 )     -71.8 %
                                                 
Cost of operations     2,203       85.6 %     3,281       135.3 %     (1,078 )     -32.9 %
                                                 
Operating profit   $ 372       14.4 %     (856 )     -35.3 %     1,228       -143.5 %
                                                 

FRP HOLDINGS, INC. AND SUBSIDIARIES
     DISCONTINUED OPERATIONS
(In thousands except per share amounts)
(Unaudited)

    THREE MONTHS ENDED
    MARCH 31,
    2019   2018
         
Lease revenue     238       7,547  
                 
Cost of operations:                
Depreciation, depletion and amortization     29       1,885  
Operating expenses     95       1,178  
Property taxes     20       798  
Management company indirect           178  
Corporate expenses           747  
Total cost of operations     144       4,786  
                 
Total operating profit     94       2,761  
                 
Interest expense           (400 )
Gain on sale of buildings     23        
                 
Income before income taxes     117       2,361  
Provision for income taxes     31       639  
                 
Income from discontinued operations     86       1,722  
                 
Earnings per common share:                
Income from discontinued operations-                
Basic     0.01       0.17  
Diluted     0.01       0.17  
                 

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                      
Three months ended 03/31/19 (in thousands)                      
  Asset       Stabilized   Mining   Unallocated   FRP
          Joint            
  Management   Development   Venture   Royalties   Corporate   Holdings
  Segment   Segment   Segment   Segment   Expenses   Totals
Income (loss) from continuing operations   (48 )     (716 )     (196 )     1,452       1,149       1,641  
Income Tax Allocation   (18 )     (266 )     (9 )     539       426       672  
Income (loss) from continuing operations before income taxes   (66 )     (982 )     (205 )     1,991       1,575       2,313  
                                               
Less:                                              
Unrealized rents   3             28                   31  
Interest income         224                   1,586       1,810  
Plus:                                              
Unrealized rents                     122             122  
Equity in loss of Joint Venture         254             10             264  
Interest Expense               577             11       588  
Depreciation/Amortization   177       58       1,200       52             1,487  
Management Co. Indirect   102       395       46       49             592  
Allocated Corporate Expenses   163       399       40       43             645  
                                               
Net Operating Income   373       (100 )     1,630       2,267             4,170  
                                               


Net Operating Income Reconciliation                      
Three months ended 03/31/18 (in thousands)                      
  Asset       Stabilized   Mining   Unallocated   FRP
          Joint            
  Management   Development   Venture   Royalties   Corporate   Holdings
  Segment   Segment   Segment   Segment   Expenses   Totals
Income (loss) from continuing operations   187       (584 )     (1,383 )     1,115       (28 )     (693 )
Income Tax Allocation   69       (217 )     (316 )     414       (10 )     (60 )
Income (loss) from continuing operations before income taxes   256       (801 )     (1,699 )     1,529       (38 )     (753 )
                                               
Less:                                              
Unrealized rents               52                   52  
Other income         5                         5  
Plus:                                              
Unrealized rents   20                   119             139  
Equity in loss of Joint Venture                     12             12  
Interest Expense               843                   843  
Depreciation/Amortization   131       57       2,156       54             2,398  
Management Co. Indirect   24       241       96                   361  
Allocated Corporate Expenses   3       419       142       77       38       679  
                                               
Net Operating Income   434       (89 )     1,486       1,791             3,622  

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