FRP HOLDINGS, INC./NEWS
Contact: John D. Milton, Jr.
Chief Financial Officer 904/858-9100
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FRP HOLDINGS, INC. (NASDAQ: FRPH) ANNOUNCES RESULTS FOR THE SECOND QUARTER AND
SIX MONTHS ENDED JUNE 30, 2018.
FRP Holdings, Inc. (NASDAQ-FRPH) Jacksonville, Florida; August 2, 2018 -
Second Quarter Consolidated Results of Operations.
As previously announced on May 21, 2018, the Company completed the disposition
of 40 industrial warehouse properties and three additional land parcels to an
affiliate of Blackstone Real Estate Partners VIII, L.P. for $347.2 million.
One warehouse property valued at $11.7 million was excluded from the sale due
to the tenant exercising its right of first refusal to purchase the property.
These properties comprised substantially all the assets of our Asset Management
segment and have been reclassified as discontinued operations for all periods
presented. As of the end of the quarter, cash was $311 million, and we are
currently exploring options to reinvest these proceeds into opportunities more
in line with our other business segments.
Net income for the second quarter of 2018 was $119,982,000 or $11.87 per share
versus $1,713,000 or $.17 per share in the same period last year. Income from
discontinued operations for the second quarter of 2018 was $120,465,000 or
$11.92 per share versus $1,588,000 or $.16 per share in the same period last
year. Loss from continuing operations for the quarter of $879,000 included
$1,085,000 in stock compensation expense ($682,800 for the 2018 director stock
grant and $402,000 for vesting of option grants from 2016 and 2017 due to the
asset disposition).
Total revenues were $5,553,000, up 104.2%, versus the same period last year,
primarily because of the addition of rental revenues from Dock 79 when its
results were consolidated starting in July 2017.
In April, construction began on Phase II of our RiverFront on the Anacostia
project, which we expect to deliver in the first or second quarter of 2020.
Second Quarter Segment Operating Results.
Asset Management Segment:
------------------------
Most of the Asset Management Segment was reclassified to discontinued
operations leaving only three office buildings. Total revenues in this segment
were $568,000, up $15,000 or 2.7%, over the same period last year. Operating
profit was $149,000, down $62,000 compared to the same quarter last year due
to an $82,000 increase in corporate expense allocation.
Mining Royalty Lands Segment:
----------------------------
Total revenues in this segment were $2,055,000 versus $1,833,000 in the same
period last year. Total operating profit in this segment was $1,866,000, an
increase of $193,000 versus $1,673,000 in the same period last year.
Land Development and Construction Segment:
-----------------------------------------
The Land Development and Construction 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."
* We began construction in the third quarter of last year on our joint
venture with St. John Properties and expect to complete construction
of the first phase of this project in the third quarter of 2018.
This first phase will comprise four single-story buildings totaling
100,000 square feet of office and retail space.
* We are the financial backer of a residential development in Essexshire
now known as "Hyde Park." This project will hold 125 town homes and
4 single family lots and is currently in the entitlement process.
* This quarter we began construction on a 95,000-square foot spec
building at Hollander Business Park. This Class "A" facility will be
our first building with a 32-foot clear and should come on line in the
second quarter of 2019.
* As mentioned previously, in April of this past quarter, 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.
RiverFront on the Anacostia Segment:
-----------------------------------
Average occupancy for the quarter was 95.0% and at the end of the second
quarter, Dock 79 was 95.1% leased and 97.4% occupied. During the second
quarter, 58.0% of expiring leases renewed with an average increase in rent of
4.5%. Both figures exceeded our budgeted expectations. Dock 79 is a joint
venture between the Company and MidAtlantic Realty Partners, in which FRP
Holdings, Inc. is the majority partner with 66% ownership.
Six Months Consolidated Results of Operations.
Net income for first half of 2018 was $121,542,000 or $12.04 per share versus
$3,156,000 or $.32 per share in the same period last year. Income from
discontinued operations for the first half of 2018 was $122,187,000 or $12.10
per share versus $3,384,000 or $.34 per share in the same period last year.
Loss from continuing operations for the period of $1,572,000 included
$1,085,000 in stock compensation expense ($682,800 for the 2018 director
stock grant and $402,000 for vesting of option grants from 2016 and 2017 due
to the asset disposition).
Total revenues were $10,628,000, up 98.5%, versus the same period last year,
primarily because of the addition of rental revenues from Dock 79 when its
results were consolidated starting in July 2017.
Six Months Segment Operating Results.
Asset Management Segment:
------------------------
Total revenues in this segment were $1,149,000, down $2,000 or .2%, over the
same period last year. Operating profit of $395,000 was down $36,000 compared
to the same quarter last year due primarily to an increase of $21,000 in
corporate expense allocation.
Mining Royalty Lands Segment:
----------------------------
Total revenues in this segment were $3,827,000 versus $3,595,000 in the same
period last year. Total operating profit in this segment was $3,407,000, an
increase of $175,000 versus $3,232,000 in the same period last year.
RiverFront on the Anacostia Segment:
-----------------------------------
Average occupancy for the first six months was 94.7% and at the end of the
second quarter, Dock 79 was 95.1% leased and 97.4% occupied. Through the first
half of the year, 60.2% of expiring leases renewed with an average increase in
rent of 3.6%. Both figures exceeded our budgeted expectations. Dock 79 is a
joint venture between the Company and MidAtlantic Realty Partners, in which
FRP Holdings, Inc. is the majority partner with 66% ownership.
Summary and Outlook.
The last three months were huge for this company. Mining Royalty revenue was up
the second straight quarter. Dock 79 continues to exceed our lofty expectations
making us all the more excited for 2020 and the arrival of its younger sibling,
"The Maren." The development of our remaining lots commenced with the start of
construction of our first 32-foot clear building at Hollander Business Park.
However, all of that is secondary in importance to the significance of the sale
of our industrial real estate portfolio, which closed the book on nearly three
decades of hard work and value creation by our team in Baltimore and raises the
question of what comes next. The problem of what to do with the proceeds is a
good one to have, but a problem nonetheless. Selling when one believes
valuations are at their peak also means having to deploy the proceeds when
valuations are at their peak, which obviously we are loath to do. As mentioned
previously, we are currently looking for opportunities more in line with our
other business segments, but that does not mean we are going to let this money
"burn a hole in our pocket." Being opportunistic means being disciplined in our
approach, remaining patient rather than pressing. If that means letting the
cash earn interest for a few quarters, that is what we are prepared to do. We
are not going to wait forever to put this money to work, but this sale and its
proceeds are too important an opportunity to waste, and as stewards of your
capital, we are taking this moment very seriously.
Conference Call.
The Company will also host a conference call on Thursday, August 2, 2018 at
2:00 p.m. (EDT). Analysts, stockholders and other interested parties may
access the teleconference live by calling 1-800-311-9406 (passcode 16794705)
within the United States. International callers may dial 1-334-323-7224
(passcode 16794705). 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/frp080218. For the archived audio via
the internet, click on the following link
http://archive.conferenceamerica.com/archivestream/frp080218.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 81414237. 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 the Sale Transaction may adversely affect our
remaining business; 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) mining royalty land ownership and leasing, (ii) land acquisition,
entitlement and development primarily for future warehouse/office or
residential building construction, (iii) ownership, leasing, and management
of a residential apartment building, and (iv) warehouse/office building
ownership, leasing and management.
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2018 2017 2018 2017
------ ------ ------ ------
Revenues:
Rental revenue $ 3,350 750 6,497 1,507
Mining Royalty and rents 2,033 1,809 3,783 3,548
Revenue - reimbursements 170 160 348 299
--------- ------ ------- ------
Total Revenues 5,553 2,719 10,628 5,354
Cost of operations:
Depreciation, depletion
and amortization 2,131 273 4,529 499
Operating expenses 1,103 207 1,968 437
Property taxes 611 376 1,286 737
Management company indirect 455 307 816 611
Corporate expenses 1,709 566 2,388 1,893
--------- ------ ------- ------
Total cost of operations 6,009 1,729 10,987 4,177
Total operating profit (loss) (456) 990 (359) 1,177
Interest income 216 - 221 -
Interest expense (807) - (1,650) -
Equity in loss of
joint ventures (11) (806) (23) (1,577)
--------- ------ ------- ------
Income (loss) before
income taxes (1,058) 184 (1,811) (400)
Provision for (benefit
from) income taxes (179) 59 (239) (172)
--------- ------ ------- ------
Income (loss) from
continuing operations (879) 125 (1,572) (228)
Income from discontinued
operations, net 120,465 1,588 122,187 3,384
Net income 119,586 1,713 120,615 3,156
Loss attributable to
noncontrolling interest (396) - (927) -
--------- ------ ------- ------
Net income attributable
to the Company $ 119,982 1,713 121,542 3,156
========= ====== ======= ======
Earnings per common share:
Income (loss) from
continuing operations-
Basic $ (0.09) 0.01 (0.16) (0.02)
Diluted $ (0.09) 0.01 (0.16) (0.02)
Discontinued operations-
Basic $ 12.01 0.16 12.19 0.34
Diluted $ 11.92 0.16 12.10 0.34
Net income attributable
to the Company-
Basic $ 11.96 0.17 12.13 0.32
Diluted $ 11.87 0.17 12.04 0.32
Number of shares (in
thousands) used in computing:
-basic earnings
per common share 10,033 9,965 10,024 9,948
-diluted earnings
per common share 10,109 10,038 10,099 10,019
FRP HOLDINGS, INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
June 30 December 31
2018 2017
----------- -----------
Assets:
Real estate investments at cost:
Land $ 83,709 87,235
Buildings and improvements 146,580 147,670
Projects under construction 2,028 1,764
----------- -----------
Total investments in properties 232,317 236,669
Less accumulated depreciation and depletion 28,446 26,755
----------- -----------
Net investments in properties 203,871 209,914
----------- -----------
Real estate held for investment, at cost 7,176 7,176
Investments in joint ventures 22,616 13,406
----------- -----------
Net real estate investments 233,663 230,496
----------- -----------
Cash and cash equivalents 32,849 4,524
Cash held in escrow 278,573 333
Accounts receivable, net 648 615
Federal and state income taxes receivable - 2,962
Unrealized rents 595 223
Deferred costs 1,228 2,708
Other assets 178 179
Assets of discontinued operations 2,210 176,694
----------- -----------
Total assets $ 549,944 418,734
=========== ===========
Liabilities:
Secured notes payable, current portion $ - 125
Secured notes payable, less current portion 88,720 90,029
Accounts payable and accrued liabilities 3,072 2,081
Environmental remediation liability 1,807 2,037
Federal and state income taxes payable 728 -
Deferred revenue 26 107
Deferred income taxes 21,254 25,982
Deferred compensation 1,455 1,457
Tenant security deposits 47 54
Liabilities of discontinued operations 46,456 32,280
----------- -----------
Total liabilities 163,565 154,152
=========== ===========
Commitments and contingencies (Note 8)
Equity:
Common stock, $.10 par value
25,000,000 shares authorized,
10,046,019 and 10,014,667 shares issued
and outstanding, respectively 1,005 1,001
Capital in excess of par value 57,324 55,636
Retained earnings 308,397 186,855
Accumulated other comprehensive income, net 38 38
----------- -----------
Total shareholders' equity 366,764 243,530
Noncontrolling interest MRP 19,615 21,052
----------- -----------
Total equity 386,379 264,582
----------- -----------
Total liabilities and shareholders' equity $ 549,944 418,734
=========== ===========
FRP HOLDINGS, INC. AND SUBSIDIARIES
DISCONTINUED OPERATIONS
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2018 2017 2018 2017
------ ------ ------ ------
Revenues:
Rental revenue $ 3,394 5,472 9,412 10,998
Revenue - reimbursements 716 1,169 2,245 2,330
--------- ------ ------- ------
Total Revenues 4,110 6,641 11,657 13,328
Cost of operations:
Depreciation, depletion
and amortization 1,217 1,929 3,102 3,762
Operating expenses 464 795 1,642 1,566
Property taxes 449 753 1,247 1,454
Management company indirect 812 168 990 333
Corporate expenses 655 - 1,402 -
--------- ------ ------- ------
Total cost of operations 3,597 3,645 8,383 7,115
Total operating profit 513 2,996 3,274 6,213
Interest expense (187) (371) (587) (619)
Gain on sale of buildings 164,807 - 164,807 -
--------- ------ ------- ------
Income before income taxes 165,133 2,625 167,494 5,594
Provision for income taxes 44,668 1,037 45,307 2,210
--------- ------ ------- ------
Income from
discontinued operations $ 120,465 1,588 122,187 3,384
========= ====== ======= ======
Earnings per common share:
Income (loss) from
discontinued operations-
Basic $ 12.01 0.16 12.19 0.34
Diluted $ 11.92 0.16 12.10 0.34
Asset Management Segment:
------------------------
Three months ended June 30
---------------------------------------
(dollars in thousands) 2018 % 2017 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 546 96.1% 536 96.9% 10 1.9%
Revenue-reimbursements 22 3.9% 17 3.1% 5 29.4%
-------- ------- -------- ------- -------- -------
Total revenue 568 100.0% 553 100.0% 15 2.7%
Depreciation, depletion and amortization 129 22.7% 128 23.1% 1 0.8%
Operating expenses 91 16.0% 128 23.1% (37) -28.9%
Property taxes 40 7.1% 35 6.3% 5 14.3%
Management company indirect 50 8.8% 24 4.4% 26 108.3%
Corporate expense 109 19.2% 27 4.9% 82 303.7%
-------- ------- -------- ------- -------- -------
Cost of operations 419 73.8% 342 61.8% 77 22.5%
-------- ------- -------- ------- -------- -------
Operating profit $ 149 26.2% 211 38.2% (62) -29.4%
======== ======= ======== ======= ======== =======
Mining Royalty Lands Segment:
----------------------------
Three months ended June 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Mining Royalty and rents $ 2,033 98.9% 1,809 98.7%
Revenue-reimbursements 22 1.1% 24 1.3%
-------- ------- -------- -------
Total revenue 2,055 100.0% 1,833 100.0%
Depreciation, depletion and amortization 36 1.8% 35 1.9%
Operating expenses 40 1.9% 39 2.1%
Property taxes 61 3.0% 58 3.2%
Corporate expense 52 2.5% 28 1.5%
-------- ------- -------- -------
Cost of operations 189 9.2% 160 8.7%
-------- ------- -------- -------
Operating profit $ 1,866 90.8% 1,673 91.3%
======== ======= ======== =======
Land Development and Construction Segment:
-----------------------------------------
Three months ended June 30
--------------------------------------
(dollars in thousands) 2018 2017 Change
-------- -------- --------
Rental revenue $ 214 214 -
Revenue-reimbursements 103 119 (16)
-------- -------- --------
Total revenue 317 333 (16)
Depreciation, depletion and amortization 57 110 (53)
Operating expenses 367 40 327
Property taxes 231 283 (52)
Management company indirect 292 283 9
Corporate expense 283 217 66
-------- -------- --------
Cost of operations 1,230 933 297
-------- -------- --------
Operating loss $ (913) (600) (313)
======== ======== ========
Dock 79 Segment:
---------------
Three months ended June 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Rental revenue $ 2,590 99.1% - -%
Revenue-reimbursements 23 0.9% - -%
-------- ------- -------- -------
Total revenue 2,613 100.0% - -%
Depreciation and amortization 1,909 73.1% - -%
Operating expenses 605 23.1% - -%
Property taxes 279 10.7% - -%
Management company indirect 113 4.3% -
Corporate expense 95 3.6% - -%
-------- ------- -------- -------
Cost of operations 3,001 114.8% - -%
-------- ------- -------- -------
Operating profit $ (388) -14.8% $ - -%
======== ======= ======== =======
Asset Management Segment:
------------------------
Six months ended June 30
---------------------------------------
(dollars in thousands) 2018 % 2017 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 1,099 95.6% 1,113 96.7% (14) -1.3%
Revenue-reimbursements 50 4.4% 38 3.3% 12 31.6%
-------- ------- -------- ------- -------- -------
Total revenue 1,149 100.0% 1,151 100.0% (2) -0.2%
Depreciation, depletion and amortization 260 22.6% 260 22.6% - 0.0%
Operating expenses 229 19.9% 252 21.9% (23) -9.1%
Property taxes 79 6.9% 71 6.2% 8 11.3%
Management company indirect 74 6.5% 46 4.0% 28 60.9%
Corporate expense 112 9.7% 91 7.9% 21 23.1%
-------- ------- -------- ------- -------- -------
Cost of operations 754 65.6% 720 62.6% 34 4.7%
-------- ------- -------- ------- -------- -------
Operating profit $ 395 34.4% 431 37.4% (36) -8.4%
======== ======= ======== ======= ======== =======
Mining Royalty Lands Segment:
----------------------------
Six months ended June 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Mining Royalty and rents $ 3,783 98.9% 3,548 98.7%
Revenue-reimbursements 44 1.1% 47 1.3%
-------- ------- -------- -------
Total revenue 3,827 100.0% 3,595 100.0%
Depreciation, depletion and amortization 90 2.4% 74 2.1%
Operating expenses 80 2.1% 78 2.2%
Property taxes 121 3.2% 117 3.2%
Corporate expense 129 3.3% 94 2.6%
-------- ------- -------- -------
Cost of operations 420 11.0% 363 10.1%
-------- ------- -------- -------
Operating profit $ 3,407 89.0% 3,232 89.9%
======== ======= ======== =======
Land Development and Construction Segment:
-----------------------------------------
Six months ended June 30
--------------------------------------
(dollars in thousands) 2018 2017 Change
-------- -------- --------
Rental revenue $ 395 394 1
Revenue-reimbursements 219 214 5
-------- -------- --------
Total revenue 614 608 6
Depreciation, depletion and amortization 114 165 (51)
Operating expenses 475 107 368
Property taxes 499 549 (50)
Management company indirect 533 565 (32)
Corporate expense 702 725 (23)
-------- -------- --------
Cost of operations 2,323 2,111 212
-------- -------- --------
Operating loss $ (1,709) (1,503) (206)
======== ======== ========
Dock 79 Segment:
---------------
Six months ended June 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Rental revenue $ 5,003 99.3% - -%
Revenue-reimbursements 35 0.7% - -%
-------- ------- -------- -------
Total revenue 5,038 100.0% - -%
Depreciation and amortization 4,065 80.7% - -%
Operating expenses 1,184 23.5% - -%
Property taxes 587 11.7% - -%
Management company indirect 209 4.1% -
Corporate expense 237 4.7% - -%
-------- ------- -------- -------
Cost of operations 6,282 124.7% - -%
-------- ------- -------- -------
Operating profit $ (1,244) -24.7% $ - -%
======== ======= ======== =======