FRP HOLDINGS, INC./NEWS
Contact: John D. Milton, Jr.
Chief Financial Officer 904/858-9100
------------------------------------------------------------------------------
FRP HOLDINGS, INC. (NASDAQ: FRPH) ANNOUNCES RESULTS FOR THE THIRD QUARTER AND
NINE MONTHS ENDED SEPTEMBER 30, 2018
FRP Holdings, Inc. (NASDAQ-FRPH) Jacksonville, Florida; November 7, 2018 -
Third Quarter Consolidated Results of Operations
Net income for the third quarter of 2018 was $2,224,000 or $.22 per share
versus $25,391,000 or $2.52 per share in the same period last year. Loss from
discontinued operations for the third quarter of 2018 was $78,000 or $.01 per
share versus income from discontinued operations of $1,585,000 or $.16 per
share in the same period last year. The third quarter of 2017 included a gain
on remeasurement of investment of $60.2 million in the Company's Dock 79 real
estate partnership as a result of the asset's stabilization and the ensuing
change in control of the partnership for accounting purposes. This change in
control brought with it this substantial and non-taxable gain. The gain is
based on the difference between the carrying value and the fair value of all
assets and liabilities in the partnership and is included in Income from
continuing operations before income taxes. An affiliate of Blackstone Real
Estate Group has the option to purchase the Company's last remaining
warehouse property at 1502 Quarry Drive for $11.7 million if the current
tenant fails to properly exercise its right of first refusal. The Company
currently is seeking a court determination that the tenant has failed to
exercise its right of first refusal.
Third 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 $9,000 or 1.6%, over the same period last
year. Operating profit was $242,000, up $20,000 compared to the same
quarter last year.
Mining Royalty Lands Segment:
----------------------------
Total revenues in this segment were $2,125,000 versus $1,786,000 in the
same period last year. Total operating profit in this segment was $1,933,000,
an increase of $296,000 versus $1,637,000 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 by the end of the year. This first phase
will comprise four single-story buildings totaling 100,000 square feet
of office and retail space.
* We are the principal capital source of a residential development venture
in Essexshire now 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.
This project will hold 125 town homes and 4 single family lots and is
currently in the entitlement process.
* Last quarter, we began construction on a 94,350-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.
* 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.
* During this quarter, the Company signed a Letter of Intent on several
contiguous parcels in Baltimore that we intend to develop into industrial
real estate. The parcels total 300 acres and are capable of supporting
1.8 million square feet of industrial product.
* At the end of this quarter, the Company signed a Letter of Intent to
enter 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
plans to contribute to the joint venture $35 million in common equity
and another $20-25 million in preferred equity.
RiverFront on the Anacostia Segment:
-----------------------------------
Average occupancy for the quarter was 95.8% and at the end of the third
quarter, Dock 79 was 94.4% leased and 93.8% occupied. During the third quarter,
50.0% of expiring leases renewed with an average increase in rent of 2.62%.
Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings,
Inc. is the majority partner with 66% ownership.
Nine Months Consolidated Results of Operations
Net income for first nine months of 2018 was $123,766,000 or $12.24 per share
versus $28,547,000 or $2.84 per share in the same period last year. Income from
discontinued operations for the first nine months of 2018 was $122,109,000 or
$12.08 per share versus $4,969,000 or $.50 per share in the same period last
year. The third quarter of 2017 included a gain on remeasurement of investment
of $60.2 million in the Company's Dock 79 real estate partnership as a result
of the asset's stabilization and the ensuing change in control of the
partnership for accounting purposes. This change in control brought with it
this substantial and non-taxable gain. The gain is based on the difference
between the carrying value and the fair value of all assets and liabilities
in the partnership and is included in Income from continuing operations before
income taxes.
Total revenues were $16,370,000, up 57.6%, 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.
Nine Months Segment Operating Results
Asset Management Segment:
------------------------
Total revenues in this segment were $1,717,000, up $7,000 or .4%, over the
same period last year. Operating profit of $637,000 was down $16,000 compared
to the same quarter last year due primarily to an increase of $28,000 in
corporate expense allocation.
Mining Royalty Lands Segment:
----------------------------
Total revenues in this segment were $5,952,000 versus $5,381,000 in the same
period last year. Total operating profit in this segment was $5,340,000, an
increase of $471,000 versus $4,869,000 in the same period last year.
RiverFront on the Anacostia Segment:
-----------------------------------
Average occupancy for the first nine months was 94.8% and at the end of the
third quarter, Dock 79 was 94.4% leased and 93.8% occupied. Through the first
nine months of the year, 56.1% of expiring leases renewed with an average
increase in rent of 3.27%. 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
In light of all that happened last quarter, the last three months were bound
to be quiet by comparison. They were not, however, uneventful. The proximity
of Dock 79 to the site of the baseball's midsummer classic and its surrounding
festivities generated tremendous business for our restaurant tenants. It also
directly exposed the building to thousands of potential new tenants, as well
as the more than eight million people who tuned in to see the game. Mining
royalty revenue is up for the third straight quarter and more impressive is
the fact that this is the most revenue this segment has generated through the
first nine months of any year ever. We have a Letter of Intent on several
contiguous parcels of land that we intend to develop into 300,000 square-foot
warehouses. These parcels total over 300 acres and their purchase via a like-
kind exchange will defer the payment of several million dollars of taxes.
Perhaps most interestingly, as mentioned above, we have a Letter of Intent
with MRP for the first phase of a development in northeast DC along the Metro.
The development is in what is known as an "Opportunity Zone" and will defer
and possibly reduce a significant tax liability for the Company. This will
represent a very serious investment into what we and our partners believe is
the ground floor of the next great area for development in our nation's
capital. Finally, we are trying to remain good stewards of your proceeds from
last quarter's asset sale. We have laddered out the bonds we purchased to a
maximum of only two years in order to preserve liquidity and mitigate the
opportunity cost of rising interest rates. More importantly, we are searching
for ways that make sense to put your money to work - which is to say in
investments where we feel we can add value or where there is still room to
grow. That means partnering with people like MRP to find the next great
neighborhood in DC or developing raw land in Baltimore for an underserved
industrial asset class. It also means remaining patient until markets and
asset prices cool off a bit. At the risk of repeating ourselves, it does us
no good to sell at the top of the market if only to turn around and reinvest
at the same peak. Again, we will not wait forever to return these proceeds to
you whether in the form of new investments or as a dividend. However, we will
be disciplined, and we will be patient before we make any decision regarding
this money. It is too good an opportunity to squander.
Conference Call
The Company will also host a conference call on Wednesday, November 7, 2018 at
1:00 p.m. (EST). 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/frp110718. For the
archived audio via the internet, click on the following link
http://archive.conferenceamerica.com/archivestream/frp110718.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 50154474. 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) 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2018 2017 2018 2017
------ ------ ------ ------
Revenues:
Rental revenue $ 3,440 3,102 9,937 4,609
Mining Royalty and rents 2,102 1,763 5,885 5,311
Revenue - reimbursements 200 170 548 469
--------- ------ ------- ------
Total Revenues 5,742 5,035 16,370 10,389
Cost of operations:
Depreciation, depletion
and amortization 1,821 2,804 6,350 3,303
Operating expenses 983 875 2,951 1,312
Environmental remediation
recovery (465) - (465) -
Property taxes 663 647 1,949 1,384
Management company indirect 550 351 1,366 962
Corporate expenses
(Note 4 Related Party) 522 617 2,910 2,510
--------- ------ ------- ------
Total cost of operations 4,074 5,294 15,061 9,471
Total operating profit (loss) 1,668 (259) 1,309 918
Interest income 1,654 - 1,875 -
Interest expense (768) (783) (2,418) (783)
Equity in loss of joint ventures (13) (12) (36) (1,589)
Gain on remeasurement of
investment in real
estate partnership - 60,196 - 60,196
Loss on investment land sold (3) - (3) -
--------- ------ ------- ------
Income before income taxes 2,538 59,142 727 58,742
Provision for income taxes 508 15,543 269 15,371
--------- ------ ------- ------
Income from continuing
operations 2,030 43,599 458 43,371
Income (loss) from
discontinued operations, net (78) 1,585 122,109 4,969
--------- ------ ------- ------
Net income 1,952 45,184 122,567 48,340
Gain (loss) attributable
to noncontrolling interest (272) 19,793 (1,199) 19,793
--------- ------ ------- ------
Net income attributable
to the Company $ 2,224 25,391 123,766 28,547
========= ====== ======= ======
Earnings per common share:
Income (loss) from
continuing operations-
Basic $ 0.20 4.36 0.05 4.35
Diluted $ 0.20 4.33 0.05 4.32
Discontinued operations-
Basic $ (0.01) 0.16 12.17 0.50
Diluted $ (0.01) 0.16 12.08 0.50
Net income attributable
to the Company-
Basic $ 0.22 2.54 12.33 2.86
Diluted $ 0.22 2.52 12.24 2.84
Number of shares (in
thousands) used in computing:
-basic earnings
per common share 10,062 10,004 10,037 9,967
-diluted earnings
per common share 10,135 10,066 10,110 10,035
FRP HOLDINGS, INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
September 30 December 31
2018 2017
------------ ------------
Assets:
Real estate investments at cost:
Land $ 83,721 87,235
Buildings and improvements 146,632 147,670
Projects under construction 6,131 1,764
------------ ------------
Total investments in properties 236,484 236,669
Less accumulated depreciation and depletion 29,772 26,755
------------ ------------
Net investments in properties 206,712 209,914
------------ ------------
Real estate held for investment, at cost 7,176 7,176
Investments in joint ventures 25,090 13,406
------------ ------------
Net real estate investments 238,978 230,496
------------ ------------
Cash and cash equivalents 34,782 4,524
Cash held in escrow 34,270 333
Accounts receivable, net 738 615
Investments available for sale 191,288 -
Federal and state income taxes receivable 2,022 2,962
Unrealized rents 594 223
Deferred costs 942 2,708
Other assets 451 179
Assets of discontinued operations 3,194 176,694
------------ ------------
Total assets $ 507,259 418,734
============ ============
Liabilities:
Secured notes payable, current portion $ - 125
Secured notes payable, less current portion 88,755 90,029
Accounts payable and accrued liabilities 2,829 2,081
Environmental remediation liability 100 2,037
Federal and state income taxes payable - -
Deferred revenue 32 107
Deferred income taxes 23,795 25,982
Deferred compensation 1,452 1,457
Tenant security deposits 53 54
Liabilities of discontinued operations 1,872 32,280
------------ ------------
Total liabilities 118,888 154,152
============ ============
Commitments and contingencies (Note 8)
Equity:
Common stock, $.10 par value
25,000,000 shares authorized,
10,076 524 and 10,014,667 shares issued
and outstanding, respectively 1,008 1,001
Capital in excess of par value 58,030 55,636
Retained earnings 310,620 186,855
Accumulated other comprehensive
income (loss), net (375) 38
------------ ------------
Total shareholders' equity 369,283 243,530
Noncontrolling interest MRP 19,088 21,052
------------ ------------
Total equity 388,371 264,582
------------ ------------
Total liabilities and shareholders' equity $ 507,259 418,734
============ ============
Asset Management Segment:
------------------------
Three months ended September 30
---------------------------------------
(dollars in thousands) 2018 % 2017 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 544 95.8% 538 96.2% 6 1.1%
Revenue-reimbursements 24 4.2% 21 3.8% 3 14.3%
-------- ------- -------- ------- -------- -------
Total revenue 568 100.0% 559 100.0% 9 1.6%
Depreciation, depletion and amortization 145 25.5% 125 22.4% 20 16.0%
Operating expenses 106 18.7% 119 21.3% (13) -10.9%
Property taxes 43 7.6% 38 6.8% 5 13.2%
Management company indirect (2) -.4% 28 5.0% (30) -107.1%
Corporate expense 34 6.0% 27 4.8% 7 25.9%
-------- ------- -------- ------- -------- -------
Cost of operations 326 57.4% 337 60.3% (11) -3.3%
-------- ------- -------- ------- -------- -------
Operating profit $ 242 42.6% 222 39.7% 20 9.0%
======== ======= ======== ======= ======== =======
Mining Royalty Lands Segment:
----------------------------
Three months ended September 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Mining Royalty and rents $ 2,102 98.9% 1,763 98.7%
Revenue-reimbursements 23 1.1% 23 1.3%
-------- ------- -------- -------
Total revenue 2,125 100.0% 1,786 100.0%
Depreciation, depletion and amortization 55 2.6% 17 .9%
Operating expenses 48 2.2% 43 2.4%
Property taxes 61 2.9% 59 3.3%
Corporate expense 28 1.3% 30 1.7%
-------- ------- -------- -------
Cost of operations 192 9.0% 149 8.3%
-------- ------- -------- -------
Operating profit $ 1,933 91.0% 1,637 91.7%
======== ======= ======== =======
Land Development and Construction Segment:
-----------------------------------------
Three months ended September 30
--------------------------------------
(dollars in thousands) 2018 2017 Change
-------- -------- --------
Rental revenue $ 214 207 7
Revenue-reimbursements 116 116 -
-------- -------- --------
Total revenue 330 323 7
Depreciation, depletion and amortization 57 98 (41)
Operating expenses 143 52 91
Environmental remediation recovery (465) - (465)
Property taxes 269 282 (13)
Management company indirect 465 281 184
Corporate expense 408 210 198
-------- -------- --------
Cost of operations 877 923 (46)
-------- -------- --------
Operating loss $ (547) (600) 53
======== ======== ========
Dock 79 Segment:
---------------
Three months ended September 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Rental revenue $ 2,682 98.6% 2,357 99.6%
Revenue-reimbursements 37 1.4% 10 .4%
-------- ------- -------- -------
Total revenue 2,719 100.0% 2,367 100.0%
Depreciation and amortization 1,564 57.5% 2,564 108.3%
Operating expenses 686 25.2% 661 27.9%
Property taxes 290 10.7% 268 11.3%
Management company indirect 87 3.2% 42 1.8%
Corporate expense 52 1.9% 27 1.2%
-------- ------- -------- -------
Cost of operations 2,679 98.5% 3,562 150.5%
-------- ------- -------- -------
Operating profit $ 40 1.5% $ (1,195) -50.5%
======== ======= ======== =======
Asset Management Segment:
------------------------
Nine months ended September 30
---------------------------------------
(dollars in thousands) 2018 % 2017 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 1,643 95.7% 1,651 96.5% (8) -0.5%
Revenue-reimbursements 74 4.3% 59 3.5% 15 25.4%
-------- ------- -------- ------- -------- -------
Total revenue 1,717 100.0% 1,710 100.0% 7 0.4%
Depreciation, depletion and amortization 405 23.6% 385 22.5% 20 5.2%
Operating expenses 335 19.5% 371 21.7% (36) -9.7%
Property taxes 122 7.1% 109 6.4% 13 11.9%
Management company indirect 72 4.2% 74 4.3% (2) -2.7%
Corporate expense 146 8.5% 118 6.9% 28 23.7%
-------- ------- -------- ------- -------- -------
Cost of operations 1,080 62.9% 1,057 61.8% 23 2.2%
-------- ------- -------- ------- -------- -------
Operating profit $ 637 37.1% 653 38.2% (16) -2.5%
======== ======= ======== ======= ======== =======
Mining Royalty Lands Segment:
----------------------------
Nine months ended September 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Mining Royalty and rents $ 5,885 98.9% 5,311 98.7%
Revenue-reimbursements 67 1.1% 70 1.3%
-------- ------- -------- -------
Total revenue 5,952 100.0% 5,381 100.0%
Depreciation, depletion and amortization 145 2.4% 91 1.7%
Operating expenses 128 2.2% 121 2.2%
Property taxes 182 3.1% 176 3.3%
Corporate expense 157 2.6% 124 2.3%
-------- ------- -------- -------
Cost of operations 612 10.3% 512 9.5%
-------- ------- -------- -------
Operating profit $ 5,340 89.7% 4,869 90.5%
======== ======= ======== =======
Land Development and Construction Segment:
-----------------------------------------
Nine months ended September30
--------------------------------------
(dollars in thousands) 2018 2017 Change
-------- -------- --------
Rental revenue $ 609 601 8
Revenue-reimbursements 335 330 5
-------- -------- --------
Total revenue 944 931 13
Depreciation, depletion and amortization 171 263 (92)
Operating expenses 618 159 459
Environmental remediation recovery (465) - (465)
Property taxes 768 831 (63)
Management company indirect 998 846 152
Corporate expense 1,110 935 175
-------- -------- --------
Cost of operations 3,200 3,034 166
-------- ------- --------
Operating loss $ (2,256) (2,103) (153)
======== ======== ========
Dock 79 Segment:
---------------
Nine months ended September 30
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Rental revenue $ 7,685 99.1% 2,357 99.6%
Revenue-reimbursements 72 0.9% 10 .4%
-------- ------- -------- -------
Total revenue 7,757 100.0% 2,367 100.0%
Depreciation and amortization 5,629 72.6% 2,564 108.3%
Operating expenses 1,870 24.1% 661 27.9%
Property taxes 877 11.3% 268 11.3%
Management company indirect 296 3.8% 42 1.8%
Corporate expense 289 3.7% 27 1.2%
-------- ------- -------- -------
Cost of operations 8,961 115.5% 3,562 150.5%
-------- ------- -------- -------
Operating profit $ (1,204) -15.5% $ (1,195) -50.5%
======== ======= ======== =======
FRP HOLDINGS, INC. AND SUBSIDIARIES
DISCONTINUED OPERATIONS
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2018 2017 2018 2017
------ ------ ------ ------
Revenues:
Rental revenue $ 190 5,636 9,602 16,634
Revenue - reimbursements 29 1,383 2,274 3,713
--------- ------ ------- ------
Total Revenues 219 7,019 11,876 20,347
Cost of operations:
Depreciation, depletion
and amortization 29 1,965 3,131 5,727
Operating expenses 52 1,004 1,694 2,570
Property taxes 19 754 1,266 2,208
Management company indirect 370 209 1,360 542
Corporate expenses 56 - 1,458 -
--------- ------ ------- ------
Total cost of operations 526 3,932 8,909 11,047
Total operating profit (loss) (307) 3,087 2,967 9,300
Interest expense - (468) (587) (1,087)
Gain on sale of buildings 200 - 165,007 -
--------- ------ ------- ------
Income (loss) before
income taxes (107) 2,619 167,387 8,213
Provision for (benefit
from) income taxes (29) 1,034 45,278 3,244
--------- ------ ------- ------
Income (loss) from
discontinued operations $ (78) 1,585 122,109 4,969
========= ====== ======= ======
Earnings per common share:
Income (loss) from
discontinued operations-
Basic $ (0.01) 0.16 12.17 0.50
Diluted $ (0.01) 0.16 12.08 0.50