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 FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2018
FRP Holdings, Inc. (NASDAQ-FRPH) Jacksonville, Florida; March 7, 2019 -
Fourth Quarter Consolidated Results of Operations
Net income for the fourth quarter of 2018 was $706,000 or $.07 per share
versus $13,203,000 or $1.31 per share in the same period last year. Income
from discontinued operations for the fourth quarter of 2018 was $20,000 or
$.00 per share versus $6,034,000 or $.60 per share in the same period last
year. The fourth quarter of 2017 included a reduction of $12,043,000, or
$1.20 per share, in the provision for income taxes resulting from revaluing
the Company's net deferred tax liabilities per the Tax Cuts and Jobs Act of
2017. This positively impacted net income by the same amount.
The fourth quarter of 2018 was impacted by the following items:
* Interest income is reduced by a $905,000 realized loss on the sale
of bonds during the quarter.
* Corporate expense includes $372,000 for the annual director stock
grant and $100,000 for stock options granted to employees.
* Operating expenses includes $218,000 professional fees related to
organization of the Bryant St. joint venture.
* Operating expenses include $276,000 in due diligence costs on the
CSX Fort Smallwood potential purchase.
* Interest income includes the $81,000 preferred return on The Maren.
* Loss on joint ventures includes $64,000 for our share of the loss.
The fourth quarter of 2017 included consulting fees of $200,000 charged to
discontinued operations.
Fourth 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 $592,000, up $18,000 or 3.1%, over the same period last year.
Operating profit was $261,000, up $33,000 compared to the same quarter last
year due to lower allocation of corporate expenses.
Mining Royalty Lands Segment:
----------------------------
Total revenues in this segment were $2,187,000 versus $1,860,000 in the same
period last year. Total operating profit in this segment was $1,950,000, an
increase of $254,000 versus $1,696,000 in the same period last year.
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."
* We finished shell construction this past quarter 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 subsequent to the end of the year in January. We are now
in the process of leasing these 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 from sale. This project will hold 125 town homes and 4
single family lots and is currently in the entitlement process.
* 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 will be our first building with a 32-foot clear and
should come on line in the second quarter of 2019.
* 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.
Stabilized Joint Venture Segment:
--------------------------------
Average occupancy for the quarter was 94.63%, and at the end of the fourth
quarter Dock 79 was 96.39% leased and 95.08% occupied. During the fourth
quarter, 65.57% of expiring leases renewed with an average increase in rent
of 3.36%. Dock 79 is a joint venture between the Company and MRP, in which
FRP Holdings, Inc. is the majority partner with 66% ownership.
Calendar Year 2018 Consolidated Results of Operations
Net income for 2018 was $124,472,000 or $12.32 per share versus $41,750,000
or $4.16 per share in the same period last year. Income from discontinued
operations for 2018 was $122,129,000 or $12.09 per share versus $11,003,000
or $1.10 per share in the same period last year. Interest income was reduced
by realized losses on bond and bond fund sales of $1,195,000 in 2018. Calendar
year 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. Calendar year 2017 also included a gain of $12,043,000, or
$1.20 per share, due to a reduction in the provision for income taxes
resulting from revaluing the Company's net deferred tax liabilities per the
Tax Cuts and Jobs Act of 2017.
Total revenues were $22,022,000, up 41.1%, 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.
Calendar Year 2018 Segment Operating Results
Asset Management Segment:
------------------------
Total revenues in this segment were $2,309,000, up $25,000 or 1.1%, over the
same period last year. Operating profit of $898,000 was up $17,000 compared
to the same period last year.
Mining Royalty Lands Segment:
----------------------------
Total revenues in this segment were $8,139,000 versus $7,241,000 in the same
period last year. Total operating profit in this segment was $7,290,000, an
increase of $725,000 versus $6,565,000 in the same period last year.
Stabilized Joint Venture Segment:
--------------------------------
Average occupancy for 2018 was 94.77%, and at the end of 2018 Dock 79 was
96.39% leased and 95.08% occupied. Through calendar year 2018, 58.40% of
expiring leases renewed with an average increase in rent of 3.29%. 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
2018 was among the more important years in the history of this company.
Our mining royalty segment had its biggest year ever in terms of both revenue
and operating profit; we broke ground on The Maren, Phase II of RiverFront on
the Anacostia; and we entered an incredibly important joint venture with MRP
in our Bryant Street Project. But without a doubt, the most important event
was the sale of our industrial real estate portfolio. This asset sale provides
us with substantial liquidity heading into a period of economic uncertainty
when liquidity may be at a premium. At the very least, it gives us the very
enviable problem of what to do with a substantial amount of money. We have
said before that because we believe that we sold at the top, we are not
anxious to turn around and reinvest at the top. Though we believe there are
still some investment opportunities out there right now that make financial
sense--Bryant Street is an excellent example--we would like to hold on to most
of the cash until asset prices cool off and the economic future becomes a
little clearer.
We end the year a very different company than we started, and yet a number
of things remain the same--we still have some of the best assets in the
businesses we are involved in and our management team remains committed to
maximizing the value of your investment. Central to both those issues is how
we decide to redeploy the proceeds of the warehouse sale, so please, at the
risk of repeating ourselves, rest assured that we will not squander this
opportunity.
Conference Call
The Company will also host a conference call on Thursday, March 7, 2019 at
1:00 p.m. (EST). 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/frp030719.
For the archived audio via the internet, click on the following link
http://archive.conferenceamerica.com/archivestream/frp030719.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 15511787. 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, (ii) real property acquisition, entitlement, development and
construction primarily for apartment, retail, warehouse, and office,
(iv) leasing and management of a residential apartment building.
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31
2018 2017 2018 2017
---- ---- ---- ----
Revenues:
Rental revenue $ 3,282 3,206 13,219 7,815
Mining Royalty and rents 2,165 1,842 8,050 7,153
Revenue - reimbursements 205 165 753 634
------ ------ ------ ------
Total Revenues 5,652 5,213 22,022 15,602
Cost of operations:
Depreciation, depletion
and amortization 1,548 2,631 7,898 5,934
Operating expenses 1,334 824 4,285 2,136
Environmental
remediation recovery - - (465) -
Property taxes 676 632 2,625 2,016
Management company indirect 399 333 1,765 1,295
Corporate expenses
(Note 4 Related Party) 1,042 670 3,952 3,180
------ ------ ------ ------
Total cost of operations 4,999 5,090 20,060 14,561
Total operating profit 653 123 1,962 1,041
Net investment income,
including realized losses 797 - 2,672 -
Interest expense (685) (1,958) (3,103) (2,741)
Equity in loss of joint ventures (52) (9) (88) (1,598)
Gain on remeasurement of
investment in real estate
partnership - - - 60,196
Gain on investment land sold 43 - 40 -
------ ------ ------ ------
Income (loss) before income
taxes 756 (1,844) 1,483 56,898
Provision for (benefit from)
income taxes 255 (8,021) 524 7,350
------ ------ ------ ------
Income from continuing
operations 501 6,177 959 49,548
Income from discontinued
operations, net of tax 20 6,034 122,129 11,003
------ ------ ------ ------
Net income 521 12,211 123,088 60,551
Gain (loss) attributable
to noncontrolling interest (185) (992) (1,384) 18,801
------ ------ ------ ------
Net income attributable
to the Company $ 706 13,203 124,472 41,750
====== ====== ====== ======
Earnings per common share:
Income from continuing
operations-
Basic $ 0.05 0.62 0.10 4.97
Diluted $ 0.05 0.61 0.09 4.94
Discontinued operations-
Basic $ 0.00 0.60 12.16 1.10
Diluted $ 0.00 0.60 12.09 1.10
Net income attributable
to the Company-
Basic $ 0.07 1.32 12.40 4.19
Diluted $ 0.07 1.31 12.32 4.16
Number of shares (in
thousands) used in computing:
-basic earnings per
common share 10,049 10,011 10,040 9,975
-diluted earnings per
common share 10,094 10,070 10,105 10,040
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
December 31 December 31
2018 2017
----------- -----------
Assets:
Real estate investments at cost:
Land $ 83,721 87,235
Buildings and improvements 144,543 147,670
Projects under construction 6,683 1,764
----------- -----------
Total investments in properties 234,947 236,669
Less accumulated depreciation and depletion 28,394 26,755
----------- -----------
Net investments in properties 206,553 209,914
----------- -----------
Real estate held for investment, at cost 7,167 7,176
Investments in joint ventures 88,884 13,406
----------- -----------
Net real estate investments 302,604 230,496
----------- -----------
Cash and cash equivalents 22,547 4,524
Cash held in escrow 202 333
Accounts receivable, net 564 615
Investments available for sale at fair value 165,212 -
Federal and state income taxes receivable 9,854 2,962
Unrealized rents 53 223
Deferred costs 773 2,708
Other assets 455 179
Assets of discontinued operations 3,224 176,694
----------- -----------
Total assets $ 505,488 418,734
=========== ===========
Liabilities:
Secured notes payable, current portion $ - 125
Secured notes payable, less current portion 88,789 90,029
Accounts payable and accrued liabilities 3,545 2,081
Environmental remediation liability 100 2,037
Deferred revenue 27 107
Deferred income taxes 27,981 25,982
Deferred compensation 1,450 1,457
Tenant security deposits 53 54
Liabilities of discontinued operations 288 32,280
----------- -----------
Total liabilities 122,233 154,152
----------- -----------
Commitments and contingencies
Equity:
Common stock, $.10 par value
25,000,000 shares authorized,
9,969,174 and 10,014,667 shares issued
and outstanding, respectively 997 1,001
Capital in excess of par value 58,004 55,636
Retained earnings 306,307 186,855
Accumulated other comprehensive income
(loss), net (701) 38
----------- -----------
Total shareholders' equity 364,607 243,530
Noncontrolling interest MRP 18,648 21,052
----------- -----------
Total equity 383,255 264,582
----------- -----------
Total liabilities and shareholders' equity $ 505,488 418,734
=========== ===========
Asset Management Segment:
------------------------
Three Months Ended December 31
---------------------------------------
(dollars in thousands) 2018 % 2017 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 569 96.1% 553 96.3% 16 2.9%
Revenue-reimbursements 23 3.9% 21 3.7% 2 9.5%
-------- ------- -------- ------- -------- -------
Total revenue 592 100.0% 574 100.0% 18 3.1%
Depreciation, depletion and amortization 135 22.8% 127 22.1% 8 6.3%
Operating expenses 117 19.8% 118 20.6% (1) -0.8%
Property taxes 42 7.1% 39 6.8% 3 7.7%
Management company indirect 30 5.0% 26 4.5% 4 15.4%
Corporate expense 7 1.2% 36 6.3% (29) -80.6%
-------- ------- -------- ------- -------- -------
Cost of operations 331 55.9% 346 60.3% (15) -4.3%
-------- ------- -------- ------- -------- -------
Operating profit $ 261 44.1% 228 39.7% 33 14.5%
Mining Royalty Lands Segment:
----------------------------
Three Months Ended December 31
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Mining Royalty and rents $ 2,165 99.0% 1,842 99.0%
Revenue-reimbursements 22 1.0% 18 1.0%
-------- ------- -------- -------
Total revenue 2,187 100.0% 1,860 100.0%
Depreciation, depletion and amortization 53 2.4% 19 1.0%
Operating expenses 40 1.8% 38 2.0%
Property taxes 87 4.0% 64 3.5%
Corporate expense 57 2.6% 43 2.3%
-------- ------- -------- -------
Cost of operations 237 10.8% 164 8.8%
-------- ------- -------- -------
Operating profit $ 1,950 89.2% 1,696 91.2%
======== ======= ======== =======
Development Segment:
-------------------
Three Months Ended December 31
----------------------------------------
(dollars in thousands) 2018 2017 Change
----------- ----------- ------------
Rental revenue $ 144 184 (40)
Revenue-reimbursements 118 115 3
----------- ----------- ------------
Total revenue 262 299 (37)
Depreciation, depletion and amortization 57 74 (17)
Operating expenses 580 41 539
Property taxes 269 277 (8)
Management company indirect 314 267 47
Corporate expense 874 296 578
----------- ----------- ------------
Cost of operations 2,094 955 1,139
----------- ----------- ------------
Operating loss $ (1,832) (656) (1,176)
=========== =========== ============
Stabilized Joint Venture Segment:
--------------------------------
Three Months Ended December 31
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Rental Revenue $ 2,569 98.4% 2,470 99.6%
Revenue-reimbursements 42 1.6% 10 .4%
-------- ------- -------- -------
Total revenue 2,611 100.0% 2,480 100.0%
Depreciation and amortization 1,303 49.9% 2,411 97.2%
Operating expenses 597 22.9% 627 25.3%
Property taxes 278 10.6% 252 10.2%
Management company indirect 55 2.1% 40 1.6%
Corporate expense 104 4.0% 38 1.5%
-------- ------- -------- -------
Cost of operations 2,337 89.5% 3,368 135.8%
-------- ------- -------- -------
Operating profit $ 274 10.5% $ (888) -35.8%
======== ======= ======== =======
Asset Management Segment:
------------------------
Twelve Months Ended December 31
---------------------------------------
(dollars in thousands) 2018 % 2017 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 2,212 95.8% 2,203 96.5% 9 0.4%
Revenue-reimbursements 97 4.2% 81 3.5% 16 19.8%
-------- ------- -------- ------- -------- -------
Total revenue 2,309 100.0% 2,284 100.0% 25 1.1%
Depreciation, depletion and amortization 540 23.4% 512 22.4% 28 5.5%
Operating expenses 452 19.6% 489 21.4% (37) -7.6%
Property taxes 164 7.1% 148 6.5% 16 10.8%
Management company indirect 102 4.4% 100 4.4% 2 2.0%
Corporate expense 153 6.6% 154 6.7% (1) -0.6%
-------- ------- -------- ------- -------- -------
Cost of operations 1,411 61.1% 1,403 61.4% 8 0.6%
-------- ------- -------- ------- -------- -------
Operating profit $ 898 38.9% 881 38.6% 17 1.9%
======== ======= ======== ======= ======== =======
Mining Royalty Lands Segment:
----------------------------
Twelve Months Ended December 31
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Mining Royalty and rents $ 8,050 98.9% 7,153 98.8%
Revenue-reimbursements 89 1.1% 88 1.2%
-------- ------- -------- -------
Total revenue 8,139 100.0% 7,241 100.0%
Depreciation, depletion and amortization 198 2.4% 110 1.5%
Operating expenses 168 2.1% 159 2.2%
Property taxes 269 3.3% 240 3.3%
Corporate expense 214 2.6% 167 2.3%
-------- ------- -------- -------
Cost of operations 849 10.4% 676 9.3%
-------- ------- -------- -------
Operating profit $ 7,290 89.6% 6,565 90.7%
======== ======= ======== =======
Development Segment:
-------------------
Twelve Months Ended
----------------------------------------
(dollars in thousands) 2018 2017 Change
----------- ----------- ------------
Rental revenue $ 753 785 (32)
Revenue-reimbursements 453 445 8
----------- ----------- ------------
Total revenue 1,206 1,230 (24)
Depreciation, depletion and amortization 228 337 (109)
Operating expenses 1,198 200 998
Environmental remediation recovery (465) - (465)
Property taxes 1,037 1,108 (71)
Management company indirect 1,312 1,113 199
Corporate expense 1,984 1,231 753
----------- ----------- ------------
Cost of operations 5,294 3,989 1,305
----------- ----------- ------------
Operating loss $ (4,088) (2,759) (1,329)
=========== =========== ============
Stabilized Joint Venture Segment:
--------------------------------
Twelve Months Ended December 31
---------------------------------------
(dollars in thousands) 2018 % 2017 %
-------- ------- -------- -------
Rental revenue $ 10,254 98.9% 4,827 99.6%
Revenue-reimbursements 114 1.1% 20 .4%
-------- ------- -------- -------
Total revenue 10,368 100.0% 4,847 100.0%
Depreciation and amortization 6,932 66.9% 4,975 102.7%
Operating expenses 2,467 23.8% 1,288 26.6%
Property taxes 1,155 11.1% 520 10.7%
Management company indirect 351 3.4% 82 1.7%
Corporate expense 393 3.8% 65 1.3%
-------- ------- -------- -------
Cost of operations 11,298 109.0% 6,930 143.0%
-------- ------- -------- -------
Operating profit $ (930) -9.0% $ (2,083) -43.0%
======== ======= ======== =======
FRP HOLDINGS, INC. AND SUBSIDIARIES
DISCONTINUED OPERATIONS
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31
2018 2017 2018 2017
---- ---- ---- ----
Revenues:
Rental revenue $ 189 5,936 9,791 22,570
Revenue - reimbursements 33 1,306 2,307 5,019
------ ------ ------ ------
Total Revenues 222 7,242 12,098 27,589
Cost of operations:
Depreciation, depletion
and amortization 30 1,871 3,161 7,598
Operating expenses 48 915 1,742 3,485
Property taxes 20 800 1,286 3,008
Management company indirect - 192 1,360 734
Corporate expenses 4 200 1,462 200
------ ------ ------ ------
Total cost of operations 102 3,978 9,011 15,025
Total operating profit 120 3,264 3,087 12,564
Interest expense - (495) (587) (1,582)
Gain on sale of buildings (92) - 164,915 -
------ ------ ------ ------
Income before income taxes 28 2,769 167,415 10,982
Provision for (benefit from)
income taxes 8 (3,265) 45,286 (21)
------ ------ ------ ------
Income from discontinued
operations $ 20 6,034 122,129 11,003
====== ====== ====== ======
Earnings per common share:
Income (loss) from
discontinued operations-
Basic $ 0.00 0.60 12.16 1.10
Diluted $ 0.00 0.60 12.09 1.10
====== ====== ====== ======