FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the Third Quarter and Nine Months Ended September 30, 2018


JACKSONVILLE, Fla., Nov. 07, 2018 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ-FRPH)

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.
  • 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 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.  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 and around the Mid-Atlantic.  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
Assets: 2018 2017
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 September 30 
(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 
                 


Contact:John D. Milton, Jr. 
 Chief Financial Officer904/858-9100