FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the First Quarter Ended March 31, 2018


JACKSONVILLE, Fla., May 08, 2018 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ:FRPH)

First Quarter Consolidated Results of Operations

Net income for the first quarter of 2018 was $1,560,000 or $.15 per share versus $1,443,000 or $.14 per share in the same period last year.  Total revenues were $12,622,000, up 35.4%, versus the same period last year, primarily because of the addition of rental revenues from Dock 79.  Our net income was adversely impacted by $747,000 in expenses related to the pending sale of our industrial warehouse portfolio.

First Quarter Segment Operating Results

Asset Management Segment:

Total revenues in this segment were $8,128,000, up $843,000 or 11.6%, over the same period last year.  Net Operating Income (NOI) in this segment for the first quarter increased slightly to $5,857,000, compared to $5,689,000 in the same period last year.  We ended the first quarter with total occupied square feet of 3,721,213 versus 3,525,234 at the end of the same period last year, an increase of 5.6% or 195,979 square feet.  Our overall occupancy rate was 93.4%.

This past quarter we entered into contract to sell 41 industrial warehouses and two adjacent lots to an affiliate of Blackstone Real Estate Partners for a total purchase price of $358.9 million.  Pending shareholder approval at our annual meeting on May 14, we expect to close on this transaction the following week.  These properties comprise substantially all the assets of our Asset Management Segment.  We are currently exploring options to reinvest a significant portion of the proceeds into opportunities more in line with our other business segments where recently we have enjoyed better returns.       

Mining Royalty Lands Segment:

Total revenues in this segment were $1,772,000 versus $1,762,000 in the same period last year.  Total operating profit in this segment was $1,541,000, a decrease of $18,000 versus $1,559,000 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.
  • Last year we began construction on a 96,047 square foot building at Patriot Business Center that we expect to finish in the second quarter of 2018.  This building is included in the sale to Blackstone.
  • 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 buildings totaling 100,000 square feet of office and retail space.
  • Our Essexshire residential project totaling 129 single family building lots is moving towards entitlement.
  • We are in the process of designing and permitting a 95,000 square foot spec building at Hollander Business Park.  We expect to begin construction during the second quarter of 2018. 

RiverFront on the Anacostia Segment:

At the end of the first quarter, Dock 79 was 90.8% leased and 91.8% occupied.  As the first “generation” of leases expire, the renewal rate of 61.9% during the first quarter is in line with expectations while the average rent increase of 2.8% is better than expected.

Summary and Outlook

This past quarter was one of our most important ever for obvious reasons.  Our portfolio of industrial real estate took decades to put together.  Most of the assets came from land we purchased, developed, and managed in-house.  The amount of sweat equity our Baltimore office put into those assets would have given even the most unsentimental seller a moment’s hesitation.  However, because of the reduction in corporate income tax rates in this low cap rate environment, the opportunity to sell was simply too good to pass up.

Though monumental, the sale of such a substantial portion of this company will not leave us wanting for things to do.  We still have vacant lots at Hollander and Lakeside that we intend to develop, and the remaining phases of RiverFront on the Anacostia will require our attention for the next decade at least.  Our aggregates royalties and the second life of those quarries will be generating returns for this company and occupying the time of its management for longer than many of us will be around. 

In the short term, though, we will be hard at work on Phase II of RiverFront on the Anacostia and our other ongoing projects; but most importantly, we will be determining the highest and best use for the proceeds of the sale.

Subsequent Events

Subsequent to the end of last quarter, 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. 

Conference Call

The Company will also host a conference call on Tuesday, May 8, 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 15482) within the United States.  International callers may dial 1-334-323-7224 (passcode 15482).  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/frp050818. For the archived audio via the internet, click on the following link http://archive.conferenceamerica.com/archivestream/frp050818.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 49397561.  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.

FRP Holdings, Inc. (FRP) is engaged in the real estate business through its subsidiaries FRP Development Corp. and Florida Rock Properties, Inc. FRP acquires, constructs, leases, operates and manages land and buildings to generate both current cash flows and long-term capital appreciation.  FRP also owns real estate which is leased under mining royalty agreements or held for investment.

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 occurrence of any event, change or other circumstances that could give rise to the termination of the Agreement of Purchase and Sale by and between the Company and BRE Foxtrot Parent, LLC, dated March 22, 2018 (the “Sale Agreement”); the risks that any of the closing conditions to the Sale Agreement may not be satisfied in a timely manner; any litigation in connection with the Sale Agreement; the possibility that the announcement and pendency of the Sale Transaction may adversely affect our remaining business; the possibility that our business and financial performance may be adversely affected if we fail to complete the Sale Transaction; the fact that our executive officers may have interests in the Sale Transaction in addition to the interests of the shareholders generally; the fact that the Sale Agreement limits our ability to pursue alternative transactions; 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) warehouse/office/residential building ownership, leasing and management, (ii) mining royalty land ownership and leasing, (iii) land acquisition, entitlement and development primarily for future warehouse/office or residential building construction, and (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
  MARCH 31,
  2018 2017
Revenues:        
 Rental revenue $9,165   6,283 
 Mining Royalty and rents  1,750   1,739 
 Revenue – reimbursements  1,707   1,300 
 Total Revenues  12,622   9,322 
         
Cost of operations:        
 Depreciation, depletion and amortization  4,283   2,059 
 Operating expenses  2,043   1,001 
 Property taxes  1,473   1,062 
 Management company indirect  539   469 
 Corporate expenses (Note 4 Related Party)  1,426   1,327 
Total cost of operations  9,764   5,918 
         
Total operating profit  2,858   3,404 
         
Interest income  5   —  
Interest expense  (1,243)  (248)
Equity in loss of joint ventures  (12)  (771)
         
Income before income taxes  1,608   2,385 
Provision for income taxes  579   942 
         
Net income  1,029   1,443 
Loss attributable to noncontrolling interest  (531  —  
         
Net income attributable to the Company $1,560   1,443 
         
Earnings per common share:        
 Basic 0.16   0.15 
 Diluted 0.15   0.14 
         
Number of shares (in thousands) used in computing:        
 -basic earnings per common share  10,015   9,931 
 -diluted earnings per common share  10,085   10,001 
         


Asset Management Segment:

  Three months ended March 31    
(dollars in thousands) 2018 % 2017 % Change %
             
Rental revenue $6,571   80.8%  6,103   83.8%  468   7.7%
Revenue-reimbursements  1,557   19.2%  1,182   16.2%  375   31.7%
                         
Total revenue  8,128   100.0%  7,285   100.0%  843   11.6%
                         
Depreciation, depletion and amortization  2,016   24.8%  1,965   27.0%  51   2.6%
Operating expenses  1,306   16.0%  895   12.3%  411   45.9%
Property taxes  837   10.3%  737   10.1%  100   13.6%
Management company indirect  202   2.5%  187   2.6%  15   8.0%
Corporate expense  788   9.7%  753   10.3%  35   4.6%
                         
Cost of operations  5,149   63.3%  4,537   62.3%  612   13.5%
                         
Operating profit $2,979   36.7%  2,748   37.7%  231   8.4%
                         


Mining Royalty Lands Segment:

  Three months ended March 31
(dollars in thousands) 2018 % 2017 %
         
Mining Royalty and rents $1,750   98.8%  1,739   98.7%
Revenue-reimbursements  22   1.2%  23   1.3%
                 
Total revenue  1,772   100.0%  1,762   100.0%
                 
Depreciation, depletion and amortization  54   3.0%  39   2.2%
Operating expenses  40   2.3%  39   2.2%
Property taxes  60   3.4%  59   3.3%
Corporate expense  77   4.3%  66   3.8%
                 
Cost of operations  231   13.0%  203   11.5%
                 
Operating profit $1,541   87.0%  1,559   88.5%
                 


Land Development and Construction Segment:

  Three months ended March 31
(dollars in thousands) 2018 2017 Change
       
Rental revenue $181   180   1 
Revenue-reimbursements  116   95   21 
             
Total revenue  297   275   22 
             
Depreciation, depletion and amortization  57   55   2 
Operating expenses  118   67   51 
Property taxes  268   266   2 
Management company indirect  241   282   (41
Corporate expense  419   508   (89
             
Cost of operations  1,103   1,178   (75
             
Operating loss $(806)  (903)  97 
             


Dock 79 Segment:

  Three Months Ended March 31
(dollars in thousands) 2018 % 2017 %
         
Rental revenue $2,413   99.5%  —    — %
Revenue-reimbursements  12   .5%  —    — %
                 
Total revenue  2,425   100.0%  —    — %
                 
Depreciation and amortization  2,156   88.9%  —    — %
Operating expenses  579   23.9%  —    — %
Property taxes  308   12.7%  —    — %
Management company indirect  96   3.9%  —      
Corporate expense  142   5.9%  —    — %
                 
Cost of operations  3,281   135.3%  —    — %
                 
Operating profit $(856  -35.3% $—    — %
                 


Non-GAAP Financial Measures

To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The non-GAAP financial measure included in this quarterly report is net operating income (NOI). FRP uses these non-GAAP financial measures to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. These measures are not, and should not be viewed as, substitutes for GAAP financial measures.

          
Net Operating Income Reconciliation         
Three months ended 03/31/18 (in thousands)         
  Asset Land  RiverFront  Mining  FRP 
  Management Development  Anacostia  Royalties  Holdings 
  Segment Segment  Segment  Segment  Totals 
Income from continuing operations 1,962 (584) (1,464 1,115  1,029 
Income Tax Allocation 727 (217) (345 414  579 
Income  from continuing operations before income taxes 2,689 (801) (1,809 1,529  1,608 
               
Less:              
 Unrealized rents 129 —   52  —    181 
 Other income —  5  —   —   5 
Plus:              
Unrealized rents —    —   —   119  119 
Equity in loss of Joint Venture —  —   —   12  12 
 Lease intangible rents 1 —   —   —   1 
 Interest Expense 290 —   953  —   1,243 
 Depreciation/Amortization 2,016 57  2,156  54  4,283 
 Management Co. Indirect 202 241  96  —   539 
 Allocated Corporate Expenses 788 419  142  77  1,426 
               
Net Operating Income (loss) 5,857 (89) 1,486  1,791  9,045 
               


Net Operating Income Reconciliation
Three months ended 03/31/17 (in thousands)
              
 Asset  Land  Mining   FRP  
 Management  Development  Royalties   Holdings  
 Segment  Segment  Segment   Totals  
              
Income (loss) from continuing operations1,512  (1,007) 938   1,443  
Income Tax Allocation988  (658) 612   942  
Inc. (loss) from continuing operations before income taxes2,500  (1,665) 1,550   2,385  
              
Less:             
 Lease intangible rents3  —   —    3  
Plus:             
 Unrealized rents39  —    109   148  
 Equity in loss of Joint Venture—   762   9   771  
 Interest Expense248  —   —    248  
 Depreciation/Amortization1,965  55  39   2,059  
 Management Co. Indirect187  282  —    469  
 Allocated Corporate Expenses753  508  66   1,327  
              
Net Operating Income (loss)5,689  (58 1,773    7,404  
              

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