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FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the Second Quarter and Six Months Ended June 30, 2018

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JACKSONVILLE, Fla., Aug. 02, 2018 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ:FRPH)

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 in 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
Assets:   2018   2017
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 %   $       %
                                 

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

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