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FRP Holdings, Inc. (Nasdaq: FRPH) Announces Results for the Fourth Quarter and Year Ended December 31, 2018

JACKSONVILLE, Fla., March 07, 2019 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ-FRPH)

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 linkhttp://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.

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

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
(In thousands, except share data)
(Unaudited)

    December 31   December 31
Assets:   2018   2017
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 December 31  
(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