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FRP Holdings, Inc. (NASDAQ: FRPH) Announces Results for the First Quarter Ended March 31, 2019

JACKSONVILLE, Fla., May 06, 2019 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ-FRPH)

First Quarter Consolidated Results of Operations

Net income for the first quarter of 2019 was $1,898,000 or $.19 per share versus $1,560,000 or $.15 per share in the same period last year. Income from discontinued operations for the first quarter of 2019 was $86,000 or $.01 per share versus $1,722,000 or $.17 per share in the same period last year.

First Quarter Segment Operating Results

Asset Management Segment:

Most of the Asset Management Segment was reclassified to discontinued operations leaving only three commercial properties and one recent industrial acquisition, Cranberry Run, which we purchased this quarter for $6,411,000. Cranberry Run is a five-building industrial park in Harford County, MD totaling 268,010 square feet of industrial/ flex space. The park is currently 26% leased and occupied, and it is our plan to make $1,455,000 in improvements in order to re-lease the property for a total investment of $29.35 per square foot. This past quarter, we entered into a Purchase and Sale Agreement to sell 7030 Dorsey Road in Anne Arundel County, one of the three commercial properties remaining from the asset sale last May, for $8,823,000. The study period for the purchaser expired April 15, 2019 and we expect to close in the second quarter of 2019. Total revenues in this segment were $641,000, up $60,000 or 10.3%, over the same period last year. Operating loss was ($66,000), down $322,000 compared to the same quarter last year due to higher allocation of corporate expenses and operating losses associated with the Cranberry Run acquisition.

Mining Royalty Lands Segment:

Total revenues in this segment were $2,229,000 versus $1,772,000 in the same period last year. Total operating profit in this segment was $2,001,000, an increase of $460,000 versus $1,541,000 in the same period last year. Among the reasons for this increase in revenue and operating profit is the contribution from our Ft. Myers quarry, the revenue from which, now that mining has begun in earnest, was more than double the minimum royalty we have been receiving until recently.

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.” This past quarter, Hampstead Overlook received non-appealable rezoning from industrial to residential.

  • We finished shell construction in December 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 in January. We are now in the process of leasing these four single-story buildings totaling 100,030 square feet of office and retail space. Phase I is currently 44% leased.

  • We are the principal capital source of a residential development venture in Essexshire 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. Hyde Park will hold 122 town homes and 4 single family lots and received a non-appealable Plan Approval this past quarter. We are now in the process of obtaining record plat and construction drawing approval as well as seeking proposals from residential home builders.

  • 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 is our first building with a 32-foot clear. Shell construction was completed subsequent to the end of the quarter and we are now in the process of leasing up the building.

  • 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. Construction began in February 2019 and should be finished in 2021.

Stabilized Joint Venture Segment:

Average occupancy for the quarter was 93.49%, and at the end of the quarter Dock 79 was 94.75% leased and 93.11% occupied. During the first quarter, 61.70% of expiring leases renewed with an average increase in rent of 3.14%. Net Operating Income for this segment was $1,630,679, up $145,282 or 9.78% compared to the same quarter last year. 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

We began this year a very different company than we were at the start of 2018. The asset sale of nearly a year ago has dramatically reshaped the landscape of our business and our direction forward. The disposition of over 40 buildings, the infrastructure required to support it, and the cash we retained from that disposition has shifted our focus towards development as the number of ongoing projects in our development segment demonstrates. Despite or maybe because of the lack of consensus regarding economic forecasts, indicators, and the volatility of markets, we believe we are in an enviable financial position given our current liquidity. Though we, like any other company, would stand to benefit from the rising tide of this nearly unprecedented stretch of economic growth, the cash and investments on our balance sheet allow us to play defense and protect our assets should a downturn present itself as our projects are coming online, while also allowing us to play offense should that same downturn create opportunities to grow our business segments via attractively priced acquisitions. It is because we prize this liquidity so much, that we remain steadfast in our commitment to redeploy these proceeds as carefully as we possibly can. The substantial amount of dry powder retained from the sale affords this company an amazing opportunity that we are loath to squander. We have some of the best assets in the business segments in which we compete, as demonstrated by another amazing quarter from our mining royalties segment and the continued ability to grow rents at Dock 79, and we will not make any further investments unless they fall in line with the quality of assets and opportunities of your company as it is situated presently. This past quarter we repurchased 35,932 shares at an average cost of $47.71 per share.

Conference Call

The Company will also host a conference call on Monday, May 6, 2019 at 2:00 p.m. (EDT). 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/frp050619. For the archived audio via the internet, click on the following link http://archive.conferenceamerica.com/archivestream/frp050619.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 54972211. 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, (iii) 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

MARCH 31,

2019

2018

Revenues:

Lease revenue

$

3,485

3,303

Mining lands lease revenue

2,229

1,772

Total Revenues

5,714

5,075

Cost of operations:

Depreciation, depletion and amortization

1,487

2,398

Operating expenses

882

865

Property taxes

753

675

Management company indirect

592

361

Corporate expenses

645

679

Total cost of operations

4,359

4,978

Total operating profit

1,355

97

Net investment income, including realized gains of $119 and $0

1,810

5

Interest expense

(588

)

(843

)

Equity in loss of joint ventures

(264

)

(12

)

Income (loss) from continuing operations before income taxes

2,313

(753

)

Provision for (benefit from) income taxes

672

(60

)

Income (loss) from continuing operations

1,641

(693

)

Income from discontinued operations, net of tax

86

1,722

Net income

1,727

1,029

Income (loss) attributable to noncontrolling interest

(171

)

(531

)

Net income attributable to the Company

$

1,898

1,560

Earnings per common share:

Income (loss) from continuing operations-

Basic

$

0.16

(0.07

)

Diluted

$

0.16

(0.07

)

Discontinued operations-

Basic

$

0.01

0.17

Diluted

$

0.01

0.17

Net income attributable to the Company-

Basic

$

0.19

0.16

Diluted

$

0.19

0.15

Number of shares (in thousands) used in computing:

-basic earnings per common share

9,952

10,015

-diluted earnings per common share

9,996

10,085

FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

March 31

December 31

Assets:

2019

2018

Real estate investments at cost:

Land

$

85,072

83,721

Buildings and improvements

149,505

144,543

Projects under construction

7,086

6,683

Total investments in properties

241,663

234,947

Less accumulated depreciation and depletion

29,847

28,394

Net investments in properties

211,816

206,553

Real estate held for investment, at cost

7,167

7,167

Investments in joint ventures

94,294

88,884

Net real estate investments

313,277

302,604

Cash and cash equivalents

29,641

22,547

Cash held in escrow

185

202

Accounts receivable, net

688

564

Investments available for sale at fair value

148,778

165,212

Federal and state income taxes receivable

8,349

9,854

Unrealized rents

665

53

Deferred costs

990

773

Other assets

459

455

Assets of discontinued operations

3,091

3,224

Total assets

$

506,123

505,488

Liabilities:

Secured notes payable

$

88,823

88,789

Accounts payable and accrued liabilities

1,851

3,545

Environmental remediation liability

100

100

Deferred revenue

831

27

Deferred income taxes

27,981

27,981

Deferred compensation

1,448

1,450

Tenant security deposits

244

53

Liabilities of discontinued operations

243

288

Total liabilities

121,521

122,233

Commitments and contingencies

Equity:

Common stock, $.10 par value 25,000,000 shares authorized, 9,933,242 and 9,969,174 shares issued and outstanding, respectively

993

997

Capital in excess of par value

57,824

58,004

Retained earnings

306,704

306,307

Accumulated other comprehensive income, net

859

(701

)

Total shareholders’ equity

366,380

364,607

Noncontrolling interest MRP

18,222

18,648

Total equity

384,602

383,255

Total liabilities and shareholders’ equity

$

506,123

505,488

Asset Management Segment:

Three months ended March 31

(dollars in thousands)

2019

%

2018

%

Change

%

Lease revenue

$

641

100.0

%

581

100.0

%

60

10.3

%

Depreciation, depletion and amortization

177

27.6

%

131

22.6

%

46

35.1

%

Operating expenses

209

32.6

%

128

22.0

%

81

63.3

%

Property taxes

56

8.8

%

39

6.7

%

17

43.6

%

Management company indirect

102

15.9

%

24

4.1

%

78

325.0

%

Corporate expense

163

25.4

%

3

0.5

%

160

5333.3

%

Cost of operations

707

110.3

%

325

55.9

%

382

117.5

%

Operating profit

$

(66

)

-10.3

%

256

44.1

%

(322

)

-125.8

%

Mining Royalty Lands Segment:

Three months ended March 31

(dollars in thousands)

2019

%

2018

%

Change

%

Mining lands lease revenue

$

2,229

100.0

%

1,772

100.0

%

457

25.8

%

Depreciation, depletion and amortization

52

2.3

%

54

3.0

%

(2

)

-3.7

%

Operating expenses

16

0.7

%

40

2.3

%

(24

)

-60.0

%

Property taxes

68

3.1

%

60

3.4

%

8

13.3

%

Management company indirect

49

2.2

%

0.0

%

49

0.0

%

Corporate expense

43

1.9

%

77

4.3

%

(34

)

-44.2

%

Cost of operations

228

10.2

%

231

13.0

%

(3

)

-1.3

%

Operating profit

$

2,001

89.8

%

1,541

87.0

%

460

29.9

%

Development Segment:

Three months ended March 31

(dollars in thousands)

2019

2018

Change

Lease revenue

$

269

297

(28

)

Depreciation, depletion and amortization

58

57

1

Operating expenses

46

118

(72

)

Property taxes

323

268

55

Management company indirect

395

241

154

Corporate expense

399

419

(20

)

Cost of operations

1,221

1,103

118

Operating loss

$

(952

)

(806

)

(146

)

Stabilized Joint Venture Segment:

Three months ended March 31

(dollars in thousands)

2019

%

2018

%

Change

%

Lease revenue

$

2,575

100.0

%

2,425

100.0

%

150

6.2

%

Depreciation, depletion and amortization

1,200

46.6

%

2,156

88.9

%

(956

)

-44.3

%

Operating expenses

611

23.7

%

579

23.9

%

32

5.5

%

Property taxes

306

11.9

%

308

12.7

%

(2

)

-0.6

%

Management company indirect

46

1.8

%

96

3.9

%

(50

)

-52.1

%

Corporate expense

40

1.6

%

142

5.9

%

(102

)

-71.8

%

Cost of operations

2,203

85.6

%

3,281

135.3

%

(1,078

)

-32.9

%

Operating profit

$

372

14.4

%

(856

)

-35.3

%

1,228

-143.5

%

FRP HOLDINGS, INC. AND SUBSIDIARIES
DISCONTINUED OPERATIONS
(In thousands except per share amounts)
(Unaudited)

THREE MONTHS ENDED

MARCH 31,

2019

2018

Lease revenue

238

7,547

Cost of operations:

Depreciation, depletion and amortization

29

1,885

Operating expenses

95

1,178

Property taxes

20

798

Management company indirect

178

Corporate expenses

747

Total cost of operations

144

4,786

Total operating profit

94

2,761

Interest expense

(400

)

Gain on sale of buildings

23

Income before income taxes

117

2,361

Provision for income taxes

31

639

Income from discontinued operations

86

1,722

Earnings per common share:

Income from discontinued operations-

Basic

0.01

0.17

Diluted

0.01

0.17

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 this non-GAAP financial measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. This measure is not, and should not be viewed as, a substitute for GAAP financial measures.

Net Operating Income Reconciliation

Three months ended 03/31/19 (in thousands)

Asset

Stabilized

Mining

Unallocated

FRP

Joint

Management

Development

Venture

Royalties

Corporate

Holdings

Segment

Segment

Segment

Segment

Expenses

Totals

Income (loss) from continuing operations

(48

)

(716

)

(196

)

1,452

1,149

1,641

Income Tax Allocation

(18

)

(266

)

(9

)

539

426

672

Income (loss) from continuing operations before income taxes

(66

)

(982

)

(205

)

1,991

1,575

2,313

Less:

Unrealized rents

3

28

31

Interest income

224

1,586

1,810

Plus:

Unrealized rents

122

122

Equity in loss of Joint Venture

254

10

264

Interest Expense

577

11

588

Depreciation/Amortization

177

58

1,200

52

1,487

Management Co. Indirect

102

395

46

49

592

Allocated Corporate Expenses

163

399

40

43

645

Net Operating Income

373

(100

)

1,630

2,267

4,170


Net Operating Income Reconciliation

Three months ended 03/31/18 (in thousands)

Asset

Stabilized

Mining

Unallocated

FRP

Joint

Management

Development

Venture

Royalties

Corporate

Holdings

Segment

Segment

Segment

Segment

Expenses

Totals

Income (loss) from continuing operations

187

(584

)

(1,383

)

1,115

(28

)

(693

)

Income Tax Allocation

69

(217

)

(316

)

414

(10

)

(60

)

Income (loss) from continuing operations before income taxes

256

(801

)

(1,699

)

1,529

(38

)

(753

)

Less:

Unrealized rents

52

52

Other income

5

5

Plus:

Unrealized rents

20

119

139

Equity in loss of Joint Venture

12

12

Interest Expense

843

843

Depreciation/Amortization

131

57

2,156

54

2,398

Management Co. Indirect

24

241

96

361

Allocated Corporate Expenses

3

419

142

77

38

679

Net Operating Income

434

(89

)

1,486

1,791

3,622