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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

/EIN News/ -- 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 Officer 904/858-9100

 

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