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

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