Investment in Joint Ventures (Equity Method)

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in Joint Ventures (Equity Method)

(11) Investments in Joint Ventures (Equity Method).

Brooksville. In 2006, the Company entered into a Joint Venture Agreement with Vulcan Materials Company to jointly own and develop approximately 4,300 acres of land near Brooksville, Florida. Under the terms of the joint venture, FRP contributed its fee interest in approximately 3,443 acres formerly leased to Vulcan under a long-term mining lease which had a net book value of $2,548,000. Vulcan is entitled to mine a portion of the property until 2032 and pay royalties to the Company. FRP also contributed $3,018,000 for one-half of the acquisition costs of a 288-acre contiguous parcel. Vulcan contributed 553 acres that it owned as well as its leasehold interest in the 3,443 acres that it leased from FRP and $3,018,000 for one-half of the acquisition costs of the 288-acre contiguous parcel. The joint venture is jointly controlled by Vulcan and FRP. Distributions will be made on a 50-50 basis except for royalties and depletion specifically allocated to the Company. Other income for the six months ended June 30, 2019 includes a loss of $22,000 representing the Company’s portion of the loss of this joint venture.

BC FRP Realty (Windlass Run). During the quarter ending March 2016, we entered into an agreement with a Baltimore development company (St. John Properties, Inc.) to jointly develop the remaining lands of our Windlass Run Business Park. The 50/50 partnership initially calls for FRP to combine its 25 acres (valued at $7,500,000) with St. John Properties’ adjacent 10 acres fronting on a major state highway (valued at $3,239,536) which resulted in an initial cash distribution of $2,130,232 to FRP in May 2016. Thereafter, the venture will jointly develop the combined properties into a multi-building business park to consist of approximately 329,000 square feet of single-story office space. On September 28, 2017 BC FRP Realty, LLC obtained $17,250,000 of construction financing commitments for 4 buildings through September 15, 2022 from BB&T at 2.5% over LIBOR. The balance outstanding on these loans at June 30, 2019 was $10,913,000.

Hyde Park. On January 27, 2018 the Company entered into a loan agreement with a Baltimore developer to be 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 the Company is also entitled to a portion of proceeds from sale. Hyde Park will hold 122 town homes and four single-family lots and received a non-appealable Plan Approval during the first quarter of 2019. We are currently pursuing entitlements and have a home builder under contract to purchase the land upon government approval to begin development. The loan balance at June 30, 2019 was $849,000.

RiverFront Holdings II, LLC. On May 4, 2018, the Company and MRP formed a partnership to develop Phase II of our RiverFront on the Anacostia project and closed on construction financing with Eagle Bank. The Company has contributed its land with an agreed value of $16.3 million (cost basis of $4.6 million) and $6.2 million of cash. MRP contributed capital of $5.6 million to the partnership including development costs paid prior to the formation of the partnership and a $725,000 development fee. The Company further agreed to fund $13.75 million preferred equity financing at 7.5% interest rate all of which was advanced through June 30, 2019. The Company records interest income for this loan and a loss in equity in ventures for our 80% equity in the partnership. The loan from Eagle Bank allows draws of up to $71 million during construction at an interest rate of 3.25% over LIBOR. The loan is interest only and matures in 36 months with a 12-month extension assuming completion of construction and at least one occupancy. There is a provision for an additional 60 months extension with a 30-year amortization of principal at 2.15% over seven-year US Treasury Constant if NOI is sufficient for a 9% yield. The loan balance at June 30, 2019 was $12,199,000. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting through the construction and lease up period as MRP acts as the administrative agent of the joint venture and oversees and controls the day to day operations of the project.

Bryant Street Partnerships. On December 24, 2018 the Company and MRP formed four partnerships to purchase and develop approximately five acres of land at 500 Rhode Island Ave NE, Washington, D.C. This property is the first phase of the Bryant Street Master Plan. The property is located in an Opportunity Zone, which provides tax benefits in the new communities development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed cash of $32 million in exchange for a 61.36% common equity in the partnership. The Company also contributed cash of $23 million as preferred equity financing at 8.0% interest rate. The Company records interest income for this loan and a loss in equity in ventures for our 61.36% equity in the partnership. On March 13, 2019 the partnerships closed on a construction loan with a group of lenders for up to $132 million at an interest rate of 2.25% over LIBOR. The loan matures March 13, 2023 with up to two extension of one year each upon certain conditions including, for the first, a debt service coverage of at least 1.10 and a loan-to-value that does not exceed 65% and for the second, a debt service coverage of 1.25 and a maximum loan-to-value of 65%. Borrower may prepay a portion of the unpaid principal to satisfy such tests. There were no draws on the loan through June 30, 2019. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting as all the major decisions are shared equally.

Amber Ridge. On June 26, 2019 the Company entered into a loan agreement with a Baltimore developer to be the principal capital source of a residential development venture in Prince Georges County, Maryland known as “Amber Ridge.” We have committed up to $18.5 million in exchange for an interest rate of 10% and a preferred return of 20% after which the Company is also entitled to a portion of proceeds from sale. This project will hold 190 single-family town homes.

Investments in Joint Ventures (in thousands):

								The
								Company's
								Share of
	Common			Total	Total Assets of	Profit (Loss)		Profit (Loss) of
	Ownership			Investment	The Partnership	Of the Partnership		the Partnership
As of June 30, 2019
Brooksville Quarry, LLC	50.00	%	$	7,478	14,309	(44	)	(22	)
BC FRP Realty, LLC	50.00	%		5,652	22,425	(660	)	(330	)
Hyde Park				859	859	—		—
RiverFront Holdings II, LLC	80.00	%		25,453	65,957	(391	)	(386	)
Bryant Street Partnerships	61.36	%		55,495	79,580	202		202
Total			$	94,937	183,130	(893	)	(536	)
As of December 31, 2018
Brooksville Quarry, LLC	50.00	%	$	7,449	14,325	(122	)	(61	)
BC FRP Realty, LLC	50.00	%		5,976	21,371	—		—
Hyde Park				594	594	39		39
RiverFront Holdings II, LLC	80.00	%		19,865	38,869	(66	)	(66	)
Bryant Street Partnerships	61.36	%		55,000	77,541	—		—
Total			$	88,884	152,700	(149	)	(88	)

Summarized Financial Information for the Investments in Joint Ventures (in thousands):

	As of June 30, 2019
	Brooksville		BC FRP				RiverFront		Bryant Street
	Quarry, LLC		Realty, LLC		Hyde Park		Holdings II, LLC		Partnerships		Total
Investments in real estate, net	$	14,296		22,281		859		65,704		59,816		$	162,956
Cash and cash equivalents		11		17		—		253		14,714			14,995
Unrealized rents & receivables		—		26		—		—		60			86
Deferred costs		2		101		—		—		4,990			5,093
Total Assets	$	14,309		22,425		859		65,957		79,580		$	183,130
Secured notes payable	$	—		11,181		—		12,199		—		$	23,380
Other liabilities		42		50		—		11,313		4,737			16,142
Capital – FRP		7,478		5,597		859		36,814		55,194			105,942
Capital - Third Parties		6,789		5,597		—		5,631		19,649			37,666
Total Liabilities and Capital	$	14,309		22,425		859		65,957		79,580		$	183,130

	As of December 31, 2018
	Brooksville		BC FRP				RiverFront		Bryant Street
	Quarry, LLC		Realty, LLC		Hyde Park		Holdings II, LLC		Partnerships		Total
Investments in real estate, net	$	14,299		21,352		594		38,793		41,821		$	116,859
Cash and cash equivalents		20		11		—		76		35,670			35,777
Deferred costs		6		8		—		—		50			64
Total Assets	$	14,325		21,371		594		38,869		77,541		$	152,700
Secured notes payable	$	—		9,549		—		—		—		$	9,549
Other liabilities		119		38		—		1,887		2,886			4,930
Capital – FRP		7,449		5,892		594		31,347		55,000			100,282
Capital - Third Parties		6,757		5,892		—		5,635		19,655			37,939
Total Liabilities and Capital	$	14,325		21,371		594		38,869		77,541		$	152,700

The Company’s capital recorded by the unconsolidated Joint Ventures is $11,005,000 more than the Investment in Joint Ventures reported in the Company’s consolidated balance sheet due to the lower basis in property contributed.

The amount of consolidated accumulated deficit for these joint ventures was $(3,093,000) and $(2,702,000) as of June 30, 2019 and December 31, 2018 respectively.