EX-99 2 frphpr3Q2018.txt PRESS RELEASE FRP HOLDINGS, INC./NEWS Contact: John D. Milton, Jr. Chief Financial Officer 904/858-9100 ------------------------------------------------------------------------------ FRP HOLDINGS, INC. (NASDAQ: FRPH) ANNOUNCES RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2018 FRP Holdings, Inc. (NASDAQ-FRPH) Jacksonville, Florida; November 7, 2018 - 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. * During this quarter, the Company signed a Letter of Intent on several contiguous parcels in Baltimore that we intend to develop into industrial real estate. The parcels total 300 acres and are capable of supporting 1.8 million square feet of industrial product. * 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 the 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. We have a Letter of Intent on several contiguous parcels of land that we intend to develop into 300,000 square-foot warehouses. These parcels total over 300 acres and their purchase via a like- kind exchange will defer the payment of several million dollars of taxes. 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 Baltimore for an underserved industrial asset class. 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 2018 2017 ------------ ------------ Assets: 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 September30 -------------------------------------- (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