Q4 2020 FRP Holdings Inc Earnings Call
[music].
Excuse me everyone. We now of all of our speakers in conference. Please be aware of that each of your lines is in a listen only mode. At the conclusion of today's presentation. We will open the floor for questions instructions for asking questions will be given at that time.
I'd now like to turn the conference over to John Baker of the second Mr. Baker you may begin.
Good morning, My name is John Baker, and I'm Executive Chairman and CEO of the FRP Holdings, Inc.
With me today on the line or David the V. A junior our President John Baker, the third our CFO, David the V. As the third our executive Vice President John Klopfenstein, Our Chief Accounting Officer, and John Milton Our Secretary.
Before we begin a discussion of the quarter's results. Let me remind you that any statements on this call, 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 and such forward looking statements.
These risks and uncertainties are listed from time to time, and 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, except as imposed by law.
As a result of the future batch.
New information.
Now, let me turn to the results net income for the fourth quarter of 2020 with 393000 or four cents per share, bringing our net income for the year to $11 million 615000 of our dollar 21 per share versus <unk>.
<unk> me and 177 or $1 63 per share the.
The lower results for 'twenty, and 'twenty were driven by lower investment income as interest rates fell dramatically during the year and by greater losses on our joint ventures, and especially the Marin and Bryant Street, which had high interest and depreciation expense and operating loss.
Losses, as we built our rent rolls from zero at both locations.
These losses were partially offset by gains on property sales, including our free remaining watch and the likes of business Park are depleted mining side of golf Hammock, Florida.
And right of way through our four buyers property and our newly completed and fully occupied warehouse and I'll hop.
And I Wonder business Park and Baltimore.
During the year, we made good progress on our new developments at Bryant Street and half Street in Washington.
Our two mixed use projects and Greenville, South Carolina.
And if the Marin, where we completed the construction of the second phase of our Anacostia property and expect to achieve 90% occupancy this month and.
Additionally, our mining royalty business had record results and we negotiated.
The new 12 year interest only loans on dock 79, and the Marin and <unk>.
Fixed rate of three point or 3%.
And with total principal on the on the two loans of $180 million.
The loan on the dock 79 and replaces.
A full 0.15 per cent long and.
And on that property alone, we will save over a million dollars of year.
And the interest.
Finally during the year, we repurchased 510 day.
And 145 shares of our stock and an average cost of $41.78, while still leaving ourselves with the $150 million of cash and equivalents a day.
Iran.
Let me turn over the call draw of President, David <unk>, who will walk you through our various projects David.
Thank you John and good day to those on the call. This morning.
Let me now out of bit of details of the highlights John provided in his opening remarks.
As to our asset management segment with the disposition of our final two heritage properties and 2019, we completed the liquidation of a little over 4 million square feet of assets that made up this business segment, leaving just the company's 33000 square foot multi tenanted home off of.
This building and Sparks, Maryland, and the now vacant lot and Jacksonville, Florida and at one time House, Florida Rock Industries' home office.
Remains under lease to Vulcan materials.
Earlier this year, we transferred from the development segment.
And you know 162nd Street are completed 94350 square foot speculative warehouse building and Baltimore City.
The building became 100% leased and occupied and the first quarter of 2020 and we subsequently completed the sale of the asset and July of 2020, realizing a gain of some $3 $8 million.
And early 2019, we added and assets of this business segment through the purchase of the Cranberry run business Park, and Aberdeen, Maryland the.
268000 square foot multi building warehouse park that was in dire need of rehabilitation.
We spent the remaining months of 2019 and part of 2020, completing an extensive renovation of the park and associated building.
During 2020, we received significant leasing success, bringing the park from 26, four and 1% at the beginning of the year, the 87.6% occupancy at year zone.
Total revenues for the asset management segment for the quarter were up 44% of $658000 over the same period last year with an operating profit of $36000.
First is the loss of $213000 and the same quarter last year and.
Increased revenues and profit this quarter.
And were mainly attributable to improved leasing of cranberry well.
And the mining and royalty segment total revenues for the quarter were $2.383 million versus 2 billion $274000 and the same period last year.
Total operating profit was $2.089 million and increase of 2.5% over the same period last year.
And of particular note as John said earlier in his opening remarks. This business segment experienced the highest revenue numbers for the year and our company's history.
With respect to ongoing and new projects and the development section.
Highlights would include.
One at year's end phase one of our joint venture with St. John's properties.
Instead of four buildings totaling 72080 square feet of single story office buildings, and 27950 square feet of small bay retail space against the wall.
And the mortality, Maryland lease.
The leasing efforts procured one retail tenant despite the 10 of the pandemic.
We took possession and the fourth quarter of 2020 with lease commencement in January of 'twenty. One as a result, the project is now 46, 7% occupied overall of two 7% increase over 2019.
The completion of this project will consist of 329000 square feet of office and retail space.
Second line.
We continue with the pay U D entitlement process and Hampstead overlook our 118 acre development tracked and Hampstead, Maryland Con.
The concept plan approved in the first quarter of this year calls for 164 single family and 91 Townhome units. We are currently seeking preliminary plan approval from local agencies as the next step and the development process. We are optimistic the 'twenty 'twenty, one will be the year of <unk>.
Substantial progress towards this goal.
Third is an update to our lending ventures.
And all of the entitlements were completed this year of Hyde Park, and Baltimore County, Maryland, and a homebuilder purchased all of 126 residential lots and prior to the commencement of any land development activities.
And all principal and accrued interest has been repaid and part of the profits have been received.
Additional profits are expected to be received in 2020, one and early 2020 two.
Solving and an overall return of our $3 5 million dollar of investment of over 27% or a little over $1 billion.
Poor relative to our other lending adventure and there's also of residential development project called Amber Ridge and located in Prince George's County, Maryland.
Our total commitment for this project is 18 and and a half million dollars and.
As with Hyde Park the.
The investment includes a charged 10% interest rate and a preferred return of 20% above which a profit induced waterfall determines the final split of proceeds and similar to a high bar.
Entitlements are complete land development has commenced and two national homebuilders are under contract to purchase all of 187 loss after completion of the horizontal development.
Five phase two of our riverfront on the Anacostia project, and Washington D C known as Marin.
As John alluded to earlier began leasing and March and received a final certificate of occupancy for the building.
In September of 'twenty one.
By year's end 87, five per cent of the apartments were leased and $84 one per cent were occupied.
Far outs exceeding expectations, despite the pandemic environment.
Of note.
The apartments are expected to reach occupancy by the end of this month.
Relative to the 6900 square feet of first for retail.
76% of of the spaces leased with occupancy currently scheduled for the third quarter of this year.
As with Dock 79. This is a joint venture project with mid Atlantic Realty partners or MRP.
And which FRP is the major partner.
Six at the end of 2018, we entered into a third joint venture with MRP to develop the first phase of a mixed use residential and retail development adjacent to the Red line Metro station in northeast, Washington D C known as Bryant Street.
As the transit oriented development the immediate access the public transportation options is a critical feature to the design and marketing of this project.
FRP contributed $32 million and common equity and another $23 million and preferred equity to the joint venture all of which were capital gains dollars.
Construction began in February of 2019, and the projected year end is 82% complete.
The first building delivery.
Entitled Coda and.
The <unk> of 154 apartments was completed at the end of December and our leasing team has produced 34 leases as of the end of February.
And this building 25% leased.
On time and within budget.
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We expect to deliver the remaining three phases of phase one and Q3 of this year.
Not unexpectedly we are keeping a watchful eye on the completion of construction and the delivering of such a large project during the pandemic.
We believe leasing activity should.
The increase is the critical mass of vaccinations are completed and we approach herd immunity.
Thereby allowing a certain return to normalcy that hinges on people moving about freely.
A linchpin to the attractiveness of this project.
This property is located in a designated opportunity zone, which allows us to defer of significant tax liability.
In total.
Phase wanted Brian Street will consist of 487 apartments, and 86100 square feet of first floor and freestanding retail.
Approximately 44000 square feet of the retail is pre leased.
Seven in December 2019, the company entered into its fourth joint venture with MRP for the development of of mixed use project known as 1800 half Street.
And in August of this year, we back again and construction.
The development is located and the Buzzard point area of Washington, D C less than a half mile downriver from box 79 and married it.
It lies directly between our two acre site on the Anacostia River.
Currently under leased the Vulcan materials, and Audi field, the home stadium of the D C United professional soccer team.
The 10 story structure, and we will have 344 apartments.
<unk> thousand 246 square feet of ground floor retail and is scheduled for completion and the third quarter of 2020 two.
This project is also located in the opportunity zone, and FRP contribute 37 $3 million of capital gains and common equity.
At the end of 2019, we entered into two joint venture agreements with Woodfield development, a new strategic partner to invest and the two distinct projects and Greenville, South Carolina.
What bill has vast experience developing residential and mixed use projects throughout the south of Houston, and Washington D C.
Our first JV called Riverside, and so 200 unit multifamily project in which FRP contributed $6 $2 million of capital gains and exchange for a 40% ownership interest.
Construction began in Q1 of 20.
And is on schedule the fleet and the third quarter of 2021.
This is of qualified opportunity zone investment.
Our second joint venture with Woodfield is the 227 unit multifamily development.
And title 0.4 O eight Jackson.
Which is a nod to Shoeless, Joe Jackson and is adjacent to Greenville Minor League Baseball Stadium.
This project will also include 4700 square feet of retail space.
FRP has received a 40% ownership position and this project and exchange for $9 $7 million and capital gains bonds.
Construction began in may of this year and should be complete and the third quarter of 2022.
This is also a qualified opportunity ambassador and along with Riverside will allow us to defer a little over $4 $3 million and federal taxes.
Well it was the out 2020.
In November we completed the purchase of of 55 acre tract of land and Aberdeen, Maryland.
Adjacent to the Cranberry run business Park we.
We paid $10 $5 million for this profit.
This project will be known as Cranberry run phase two and could support up to 675000 square feet of warehouse product and a robust distribution market.
This purchase will expand our industrial land holdings to allow us to continue.
The industrial development program beyond the remaining undeveloped building lot and Hollander business Park and Baltimore City.
We are currently petitioning for amortization to bring all parcels of this property and the the same municipal boundaries. This process will take a year and we will begin the design process and the interim.
Existing land leases for the storage of trailers on site will help to all side of our carry and entitlement costs.
We are hopeful we can begin construction here in late 2020, two or early 2020 three.
Moving on to our stabilized joint ventures business segment.
In July of 2019, we completed the partial 10 and 31 lifetime exchange by investing 6 million net orders for a 26.65% beneficial interest and.
And a Delaware statutory trust or D. S. T that owns of 294 unit Garden style apartment community known as Hickory Creek, located and Henry Go County, Virginia.
Complex was constructed the 1984 substantially renovated in 2016 the.
The business plan calls for further rehabilitation of the apartments generating value added rents prior to selling the project after an appropriate hold period we.
Continue to receive monthly distributions from operations and Hickory Creek.
The fourth quarter distributions were $85000 and.
And $339000 per the year.
Occupancy averaged above 95 per cent for the year.
With the collection rate and 12, COVID-19 related payment plans, representing less than 3% of revenues.
Relative to dock 79, the average occupancy for the year was 93, 1% down.
Down from 95, 1% of last year.
This past quarter retention rate was 64 per cent.
Similar to the same period last year.
Rail rates, however were flat due to the government imposed restrictions on rent age of races due to COVID-19.
Net operating income for the quarter was 1.55 million down $270000 or $14, seven and 7% over the same period last year.
All in all dock 79, faired quite well during the year. Despite the significant interruptions, we all experienced throughout 2020 generating a net operating income of 6 million and $652000 down seven 1% over 2019.
Keeping our eyes on RASM net retention.
Finding creative solutions to help our tenants whether of difficult new reality and optimizing expense savings continues to be our primary focus as we navigate this property through the pandemic.
So seriously impacted by Covid with shutdowns and reduced cash capacity canceled stadium events and general uncertainty our three retail tenants at dock 79, which total approximately 10.5 thousand square feet of the total of 14000 of retail space seemed.
To be holding their own and looking forward, the warmer weather and better utilization of the outdoor spaces.
The remaining retail suite is being actively marketed but we are being quite selective as to vendor and us.
Full occupancy is expected in late 'twenty, one for the retail program.
Dock 79 was our first joint venture between the MRP and FRP.
And which FRP is the major partner with the 66% ownership position.
We have touched a few times on the impact of Covid has had on the FRP.
Make no mistake, we are not immune to the effects of this terrible global disease, there's monopolize the world's attention throughout 2020.
FRP has significantly adjusted its operations with.
Withstood infected employees and contractors held the hands of tenants paralyzed by new government regulations, preventing their opening for business and witnessed the carnage of life and the and our enterprise and many turns.
All of the while we're immensely grateful that as a business and the collection of professionals. We stand the top of a solid financial foundation that uniquely enables us to progress as an organization with a steadfast mission.
That followed closely so the.
The Insulates us from much of the troubles other space. Thank you and I'll now turn the call back to John.
Thank you David.
Now we are at this point happy to open up the call for any questions that any of you might have.
And at this time, we will open the floor for questions and if he would like to ask a question. Please press star followed by a one on your telephone keypad questions will be taken in the order and which they are received if at any time, you would like to remove yourself from the questioning queue press the star to again to ask the question Press Star one now.
And our first question comes from Bill Chen. Please go ahead.
Hi, guys.
Hey, Bill though.
A couple of questions of that probably got a jump around a little bit the.
I think there was the Alamo Drafthouse and the Bryant Street the project.
My memory serves me correctly and they just filed for bankruptcy yesterday is there any of our and any update from weather would go the route with the Alamo Drafthouse is the tenant on the binary project.
Bill the state of the Deville Yea, we we know about the the parent filing bankruptcy about the same time you did.
And the.
The lease that we have is with the franchisee.
Okay and there they have three three different that's the way this will be the third and they have two other operations that are open, but certainly not to the extent that they would like them to be.
So we don't know all of yet we speak with them probably all of the bi weekly basis.
Hum. So again, we're aware of and we're just gonna have to see what that what does that fall outdoors.
The building is under construction and we're going to get to a of White box program and then we'll try to figure it out from that they were expected to come and start working on the interior of the project sometime this summer.
No.
The better if we can get the herd immunity, but that's kind of about where we are now.
Got you and and just in case for some reason you know that can be repurposed that that space, if needed and Amanda Yao of movie theaters kind of got of certain lay out.
Which may be different than a typical lay out so any any color and that would be helpful.
Again and the building is is design for you know for them as you may or may not know 65 per cent of their revenues is derived from food and beverage.
And so yes.
It can be I wont say, it can be repurposed easily or quickly, but but it can certainly be repositioned that you know for other retail users.
Got you.
Okay, and I'm, just kind of jump around a little bit I Hope you guys hope mine and cranberry and abroad.
You know great job of getting that repurpose and at least up.
And can you share of what kind of line, we're getting on on that building.
Well, it's a when you say and you say, what kind of rent and a lot of the spaces there.
Bill are temporary spaces, and we called temporary league and our leases plus or minus a year and so.
So.
Our original underwriting was for something a lot less and what we're getting now.
One yoga do stored for temporary spaces, we were again and we paid about $37 a foot for that building.
And then put a bunch of money into us So we've got a pretty low basis.
Hum, but and then the leases were generating are well beyond what we had originally underwrite it.
The true.
And and the intention there is is it.
Refresh my memory I guess the intention there is to sell that.
Well you know everything's for sale as you can as you certainly know from from our past the.
As the activities I mean, the paint was hardly dry on the the Hollander building before we sold that one and and June. So we just you know again.
We don't know, we don't make any plans to sell something right away. We just look at the market and and we tried to be as opportunistic as possible and the sale of our assets.
Got you. Thank you and I think the new acquisition the Timna with all of the acquisition. The Aberdeen, that's right next to Cranberry and is that right.
Yes, Sir.
And what was there like what did you guys see that made that.
And the attractive.
Well, it's surrounded by the large box institutional.
Our houses.
It's a great location, it's a great location, it's close to 295 and as you know the where were located there and the North East you can get two of a major part of America's population and the lesson and eight hour drive.
So we and.
And more importantly, it adds it helps to put some a little bit a little bit of inventory back into our program I mean per year.
We probably had too much inventory, but.
Well as of and before we bought that we had one lawful and and Hollander business Park that could take us as much as of 100000 feet and now we were at.
Oh.
But primarily we love the location.
Gotcha.
Gotcha.
And ER.
Local rent dynamic I think the headline is generally that and Richmond, Virginia.
And I think I think I saw something and the mid single digits rent the increase with Twenty-twenty Ah just wanted to get a confirmation on that I I don't know of that happen and in the D. S T property.
So of you the comment on that and also.
If you could comment on rent trends and Green Greenville, South Carolina, and and you know if that is a market that experienced rent growth in 2020.
It has.
Excuse me is as you can imagine 2020, it's been a very unusual year for everybody and every asset class I think I'd, rather be and the mixed use them and the warehouse class and the office and retail, but so it's really kind of hard to tell it's somewhat of an anomaly and we've seen positive signs.
And both our Richmond and by virtue of some of the increases they got of Hickory Creek, but again, when you're dealing with the pandemic, it's awful hard to put any real credibility on board.
Of rent increases or whatever so for example, and D. C. As you know they they are the government wouldn't allow us to.
Who was the increase rents.
We didn't see a favorable trend we see the trend continuing I think it kind of bumped along in 2020, but we're hoping we're very very excited about.
These vaccinations and the return to.
You know to the people moving about really and I think that'll show a tremendous of a chance to the increased rents all around especially in places that had success before this came up.
Mhm.
And just one last question before I dropped off.
So you know.
I'm looking at the apartment rents and and coda.
And for the Bright Street project. It seems like the asking rent is about 280, a square foot for the.
Total building can we extrapolate that to the to the rest of the Brian Street projects.
Well.
The code of building is a little bit is is probably the of the lower and I won't say the the the low end, but a lower and then the chase which is the two buildings that are a little closer to the.
You know to the of the railroad and well.
And the other end of the park So code as units or are just the I would say just a touch below so we're gonna see greater rents.
At the chase, which of the two buildings that are under construction now so we haven't given a little bit of little bit more of a discount than we had all of that.
We had underwritten and the beginning of five 7% Miami, but but the we've only been open for the two modestly at least 34 units.
And as of February 28, so.
You know the the games the foot we feel really good about you know the project will be excited when you know when the spring comes and we finished the project because the great thing about this project as there are a lot of open space and and that's important and you know Oh and a very important factor for the retail component and also for the peak.
And that live there.
Mhm Mhm Mhm and got you. Thank you very much I think that's that's all of the question that I have.
Okay.
Thank you and our next question comes from Curtis Jensen. Please go ahead.
Hey, good morning, Fellas can you hear me okay.
Yeah, So yeah hurt us.
Well congratulations on getting through the year of is it.
Your business held up amazingly, well and you've got a heck of a lot of accomplished you're very busy.
And and it was pretty remarkable but of 23 questions if I could.
Just thinking about the.
You know some of the Submarkets and D C like southwest and Capitol Hill, and Capitol Riverfront there was.
I think and the last year, something like 3900 units delivered and into those markets and.
You know across a dozen buildings or so and as you've kind of you've got big commitments at half Street.
And Brian Street.
And you know how do you feel about and and Theres, probably been positive absorption and.
It sounds like you guys are doing a great job getting the stop and stuff like that but.
You know given your significant footprint already and and.
Given what you've learned about [laughter], there's public health.
Experience.
Are you inclined to keep putting.
The big checks and too.
The D C area or you know if you had it.
Are you.
Thinking about the I mean, obviously, you're thinking about other things. He spent 10 million per property and light industrial and Aberdeen and stuff like that but.
And just give me a sense of where you think you might be allocating.
You know where are you are you kind of done for.
For the moment and D C.
No.
Obviously, there's the stuff at Buzzard point coming down you know in the years ahead, but.
I mean, how do you how are you feeling about this market right now and in the and the multifamily market.
Given all of these crosscurrents.
I can offer the couple of comments and then John.
And I guess you get the appreciate your.
And insight to this as well we've talked about this car to somebody look the.
The South East of Washington, D C, where we're located is literally the southern entrance to the nation's Cabo and.
And the new Frederick Douglass moving more of a bridge the.
Structure improvements with the oval and all of that that's under construction, which has created somewhat of the nightmare for.
You know for the for all of the people that live there and walk around there but.
We see of very strong you know.
Strong increase and the people they continue to move into the area down there of the younger the the younger people and you can argue that with the change of the way people work, where they don't go to the offices. They liked the live and you know and nicer places and there's a tremendous amount of of of live work play type of activities.
And in and around you know the South East I mean, you've got sports and and baseball soccer you have the water you have sports betting you have.
A lot of different positive influences on that area.
So we're still pretty we're still pretty bullish on the area I mean, obviously, it's not without a little trepidation, but.
We we are we continue to to take a look at what what's in front of us and as this well we reach herd immunity and we see where things kind of play out and I think the at that point of course, we'll take a look at and where we are and decide and the kind of look at the tea leaves and and squeeze the old Crystal ball and see where.
We think things are at that time.
We're not we don't have this.
Go ahead sorry.
Curtis I would this is John Baker.
I would say we are.
Very bullish on.
On the area and.
The buzzard point and the phases, three and four of our.
Anacostia property so.
You know we were.
Very surprised pleasantly surprised at how quickly the merit of at least up I think we were.
We were figure and that we would get 15 units a month and we've got a lot of months two or three times that so.
We've got every region.
Both because of what happened before.
And.
Covid and during Covid.
They have a lot of faith and that part of of the market.
We've got them.
We're gonna Watch Bryant Street.
As David mentioned and as the.
Thing and Thats a multi.
And phase building and we're starting off with the big Hunk.
Of apartments and.
Retail so we'll watch that wanted to see if it if it leases up we're off to a decent start and.
But.
It really won't be.
The fair to the.
Analyze that market until people start using the metro again, and we get some resolution on what happens with the the.
Alamo Drafthouse theater, so yeah.
The less optimistic about debt, but.
You know.
We would be prepared to go forward, if we could get the.
Get it leased up and a reasonable amount of time zone and phase one so to answer your question were anything but done in D. C.
And you're on phase three and four do you have to wait until the bridges done before you can get going there or I know there was some.
And you had some of that.
The situation with the city I guess of it.
Around and easement or something like that there was you know, but do you have to kind of wait until the bridges done before you.
Net going there.
To the answer to the question would be yes.
Probably would want to wait till it's done but.
More importantly, with US building the building at half Street, Yeah, we wouldn't think about starting a new project until we get debt up and read it out so.
And the way of kind of be the bridge has got to be done and I don't know if you've seen at the the bridge and that round about the they're gonna have there is really working.
Beautiful.
And I never thought that bridge would be and amenity, but is it is it is gorgeous and so I think and this adds up the the whole area are.
Are they taking down the I guess, we're gonna take down the old bridge right there and it.
It will be taken down and time.
Right right.
On the on Dock 79, you said the end of the NOI was $6 6 million I think.
Is there are where theyre added expenses I mean, I'm sure there were probably added expenses.
You know related to Covid precautions and things like that expenses that you think well.
Go away that you can take out you know once once the public health issues abate a bit.
The absolute or do you think of you're going to withdraw from running the building the way it is.
If we [vocalized-noise].
Excuse me Covid. This is David Deville, Yeah, absolutely I mean, we had a we had a lot of expenses because of the keeping it sanitized and that sort of thing that the debt, we would not have under normal conditions for sure.
And how does the do you like a few of few hundred thousand dollars of you you know annually or is it you know as that.
It could.
Good day.
And it could be probably high that's probably had curtis but the the the real play on that is debt.
And our retail yeah.
We had been getting excess ranch.
And especially during the world series year and and.
And as opposed to being shut down and hoping to get rents. The so I think that's where you'll see an improvement as we come back and also.
You know I.
The rent was 93, our occupancy was 93% at the dock 79 as opposed to 95 of the year before debt that's an impact the average.
Sure John average occupancy and the rent freeze.
And and we were unable to raise the rash, where it's interesting it man and a wrench.
All of our.
What day did about 10% higher than they are at the dock. So there's there's room to rent to raise rents win.
Debt.
The freeze.
It comes back or.
Or and I should say, so I think you'll see the.
Dock 79 and get okay.
Improvements and a lot of ways.
Is that at all and not the least of which was as we were building the Marin.
I'm not exaggerating it couldn't we had you know heavy construction going on.
And the 20 or 30 feet from the dock 79 and that cannot of helped.
John.
The leasing activity at all and that's of course done now so it'll be a lot more.
Mature.
The place and I think of very very desirable place.
Great.
And when I think about Hyde Park, and Amber Ridge. It seems like you guys and it seemed like an opportunistic kind of <unk>.
<unk> mezzanine lending.
Approach.
And maybe that's not the right range, but that's how I kind of think about it and do you see it.
Knowing what's going on I mean homebuilders are dying from it.
You know land and intervene and when do you see other opportunities like those in the.
You know come and coming down the Pike.
Ah, Yes, Curtis we do as a matter of fact, we have one that's fairly close to the two of snaking of charge.
But you're absolutely right I mean, it's been it's been an interesting dynamic obviously trying to navigate the have all of.
Our partner and navigate through 2020 dealing with the title of them as you know from government agencies that are close to out of that sort of thing and the be able to get to get one of the projects sold.
And then to get all of the entitlements on the other one during the and you know during this year has really been pretty remarkable, but where and when we look at and really good areas, where we can find the whole and the tone and that's what these are these two or and we have the we have other ones that we look at but they have to meet.
We have some pretty rigid criteria before we're going to become part of the blending Bachelor of but we have a really good partner who has been in the residential.
The development business and the past president of of actually a couple of of the National homebuilding companies, who is our partner and we've known for over 25 years. So we are we're pretty excited about the lending bachelors program and it also.
It also we don't want to take our eyes off what our real business as you know.
That is industrial development and then certainly now of mixed use.
And then I'll shut up and the second my last question is you know can you just remind me of the kind of obligations you have and an opportunity zone are they.
Is there sort of an 80 20 low income.
The type of obligation or is there.
The other obligations do you have when you go into an opportunity zone.
Well the Big thing is obviously and and a lot of these you have a certain percentage and different locations of the we'll call. It affordable housing and those dynamics change depending on the you know on the location.
But more importantly, it's the whole per.
You know you have to.
All of it it differs and we had two of the the current program with the opportunities. The Io and says that you have to sell you know you have just the saddle onto the the property by the end of 'twenty 'twenty, one and then that you have to then the whole keep the property at least through I believe is 2020 seven.
And then you pay you.
You owe the taxes all of those capital gains money that you invested in 2020, one you owe taxes on 85 per cent of that.
And then as the and more importantly, if you go past 2021 of the monies that you and vast and these projects you have to keep them you have to keep them up and operating for 10 years.
And if that happens then.
The basis is frozen and you don't have to pay taxes on the increased basis, if and when you ever sell the property.
That's the big that's the big program as the deferral of taxes and the short term, but the freezing of the basis of whatever happens and you don't have to pay taxes on the increased basis. When you ultimately do sell it after the 10 year hold period.
Hmm, okay. Thanks, Thanks, a lot and keep up the good work.
Thank you.
Thanks for your support.
Thank you and our next question comes from Stephen Farrell. Please go ahead.
Hey, guys can you hear me.
Yeah, yes.
And quick question about Brian Street, I know, you've mentioned day with the Marin and your internal metrics were about the 15 leases of moms and what are your similar at least of metrics for the coda and and what kind of contingency plans are in place in case, there's a slew of lease up.
Well co.
Coda has been exactly been leasing at the rate of about 17 units.
At the you know for January and February I mean, we're just kind of like just getting started and that's the Oh, that's not a bad start considering the fact of construction is going on all the way all around you. So we're pretty actually were pretty of B.
And be happy with what has happened at the at the coda.
We are as John said, we're looking at that from you know that project closely and as I said in my remarks, we're watching that.
The construction completion, we have a lot going on as it relates to <unk>.
And then or renting the retail activity that will then we think will help to keep the leasing activity up and maybe even and crazy sit.
We are very conservative and our underwriting of these waste is going in and.
So we're not that far off of what our underwriting criteria was at least the stark and Bryant Street. So we.
We are giving out some you know and when we changed the pricing on these properties just about every day through the software programs that are the property manager has which is the pazuto companies.
And they're very good and very and very experienced and and and.
Running and operating these programs. So we're kind of following along with them.
As it relates to the retail program we have.
Has the John and I said earlier, we're watching to see what happens with the.
With the Alamo Drafthouse that's that's.
And that's 44000 and see but we have another you know 42 or 43000 feet of first floor retail and we've had some really good velocity from retail tenants, which is amazing.
And where we've created of food Hall concept.
The well occupy about 10000 square feet of that and will.
We have the incredible amount of velocity, we've actually got a couple of letters of intent that we're going to lease on so so far so good.
And and Steven to answer your question.
A lot of less optimistic point of view, we've got 150 million in cash and that's the.
That's true.
One of our plant back up is if things don't go well.
Great.
That would enable us to keep paying the bill.
The loan.
And.
And there.
Fair enough.
Okay.
Okay.
Okay.
Yeah.
The shave and you're breaking up we can't hear you.
Yeah.
Okay.
Yes.
Steve and I'm, sorry, we can't hear you.
It's the.
Yeah.
And I think it's frozen.
Yeah, we lost him.
Alright, and as a quick reminder of our audience and if you'd like to ask the question. Please press star one now with you of a question here from John Koller. Please go ahead.
Good morning, gentlemen.
I'm.
Just a couple of follow up questions from what Steven was asking if I may.
Can you bracket your capex budget for this year.
And then as a follow up to that if you can also sort of ballpark, where you see funds coming in from either of asset sales and refinancing and how you expect that to offset any cap spend yeah.
John K can you.
Talk about the Capex.
I don't have that figure of right in front of me and David do you what do you recall the thing what was yeah. What was the question I'm sorry.
Yeah, what your cash cash outflow was looking like for all of the projects you have and then how you might offset some of that from asset sales or the refinancing of a mere and cash that you might pull out I'm just curious about how the cash flow looks for the year.
As a corollary to the 150 million and you already kind of the bank.
Okay, and you say for the year do you mean, 'twenty 'twenty or 2021.
2021, please sorry.
Okay well.
We are again John.
Spoke earlier, we are we're going through some refinancing of.
The Marin and dock, that's going to generate a $180 billion of new financing one of the.
One of the programs that that will do as the mayor and we are refinancing basically the construction loan into a long term permanent financing and when we go to settlement on that financing, which John talked about we get.
The 13 million and $750000 of preferred equity back plus accrued interest of about $2 $3 million. So that's close to what $16 million there.
Our capex right now for 'twenty 'twenty, one is scheduled to be around $36 million.
So that's kind of a very you know the.
From 3000 feet, but that's kind of where we are right now we don't have any we don't have anything under contract to sell right now.
So I don't know that that will add cash. So if you take just the 16 that we know we're going to get it back and you put that against the 36, its probably a net capex of around $20 million that we would have to go into the back of 150 million to peg it out.
Okay, perfect and I'm guessing given the amount of money that's available pretty much everywhere that potential deals of.
Of any material size of probably not within your price range.
Is that a reasonable assessment that you're just seeing opportunity, but they're not price right.
We have a we have a pretty strict underwriting criteria and we're always looking but theres a lot of crazy money out there and the world today. So what we look at a lot of projects, we'd probably look last year, we looked.
I'm embarrassed to say probably over 800 projects and the we wound up the purchasing 55 acres in Aberdeen, Maryland.
[laughter], Yeah, that's that's great and that's the right filter and mine.
And Mike John here.
And John I think your point is a very good one yeah.
And.
There are not many projects.
And that are built and for sale the wood.
And our appetite because they are the.
And Theyre just expansion of this can be yeah.
And Thats exactly why we think the.
Developing.
These are projects you know is a better business model.
And then and then buying them right now.
Okay, Great and then lastly, your execution.
On the share repurchase was a quite good.
And.
I'm not asking for any opinion on where you view of the stock price or anything like that but.
Given the lack of potential deals and depending how your Capex budget goes would you still look to allocate some cash for additional repurchases, where you thought the stock was inexpensive.
And I think we've got about 10 million and approved.
At this point, yeah by the board.
Yeah and.
And.
I'm glad you're not going to ask is what.
Our pricing strategy the name.
And the nasal needless to say, we would rather pay less and more.
Okay, Alright, thank you very much.
Great.
And next we'll go to Bill Chen. Please go ahead.
Hey, guys.
On the on the refinancing of the Marin and dock 79.
And we've seen the Teng of Treasury have some wild moves lately.
Are those two transactions is kind of like a foregone conclusion or is there a is.
Is there some way that those two trends are.
The financing could be derail.
Build the rates that we quoted said today, our fixed Hum, we looked at probably where we're deep into the of the documents now.
We could probably get the settlement then the over the next two or three weeks. So we're well within the confines of the time allocated to get the settlement here and it was those loans actually were originally they had a there on a 12 year a 12 year average as opposed to the 10 and 180 basis points.
There was a floor on those all of those loans. When we first went into what the we could lock and until we send and the application, but the floor was like 2.8.
Per cent, we got a we got I wont say, we got caught and we wound up at three point of three.
Hum.
This is where hopefully we will get to the and Theres No reason to believe that we won't but you know crazier things have happened.
Mhm Mhm and I'll take you for the color and I'm on.
On the construction of loan on the Marin Oh, we have an estimate on that what what that final the number will be.
The final number of what.
For the mayor and construction alone.
And that's about $59 million.
And I mean, I think it was roughly 63 was 65 million I know the construction of law was approved for was 71 million per month.
Mhm.
And in 71 the final figure.
Six of total.
And now it's 69 of the half right now.
69, and a half Okay got you. Thank you that's helpful.
And and I think I just wanted to leave off with my my the final opinion of the shareholder a debt. We we believe that share buybacks are a great use of capital and I was just encouraged that as you continue to create a lot of value for shareholders.
There's a debt of that that the the share buyback price is a moving target you know my my suggestion would be don't get 68 and of what you paid and the pass I think I think that number could rise overtime.
And as as these projects get the follow up and and value gets created and you know just just the flexible on that and and we we we have you know I will reach out and.
Now offline to discuss Ah, but you know I I, just want to but I think I'd say.
The previous share buybacks have been done at very attractive prices and ER and the future share prices should account.
Account for the the the increase in prices through you know all of the good job that you guys had thought.
Thank you.
Okay.
Thank you.
Thank you and it appears we have no additional questions at this time.
Well I appreciate everybody joining the call of a really good.
Questions and the enjoyed being with you all and appreciate your interest and FRP and we'll talk to you next quarter.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
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