FRP Holdings Inc. Q1 2023 Earnings Call
Speaker 1: Oh.
Speaker 2: Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one key on your touchtone phone. Please note this call may be recorded. It is now my pleasure to turn today's program over to John Baker III. Sir, please begin. Good morning. I'm John Baker III, Chief Financial Officer and Treasurer of FRP Holdings and with me today are David DeVillier Jr., our President, John Baker II, our Chairman and CEO , and our
Speaker 3: John Milton, our Executive Vice President and General Counsel. John Kaufenstein, our Chief Accounting Officer. And David DeVillier III, our Executive Vice President.
Speaker 3: As a reminder, 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 in such forward-looking statements.
Speaker 3: These risks and uncertainties are listed in our SCC filings.
Speaker 3: We have no obligation to revise or update any forward-looking statements except as imposed by law as a result of future events or new information. To supplement the financial results presented in accordance with generally accepted accounting principles, FRP presents certain non-GAAP financial measures.
Speaker 3: within the meaning of Regulation G promulgated by the Securities and Exchange Commission.
Speaker 3: The non-GAAP financial measure referenced in this call is Net Operating Income, or NOI.
Speaker 3: FRP uses this non-GAAP financial measure to analyze its operations and to monitor, assess, and identify meaningful trends in its operating and financial performance.
Speaker 3: This measure is not and should not be viewed as a substitute for GAAP financial measures.
Speaker 3: Direct and file gap to net income, please refer to the segment titled non-GAAP financial measures.
Speaker 3: on pages nine and ten of our most recent earnings release.
Net income for the first quarter was $565,000, or 6 cents per share, versus $672,000, or 7 cents per share in the same period last year. Net income for the first quarter compared to the previous year was impacted primarily by an increase of $2,021,000 in equity and loss of joint venture from two projects in lease-up, as well as a $733,000 gain last year from the sales excess property in Brexhill, Florida. First quarter pro rata NOI for all segments.
versus $5.18 million in the same period last year for an increase of 34.9%. David will touch on operations with greater depth and detail in his remarks, but I will briefly mention a few operational highlights. Asset management increased revenues by 27.5% and NOI by 60.6% compared to the first quarter last year. Total revenues in the mining revenue segment increased 35.3% compared to the first quarter last year. And NOI in the first quarter of this year increased 37% over Q1 2022.
For the second quarter in a row, Mining Royalty has experienced its highest revenue total ever for any quarter.
This is the first quarter. The segment has cleared 3 million revenue.
and the first time it has surpassed $11 million in revenue in any trailing 12-month period.
Now if I could turn things over to David DeValier, Jr. to walk you through our segments in more detail. David?
Thank you, John , and good morning to those on the call.
As I've done for the past few quarters, I'd like to provide you with a slightly different perspective on the results of the company from an operational standpoint. We report our business segments in designated silos, which are important in analyzing the company.
However, operationally we have overlap and synergies that are difficult to follow using the business segments as reported. So departing from GAP and employing a day-to-day look at FRP, let me offer the following.
The company's approach is four-pronged, and this has been the core of our business since mid-2018 when we liquidated our legacy warehouse portfolio.
First, in-house asset management includes our industrial, commercial, and land development platform. you
These properties are developed, managed, and owned 100% by Apple or PIDI. And of course, there's the mining and wholtsies.
3 is the Third Party Joint Ventures, which is the name of five projects developed in conjunction with third parties, where FRP is the major owner but relies on seasoned and respected third party operating partners to perform the lion's share of entitlements, construction, and day-to-day operations. And our last segment, Lending Ventures, where we are the principal capital source for residential land development activities.
relative to our in-house industrial platform or asset management. Delivery and occupancy at our three buildings at Holliver Business Park, as well as rent growth on renewals at Cranbury, have produced a healthy lift to more than double the NOI for this period.
last year with –
Q123 NLI of $891,550 over Q122 NLI of $308,777. As of last month, our three buildings in Holland are $891,550.
totaling 247,000 square feet, are fully leased and occupied. Granbury Ron Business Park, a renovated 268,000 square foot multi-tenanted building warehouse park in Aberdeen, Maryland, remains fully occupied in the first quarter of 2023.
capping off five straight quarters of full occupancy at this location.
Our industrial pipeline is strong with three projects in the queue.
We completed annexation on a 55 acre tract of land in Aberdeen adjacent to Cranberry Business Park and will soon begin the building design and create a physical building.
up to 609,000 square feet of warehouse product.
Existing land leases for the storage of trailers on site help to offsite our carrying and title costs. We are hopeful we can begin construction there in 2025.
In Northeast Maryland, along the I-95 corridor, we own 170 acres of industrial land that will ultimately support a 900,000 square foot distribution center.
Pre-development activities here are ongoing, and pending favorable market conditions, we expect to break ground as early as 2024.
Finally, our 17-acre parcel in the Parriman Industrial section of Barford County, Maryland, not too distant from our other assets in Aberdeen.
It's moving through the entitlement process and we expect the building permit to be issued shortly for a 259,000 square foot warehouse. Dependent on final market dynamics, construction on this project could begin as early as this last me do.
Completion of these three land development projects, plus the recently delivered warehouse at Hollister, will add over 1.9 million square feet of additional warehouse product to our industrial platform.
that when added to the assets already in operation at Hollander Business Park and Cranberry Run will total over 2.35 million square feet. Relative to our mining and royalty segment, our mining and royalty division saw total revenues for the quarter of 3,282,000.
versus $2,425,000 in the same period last year.
As John echoed in his opening remarks, this is record revenue for any quarter in the mining and royalty segment for the second quarter in a row.
NOI was $3,148,000, an increase of 37% over the same period last year.
Moving on to our third-party joint ventures.
Currently, we operate both stabilized and development projects with three distinct partners. MRP, and MRP.
to stabilize and develop projects with three distinct partners, MRP, Woodfield,
at St. John's Properties.
The difference between development and stabilize as it relates to our business savings being an initial occupancy level of 90% for a minimum of 90 days.
As of quarter end, our JV platform includes seven mixed use projects totaling 1,827 apartments,
72,000 square feet of one-story office, and 226,000 square feet of retail, all of which have completed construction.
Four projects are located in Washington, D.C. where MRP Realty is our joint venture partner.
These include Doc 79, Marin, Brian .
These include Doc 79, Marin, Bryant, Phase 1, and our most recent completion, BIRC.
In Washington, D.C., our neighboring projects, Doc 79 and Marin, where our partners include both MRP Realty and most recently, Stewart Investment Company, remain healthy with occupancies of 93.4% and 93.2% respectively at quarter's end with all retail fully leased.
Our newest project in the district, Burge, received its final certificate of occupancy in the first quarter and was 32% leased and 24% occupied.
with nearly half or 45% of the retail spoken for at a quarter's end.
Our final DC project is Prine Street, a multi-building, transit-oriented mixed-use project located on the Red Line in northeast Washington, DC.
Rice Street contains two residential projects, Chase and Kota, as well as a movie theater accurate retail building and a flexible outdoor use.
fully leads to a unique entertainment concept called Metro Bar.
At the end of the first quarter, Bryant Street's residential units were 90.8% occupied, and its retail components were 84.2% leased and 79% occupied.
Our food hall, Bryan Street Market, which occupies about 10,000 square feet, opened in March and has seen early success with its first four tenants, including a visit last week by the President and Vice President of the United States in celebration of Cinco de Mayo. Moving on to South Carolina.
Our two projects in Greenville with Woodfield development.
are seeing great success. Riverside, which sits on the Swamp Rabbit River Trail, a popular recreation corridor in Greenville, opened its 200 apartments for lease in August of 21.
and was 95% occupied as of the end of the first quarter.
4-0-8 Jackson, another mixed use project, is located downtown and shares a street and plaza with more feel.
The stadium home of the Greenville Drive, which is an affiliate of the Boston Red Sox baseball team. 408 Jackson was placed in service during the fourth quarter of 2022, and as of quarter end was 53% leased and 29% occupied, with its retail component fully leased and targeting openings by the fourth quarter of this year.
The last project that makes up our third party joint venture division is undertaken with St. John's property.
a pioneer in flex development and former National Developer of the Year.
With St. John , we are developing windlass run in Middle River, Maryland that includes 72,000 square feet of single story office and 27,950 square feet of retail. This project continues to be 50.7% leased and 48% occupied.
So to summarize, relative to our third-party joint ventures, FRP's 52% ownership share of the NLI for these seven projects was $2,868,573 for first quarter of 2013.
versus $2,496,129 in the same quarter last year. That's a 14.9% increase.
Lastly, our lending ventures segment, this last leg of our operating stool.
is a program where we provide working capital towards the entitlement and horizontal development
and future sale of single-family residential projects and ultimately sales to national home builders.
The first of our two current projects is Amber Ridge in PG County, Maryland, with a total of 18.5 million dollars.
The investment includes a charged 10% interest rate and a minimum preferred return of 20% above which a profit induced waterfall determines the final split of proceeds. As of the end of the quarter, 144 lots had been taken down with the final 43 lots expected to be taken down by the end of the quarter.
of this year.
Our other current lending venture is called Prosperitarian Homes.
344 lot, 110 acre residential development project in Arity, Maryland.
We have committed $31.1 million in funding under similar terms to Amber Ridge.
The National Home Builder is under contract to purchase all lots, which will include 222 terminals and 122 single-family dwellings.
Horizontal construction has begun, and we expect the first loss to be taken down to Terroristuss
In closing, we are very pleased that the company has been able to continue to surpass itself in terms of earnings and adapt to difficult market conditions.
We flourished in a constantly changing environment and we've been able to do so thanks to the strength of our balance sheet and the consistent efforts of our talented team.
We look forward to building upon our successes and finding new ways to capitalize on our unique position in the marketplace.
Thank you and I will turn it back to John .
Thank you, David. At this point, we are happy to open it up to any questions you might have.
Thank you, David. At this point, we are happy to open it up to any questions you might have. Thank you.
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And at this time, there are no questions in the queue. We just had one pop-up from Steven Farrell with Oppenheimer. Your line is open. rubbing You can see that our number is relatively high on YouTube.
And at this time, there are no questions in the queue. We just had one pop-up from Stephen Farrell with Oppenheimer. Your line is open. Good morning. How are you? ab passion...
Morning Steven. Morning. Just a few quick questions here. In New York City at least we had a huge increase in apartment listings in March and then we also saw a big increase in rents as well.
Do you see a similar dynamic in DC, maybe people pushing back, buying homes, given the banking crisis and continuing to run?
I can take a crack at that one. Basically we have seen some pretty healthy increases in our rates.
both for renewals and also trade-outs. And as you can see, our occupancy's have been pretty strong in the Washington, DC area and also in Greenville, South Carolina.
So, obviously homes have been, with the interest rates going up the way they have, are making some of these projects a little difficult as it relates to not only building them but selling them. So it'll be interesting to see how it helps out the apartments.
Obviously, homes have been, with the interest rates going up the way they have, making some of these projects a little difficult as it relates to not only building them but selling them. So it will be interesting to see how it helps out the apartments. Yeah, Stephen, I think that...
you know, even when interest rates were low, it seemed like, you know, people in their
late 20s and 30s were pushing off a home purchase just because the
and 30s were pushing off a home purchase just because the...
because interest payments were low and house prices were so high, down payment was, I think, hard for people to afford.
Obviously, interest rates going up and home prices staying kind of where they were, it only exacerbates that. So it seems like there's a...
total lack of supply in available houses.
which we're hoping to capitalize on with our lending venture. So yeah, I don't think.
rising interest rates are a boost to the people buying homes.
That's good. Thank you. And.
You talked on the last call about Rentsware at the Verge versus the Marin and it was running about 10% less. I know that Q4 is...
For seasonality, it's a bit slow there. Have you seen a pickup in Rents there? Do you have an update? As far as Marin goes, Marin is probably the highest.
receiving the highest length per square foot. We're also pretty well occupied there. Of course, that's on the water. Burt has actually seen some pretty strong leasing activity now that we're coming into the strong leasing months.
You know, they're running, obviously our plan here is, we've got a concrete plant next to us that's closing up operations by a third party, so that's kind of helping reduce some of the traffic, not all of it, but we're starting to see some pretty healthy tours and visits, and we're seeing the rest.
starting to pop up a little bit. We think that they'll continue that way, but I think it's gonna be certainly less at the end of the day than what you'd see at dock and Marin because it's not on the water, just like those two are. So.
But we are seeing the rent starting to drop. And on the last call you also mentioned potentially starting the Phase 1 of the Stewart Partnership in Q4. Do you have any kind of thoughts on starting that project in the current environment? Well obviously there's some pretty...
strong headwinds to say that that's not going to happen, but we're still going through the due diligence process, which includes getting the property ready for what we call shovel ready for development. That will probably be able to take a look at the appropriate modeling for that project sometime at the end of the third quarter or the beginning of the fourth quarter.
but I would say that probably...
Just the timing and certainly all of the economic wins, not necessarily being the greatest, that may get pushed off a quarter. We're still kind of in the process of looking at that. But we certainly don't want to start a building too late in the fall, even if the market does dictate the right kind of actions, because it causes too much, you know, it causes too much extra cost.
I don't know if you...
kind of remember the optionality of the deal we have with the stewards but
It can either go one of four ways, and the first is the best possible way, which is...
We do our due diligence, we do our planning and entitlement, and then everybody wants to move ahead and we pay the stewards for the land and then they reinvest that money into the project and we're all good to go. And then the second option is we want to go and they don't.
And in that case, they're obligated to sell us the land and we go out and do it ourselves. Third option is we don't want to move forward and they do. And in that case, they pay us back for our due diligence and planning efforts and they pay to survive for the environment in which we live and to survive with our young kids
they're obligated to sell us the land and we go out and do it ourselves. Third option is we don't want to move forward and they do and in that case they pay us back for our due diligence and planning efforts and they go on their way.
And then the fourth option is we don't like the way the market's looking at the time that we need to make a decision and we all just sit tight.
And I think, you know, we're somewhere between the first option and the fourth option.
interest rates look like they're going to stay flat or go down then
We'll probably feel a lot better about it. Construction costs go down, we'll probably feel a lot better about it if everything stays really expensive. We'll probably feel a lot better about it if everything stays really expensive.
I think we'll probably sit tight because this is a gigantic building, over 400 units, and it's closer to the verge in terms of rents than it is to Marin, just by virtue of its location and......
We're not just going to flip a coin and say,
hope it works out. You know, this is a big deal and this is the first step in a really important partnership and we want it to be successful and we're going to give it every opportunity it can to succeed.
I'll keep going here.
on industrial and then around Baltimore moving forward.
Well, right now it was a bit of a surprise to everyone when the county executive came in and placed a moratorium on all industrial development for 180 days. And then when Dennis started to work its way through the commission.
It's reduced it to somewhat. For example, we're grandfathered.
because our project, that's the 259,000 square foot building that I mentioned in my opening remarks, we had already received what I call site plan approval, so that was grandfathered in.
So we're allowed to go forward and as I said, we're looking to get a building permit here shortly. Market conditions, we're doing market studies now to see how things are. Vacancy right now is very low in this part of the world and so we'll have to, we're gonna, we're.
be zoned industrial and what properties might not be. And that's what they're going through.
I think we'll find out some more, but we like the idea of the fact that we're not going to have a whole lot of competition because we're the last one.
I think we'll find out some more. We like the idea of the fact that we're not going to have a whole lot of competition because we're the last one to get a new permit.
And David, none of our other properties in our pipeline are in.
In that county, so it won't be an issue with with those at least as things stand.
in that county. So it won't be an issue with those at least as things currently stand. That's pretty much correct.
Well, you had the one, the 259,000, which is fine, but isn't there a lot of time for
One other of 54 acres, would that be subject to it? Yeah, that's the Krause property. That's been annexed into the town of Aberdeen, which separates that out from the other projects. We're not part of that moratorium at this point.
And again, that property, as I stated, we're really not ready to move forward on that property for probably at least another year. We spent a lot of time annexing it.
Part of the property was in the town of Aberdeen, private part of it was out. So we annexed the entire parcel in, so that kind of puts us in a better position as it relates to the improvement process. But we still have a ways to go to get the entitlements done on that property. So we really weren't even planning, regardless of this quote moratorium, to starting anything there, probably until 25.
The good thing about that property is we lease a lot of it out for trailer storage, which gives us a pretty healthy return on our initial investment while we're waiting. Just the last question.
Do you have an updated figure and just ballpark dollar value on what you'll spend for development activities for the rest of 23?
I think the projected CapEx number that we have in our 10Q is 89. 83 million. 89 million.
All right, thank you.
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Alright and we have no further questions
I want to thank everybody for their interest in the company, and we're going to get back to work and keep building shareholder value. Thank you. Thank you ladies and gentlemen. This does conclude today's call and we appreciate your participation. You may disconnect at any time.