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FRP HOLDINGS, INC.

(FRPH)
  Report
Delayed Nasdaq  -  04:00 2022-09-29 pm EDT
53.74 USD   -1.25%
08/12FRP HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL (form 10-Q)
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08/12Tranche Update on FRP Holdings, Inc.'s Equity Buyback Plan announced on February 6, 2015.
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08/12Frp : Financial Highlights Q2 2022 – PDF
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FRP HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL (form 10-Q)

08/12/2022 | 01:46pm EDT

CONDITION AND RESULTS OF OPERATIONS




The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the accompanying unaudited
consolidated financial statements and related notes in Item 1 and with the
audited consolidated financial statements and the related notes included in our
annual report on Form 10-K. The statements in this discussion regarding industry
outlook, our expectations regarding our future performance, liquidity and
capital resources and other non-historical statements in this discussion are
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties, including the risks and uncertainties described in
"Forward-Looking Statements" below and "Risk Factors" on page 5 of our annual
report on Form 10-K. Our actual results may differ materially from those
contained in or implied by any forward-looking statements. We assume no
obligation to revise or publicly release any revision to any forward-looking
statements contained in this quarterly report on Form 10-Q, unless required
by
law.



The following discussion includes a non-GAAP financial measure within the
meaning of Regulation G promulgated by the Securities and Exchange Commission to
supplement the financial results as reported in accordance with GAAP. The
non-GAAP financial measure discussed is net operating income (NOI). The Company
uses this metric to analyze its continuing operations and to monitor, assess,
and identify meaningful trends in its operating and financial performance. This
measure is not, and should not be viewed as, a substitute for GAAP financial
measures. Refer to "Non-GAAP Financial Measure" below in this quarterly report
for a more detailed discussion, including reconciliations of this non-GAAP
financial measure to its most directly comparable GAAP financial measure.



Business Overview - FRP Holdings, Inc. is a real estate development, asset management and operating company businesses. Our properties are located in the Mid-Atlantic and southeastern United States and consist of:

Lands leased to mining companies, some of which will have second lives as development properties;

Residential apartments in Washington, D.C., Greenville, South Carolina and Richmond, Virginia;

Warehouse or office properties in the Mid-Atlantic states either existing or under development;

Mixed use properties under development in Washington, D.C. or Greenville, South Carolina; and




Properties held for sale.



We believe our present capital structure, liquidity and land provide us with
years of opportunities to increase recurring revenue and long-term value for our
shareholders. We intend to focus on our core business activity of real estate
development, asset management and operations. We are developing a broad range of
asset types that we believe will provide acceptable rates of return, grow
recurring revenues and support future business. Capital commitments will be
funded with cash proceeds from completed projects, existing cash, owned-land,
partner capital and financing arrangements. We do not anticipate immediate
benefits from investments. Timing of projects may be subject to delays caused by
factors beyond our control.



Reportable Segments



We conduct primarily all of our business in the following four reportable
segments: (1) asset management (2) mining royalty lands (3) development and (4)
stabilized joint ventures. For more information regarding our reportable
segments, see Note 3. Business Segments of our condensed consolidated financial
statements included in this quarterly report.





20





Asset Management Segment.



The Asset Management segment owns, leases and manages commercial
properties. These assets create revenue and cash flows through tenant rental
payments, lease management fees and reimbursements for building operating costs.
The Company's industrial warehouses typically lease for terms ranging from 3 -
10 years often with 1 or 2 renewal options. All base rent revenue is recognized
on a straight-lined basis. All of the commercial warehouse leases are triple net
and common area maintenance costs (CAM Revenue) are billed monthly, and
insurance and real estate taxes are billed annually. 34 Loveton is the only
office product wherein all leases are full service therefore there is no CAM
revenue. Office leases are also recognized on a straight-lined basis. The major
cash outlays incurred in this segment are for operating expenses, real estate
taxes, building repairs, lease commissions and other lease closing costs,
construction of tenant improvements, capital to acquire existing operating
buildings and closing costs related thereto and personnel costs of our property
management team.


As of June 30, 2022, the Asset Management Segment owned four commercial properties in fee simple as follows:

1) 34 Loveton Circle in suburban Baltimore County, Maryland consists of one
office building totaling 33,708 square feet which is 95.1% occupied (16% of the
space is occupied by the Company for use as our Baltimore headquarters). The
property is subject to commercial leases with various tenants.

2) 155 E. 21st Street in Duval County, Florida was an office building property
that remains under lease through March 2026. We permitted the tenant to demolish
all structures on the property during 2018.

3) Cranberry Run Business Park in Hartford County, Maryland consists of five office buildings totaling 267,737 square feet which are 100% leased and occupied. The property is subject to commercial leases with various tenants.

4) Hollander 95 Business Park in Baltimore City, Maryland consists of two buildings totaling 145,590 square feet that were completed in the fourth quarter of 2021and are 69.1% leased and 52.8% occupied.




Management focuses on several factors to measure our success on a comparative
basis in this segment. The major factors we focus on are (1) net operating
income growth, (2) growth in occupancy, (3) average annual occupancy rate
(defined as the occupied square feet at the end of each month during a fiscal
year divided by the number of months to date in that fiscal year as a percentage
of the average number of square feet in the portfolio over that same time
period), (4) tenant retention success rate (as a percentage of total square feet
to be renewed), (5) building and refurbishing assets to meet Class A and Class B
institutional grade classifications, and (6) reducing complexities and deferred
capital expenditures to maximize sale price.



Mining Royalty Lands Segment.



Our Mining Royalty Lands segment owns several properties comprising
approximately 16,650 acres currently under lease for mining rents or royalties
(excluding the 4,280 acres owned by our Brooksville joint venture with Vulcan
Materials). Other than one location in Virginia, all of these properties are
located in Florida and Georgia. The Company leases land under long-term leases
that grant the lessee the right to mine and sell reserves from our property in
exchange for royalty payments. A typical lease has an option to extend the lease
for additional terms. The typical lease in this segment requires the tenant to
pay us a royalty based on the number of tons of mined materials sold from our
property during a given fiscal year multiplied by a percentage of the average
annual sales price per ton sold. As a result of this royalty payment structure,
we do not bear the cost risks associated with the mining operations, however, we
are subject to the cyclical nature of the construction markets in these states
as both volumes and prices tend to fluctuate through those cycles. In certain
locations, typically where the reserves on our property have been depleted but
the tenant still has a need for the leased land, we collect a minimum annual
rental amount. We believe strongly in the potential for future growth in
construction in Florida, Georgia, and Virginia which would positively benefit
our profitability in this segment. In the fiscal year ended December 31, 2021, a
total of 8 million tons were mined.



The major expenses in this segment are comprised of collection and accounting
for royalties, management's oversight of the mining leases, land entitlement for
post-mining uses and property taxes at our non-leased locations and at our
Grandin location which, unlike our other leased mining locations, are not
entirely paid by the tenant. As such, our costs in this business are very low as
a percentage of revenue, are relatively stable and are not affected by increases
in production at our locations. Our current mining tenants include Vulcan
Materials, Martin Marietta, Cemex, Argos and The Concrete Company.

21






Additionally, these locations provide us with opportunities for valuable "second lives" for these assets through proper land planning and entitlement.

Significant "2nd life" Mining Lands:




Location           Acreage  Status
Brooksville, FL   4,280 +/- Development of Regional of Impact and County Land
                            Use and Master Zoning in place for 5,800 residential
                            unit, mixed-use development
Ft. Myers, FL     1,907 +/- Approval in place for 105, 1 acre, waterfront
                            residential lots after mining completed.
            Total 6,187 +/-






Development Segment.


Through our Development segment, we own and are continuously monitoring for
their "highest and best use" several parcels of land that are in various stages
of development. Our overall strategy in this segment is to convert all our
non-income producing lands into income production through (i) an orderly process
of constructing new commercial and residential buildings for us to own and
operate or (ii) a sale to, or joint venture with, third parties. Additionally,
our Development segment will purchase or form joint ventures on new developments
of land not previously owned by the Company.



Revenues in this segment are generated predominately from land sales and interim
property rents. The significant cash outlays incurred in this segment are for
land acquisition costs, entitlement costs, property taxes, design and
permitting, the personnel costs of our in-house management team and horizontal
and vertical construction costs.



Development Segment - Warehouse/Office Land.

At June 30, 2022, this segment owned the following development parcels:

1) Six acres of horizontally developed land at Hollander Business Park in

Baltimore, City, Maryland with one 101,750 square feet industrial

build-to-suit currently under construction.

2) 55 acres of land that will be capable of supporting over 690,000 square feet

of industrial product located at 1001 Old Philadelphia Road in Aberdeen,

Maryland.

3) 17 acres of land in Harford County, Maryland that will support 258,545 square

    feet of industrial development.



We also have three properties that were either spun-off to us from Florida Rock
Industries in 1986 or acquired by us from unrelated third parties. These
properties, as a result of our "highest and best use" studies, are being
prepared for income generation through sale or joint venture with third parties,
and in certain cases we are leasing these properties on an interim basis for an
income stream while we wait for the development market to mature.



Development Segment - Significant Investment Lands Inventory:



                         Approx.
Location                 Acreage  Status                           NBV
Riverfront on the          2.5    Conceptual design program        $6,166,000
Anacostia Phases III-IV           ongoing
Hampstead Trade Center,    118    Residential zoning applied for   $9,968,000
MD                                in preparation for sale
Square 664E, on the               Under lease to Vulcan Materials
Anacostia River in DC       2     as a concrete batch plant        $7,594,000
                                  through 2026
Total                     122.5                                    $23,728,000




22






Development Segment - Investments in Joint Ventures

The third leg of our Development Segment consists of investments in joint ventures for properties in development. The Company has investments in joint ventures, primarily with other real estate developers which are summarized below:

      Property        JV Partner               Status               %

Ownership

Brooksville Quarry,     Vulcan    Future planned residential
LLC near              Materials   development of 3,500 acres which      50%

Brooksville, Florida Company are currently subject to mining

                                  lease

BC FRP Realty, LLC St John Development of 329,000 square for 35 acres in Properties feet multi-building business 50% Maryland

                          park in progress
Bryant Street                     Mixed-use development with 487
Partnerships for 5    MRP Realty  residential units and 91,661         61.36%
acres of land in                  square feet of retail partially
Washington, D.C.                  completed
Aberdeen Station                  $31.1 million in exchange for an
residential                       interest rate of 10% and a 20%
development in                    preferred return after which the   Financing
Harford County,                   Company is also entitled to a
Maryland                          portion of proceeds from sale
Amber Ridge                       $18.5 million in exchange for an
residential                       interest rate of 10% and a
development in                    preferred return of 20% after      Financing
Prince George's                   which the Company is also
County, Maryland                  entitled to a portion of
                                  proceeds from sale
1800 Half Street                  Construction underway on
property in Buzzard   MRP Realty  ten-story structure with 344         61.37%
Point area of                     apartments and 8,356 square feet
Washington, D.C.                  of ground floor retail
                                  Construction underway on
.408 Jackson          Woodfield   mixed-use project with 227
property in          Development  multifamily units and 4,539           40%
Greenville, SC                    square feet of retail space
                                  began in May 2020

Riverside property Woodfield Construction underway on 1430 Hampton Avenue, Development 200-unit apartment project began 40% Greenville, SC

                    in February 2020




Joint ventures where FRP is not the primary beneficiary are reflected in the
line "Investment in joint ventures" on the balance sheet and "Equity in loss of
joint ventures" on the income statement. The following table summarizes the
Company's investments in unconsolidated joint ventures (in thousands):

                                                                                            The
                                                                                            Company's
                                                                                            Share of Profit
                                                                           Profit
                          Common        Total          Total Assets of     (Loss)            (Loss) of the
                                                                           Of the
                         Ownership      Investment     The Partnership     Partnership       Partnership (1)
As of June 30, 2022
Brooksville Quarry,
LLC                          50.00 %  $      7,546              14,461              (42 )                (21 )
BC FRP Realty, LLC           50.00 %         5,485              22,115              (90 )                (45 )
Bryant Street
Partnerships                 61.36 %        58,253             203,480           (4,787 )             (3,186 )
Aberdeen Station Loan                          917                 917               -                    -
DST Hickory Creek            26.65 %         6,000              45,186             (271 )                171
Amber Ridge Loan                             6,234               6,234               -                    -
1800 Half St. Owner,
LLC                          61.37 %        39,112             119,957               -                   (64 )
Greenville/Woodfield
Partnerships                 40.00 %        16,108              92,947             (563 )               (225 )
  Total                               $    139,655             505,297           (5,753 )             (3,370 )


23







The major classes of assets, liabilities and equity of the Company's Investments
in Joint Ventures as of June 30, 2022, are summarized in the following two
tables (in thousands):



                                                               As of June 30, 2022                                           Total
                               Riverfront          Bryant Street      DST Hickory      1800 Half St.      Greenville/      Apartment/
                            Holdings II, LLC        Partnership          Creek          Partnership        Woodfield       Mixed Use

Investments in real
estate, net               $               0              195,633           43,124            119,311           92,149      $ 450,217
Cash and cash equivalents                 0                2,831              579                646              466          4,522
Unrealized rents &
receivables                               0                4,859            1,181                  0               14          6,054
Deferred costs                            0                  157              302                  0              318            777
  Total Assets            $               0              203,480           45,186            119,957           92,947     $  461,570


Secured notes payable     $               0              128,697           29,360             47,128           51,148     $  256,333
Other liabilities                         0                3,077              144             11,876            3,402         18,499
Capital - FRP                             0               54,814            4,179             37,414           15,359        111,766
Capital - Third Parties                   0               16,892           11,503             23,539           23,038         74,972
  Total Liabilities and
Capital                   $               0              203,480           45,186            119,957           92,947     $  461,570






                                                      As of June 30, 2022
                           Brooksville          BC FRP        Aberdeen     Amber Ridge     Apartment/       Grand
                           Quarry, LLC       Realty, LLC        Loan          Loan         Mixed Use        Total

Investments in real
estate, net               $      14,279           21,305          917           6,234        450,217      $ 492,952
Cash and cash
equivalents                         178              224            0               0          4,522          4,924
Unrealized rents &
receivables                           0              431            0               0          6,054          6,485
Deferred costs                        4              155            0               0            777            936
  Total Assets            $      14,461           22,115          917           6,234        461,570     $  505,297

Secured notes payable     $           0           11,093            0               0        256,333     $  267,426
Other liabilities                    42              164            0               0         18,499         18,705
Capital - FRP                     7,546            5,429          917           6,234        111,766        131,892
Capital - Third Parties           6,873            5,429            0               0         74,972         87,274
  Total Liabilities and
Capital                   $      14,461           22,115          917           6,234        461,570     $  505,297








Stabilized Joint Venture Segment.




Currently the segment includes three stabilized joint ventures which own, lease
and manage buildings. These assets create revenue and cash flows through tenant
rental payments, and reimbursements for building operating costs. The Company's
residential spaces generally lease for 12 - 15-month lease terms and 90 days
prior to the expiration, as long as there is no balance due, the tenant is
offered a renewal. If no notice to move out or renew is made, then the leases go
to month to month until notification of termination or renewal is received.
Renewal terms are typically 9 - 12 months. From March 2020 through the end of
2021, we were prohibited from increasing rent on renewals by emergency measures
in Washington, DC designed to ease the burden of the pandemic on its citizens.
These measures expired at the end of 2021. The Company also leases retail spaces
at apartment/mixed-use properties. The retail leases are typically 10 -15-year
leases with options to renew for another 5 years. Retail leases at these
properties also include percentage rents which average 3-6% of annual sales for
the tenant that exceed a breakpoint stipulated by each individual lease. All
base rent revenue is recognized on a straight-line basis. The major cash outlays
incurred in this segment are for property taxes, full service maintenance,
property management, utilities and marketing. The three stabilized joint venture
properties are as follows:







24








    Property and Occupancy        JV Partner   Method of Accounting  % Ownership
Dock 79 apartments Washington,
D.C.                              MRP Realty       Consolidated          

66%

305 apartment units and 14,430
square feet of retail
The Maren apartments
Washington, D.C. 264              MRP Realty    Consolidated as of      70.41%
residential units and 6,758                       March 31, 2021
square feet of retail
DST Hickory Creek 294 apartment Capital Square     Cost Method          26.6%
units in Henrico County, MD





Second Quarter Operational Highlights

· Dock 79 ended the reporting period with average residential occupancy above 95%

for the fifth straight quarter

· 7.33% increase on renewals at Dock 79

· Best second quarter of revenue for mining royalties in segment's history

· 55.1% increase in Asset Management Revenue versus same period last year

· 16.0% increase in NOI ($6.94 million vs $5.98 million) compared to same period

   last year



Comparative Results of Operations for the Three months ended June 30, 2022 and 2021

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 25,5 M - -
Net income 2021 28,2 M - -
Net Debt 2021 16,9 M - -
P/E ratio 2021 19,3x
Yield 2021 -
Capitalization 508 M 508 M -
EV / Sales 2020 24,9x
EV / Sales 2021 22,0x
Nbr of Employees 14
Free-Float 69,0%
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John Daniel Baker Director
David H. deVilliers President & Chief Operating Officer
John D. Baker Chief Financial Officer & Treasurer
Charles E. Commander Lead Independent Director
Harold William Shad Independent Director
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