FRPH - FRP Holdings Inc. (Nasdaq: FRPH) Announces Results for the Fourth Quarter and Year Ended December 31 2018

JACKSONVILLE, Fla., March 07, 2019 (GLOBE NEWSWIRE) -- FRP Holdings, Inc. (NASDAQ-FRPH)

Fourth Quarter Consolidated Results of Operations

Net income for the fourth quarter of 2018 was $706,000 or $.07 per share versus $13,203,000 or $1.31 per share in the same period last year.  Income from discontinued operations for the fourth quarter of 2018 was $20,000 or $.00 per share versus $6,034,000 or $.60 per share in the same period last year. The fourth quarter of 2017 included a reduction of $12,043,000, or $1.20 per share, in the provision for income taxes resulting from revaluing the Company’s net deferred tax liabilities per the Tax Cuts and Jobs Act of 2017.  This positively impacted net income by the same amount.

The fourth quarter of 2018 was impacted by the following items:

• Interest income is reduced by a $905,000 realized loss on the sale of bonds during the quarter.
• Corporate expense includes $372,000 for the annual director stock grant and $100,000 for stock options granted to employees.
• Operating expenses includes $218,000 professional fees related to organization of the Bryant St. joint venture.
• Operating expenses include $276,000 in due diligence costs on the CSX Fort Smallwood potential purchase.
• Interest income includes the $81,000 preferred return on The Maren.
• Loss on joint ventures includes $64,000 for our share of the loss.

The fourth quarter of 2017 included consulting fees of $200,000 charged to discontinued operations.

Fourth 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 $592,000, up $18,000 or 3.1%, over the same period last year.  Operating profit was $261,000, up $33,000 compared to the same quarter last year due to lower allocation of corporate expenses.

Mining Royalty Lands Segment:

Total revenues in this segment were $2,187,000 versus $1,860,000 in the same period last year.  Total operating profit in this segment was $1,950,000, an increase of $254,000 versus $1,696,000 in the same period last year.

Development Segment:

The Development 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 finished shell construction this past quarter on the two office buildings in the first phase of our joint venture with St. John Properties.  Shell construction of the two retail buildings was completed subsequent to the end of the year in January. We are now in the process of leasing these 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 from sale.  This project will hold 125 town homes and 4 single family lots and is currently in the entitlement process. 
• During the second quarter of 2018, 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, 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.
• In December 2018, the Company entered 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 contributed $32 million for common equity and another $23 million for preferred equity to the joint venture.   

Stabilized Joint Venture Segment:

Average occupancy for the quarter was 94.63%, and at the end of the fourth quarter Dock 79 was 96.39% leased and 95.08% occupied.  During the fourth quarter, 65.57% of expiring leases renewed with an average increase in rent of 3.36%.  Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 66% ownership. 

Calendar Year 2018 Consolidated Results of Operations

Net income for 2018 was $124,472,000 or $12.32 per share versus $41,750,000 or $4.16 per share in the same period last year.  Income from discontinued operations for 2018 was $122,129,000 or $12.09 per share versus $11,003,000 or $1.10 per share in the same period last year.    Interest income was reduced by realized losses on bond and bond fund sales of $1,195,000 in 2018.  Calendar year 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.  Calendar year 2017 also included a gain of $12,043,000, or $1.20 per share, due to a reduction in the provision for income taxes resulting from revaluing the Company’s net deferred tax liabilities per the Tax Cuts and Jobs Act of 2017. 

Total revenues were $22,022,000, up 41.1%, 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.

Calendar Year 2018 Segment Operating Results

Asset Management Segment:

Total revenues in this segment were $2,309,000, up $25,000 or 1.1%, over the same period last year. Operating profit of $898,000 was up $17,000 compared to the same period last year.   

Mining Royalty Lands Segment:

Total revenues in this segment were $8,139,000 versus $7,241,000 in the same period last year.  Total operating profit in this segment was $7,290,000, an increase of $725,000 versus $6,565,000 in the same period last year. 

Stabilized Joint Venture Segment:

Average occupancy for 2018 was 94.77%, and at the end of 2018 Dock 79 was 96.39% leased and 95.08% occupied. Through calendar year 2018, 58.40% of expiring leases renewed with an average increase in rent of 3.29%.  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 

2018 was among the more important years in the history of this company.  Our mining royalty segment had its biggest year ever in terms of both revenue and operating profit; we broke ground on The Maren, Phase II of RiverFront on the Anacostia; and we entered an incredibly important joint venture with MRP in our Bryant Street Project.  But without a doubt, the most important event was the sale of our industrial real estate portfolio.  This asset sale provides us with substantial liquidity heading into a period of economic uncertainty when liquidity may be at a premium.  At the very least, it gives us the very enviable problem of what to do with a substantial amount of money.  We have said before that because we believe that we sold at the top, we are not anxious to turn around and reinvest at the top.  Though we believe there are still some investment opportunities out there right now that make financial sense—Bryant Street is an excellent example—we would like to hold on to most of the cash until asset prices cool off and the economic future becomes a little clearer. 

We end the year a very different company than we started, and yet a number of things remain the same—we still have some of the best assets in the businesses we are involved in and our management team remains committed to maximizing the value of your investment.  Central to both those issues is how we decide to redeploy the proceeds of the warehouse sale, so please, at the risk of repeating ourselves, rest assured that we will not squander this opportunity. 

Conference Call

The Company will also host a conference call on Thursday, March 7, 2019 at 1:00 p.m.  (EST).  Analysts, stockholders and other interested parties may access the teleconference live by calling 1-800-311-9406 (passcode 939063) within the United States.  International callers may dial 1-334-323-7224 (passcode 939063).  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/frp030719.  For the archived audio via the internet, click on the following linkhttp://archive.conferenceamerica.com/archivestream/frp030719.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 15511787.  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) leasing and management of commercial properties owned by the Company, (ii) leasing and management of mining royalty land owned by the Company, (ii) real property acquisition, entitlement, development and construction primarily for apartment, retail, warehouse, and office, (iv) leasing and management of a residential apartment building.

FRP HOLDINGS, INC. AND SUBSIDIARIES
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FRP HOLDINGS, INC. AND SUBSIDIARIES
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Asset Management Segment:

Mining Royalty Lands Segment:

Development Segment:

Stabilized Joint Venture Segment:

Asset Management Segment:

Mining Royalty Lands Segment:

Development Segment:

Stabilized Joint Venture Segment:

FRP HOLDINGS, INC. AND SUBSIDIARIES
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