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Fourth Quarter Consolidated Results of Operations
Net income for the fourth quarter of 2022 was $2,756,000 or $.29 per share versus a net loss of $(592,000) or $(.06) per share in the same period last year. The fourth quarter of 2022 was impacted by the following items:
Fourth Quarter Segment Operating ResultsAsset Management Segment:
Mining Royalty Lands Segment:
Total revenues in this segment were $2,904,000 versus $2,267,000 in the same period last year. Total operating profit in this segment was $2,452,000, an increase of $485,000 versus $1,967,000 in the same period last year. This increase is primarily the result of the additional royalties from the acquisition in Astatula, Florida, which we completed at the beginning of the second quarter. Net Operating Income this quarter for this segment was $2,779,000, up $643,000 or 30% compared to the same quarter last year.
Development Segment:
With respect to ongoing projects:
Total revenues in this segment were $5,482,000, an increase of $400,000 versus $5,082,000 in the same period last year. The Maren’s revenue was $2,571,000 an increase of 7.18% and Dock 79 revenues increased $227,000 to $2,911,000 or 8.45%. Total operating profit in this segment was $1,029,000 an increase of $1,023,000 versus $6,000 in the same period last year. Pro-rata net operating income this quarter for this segment was $2,228,000, up $93,000 or 4.36% compared to the same quarter last year.This quarter, as part of our new partnership with SIC and MRP, we sold a 20% ownership interest in a tenancy-in-common (TIC) of Dock 79 and The Maren for $65.3 million, $44.5 million attributable to The Company, placing a combined valuation of the two buildings at $326.5 million.
Dock 79’s average residential occupancy for the quarter was 93.52%, and at the end of the quarter, Dock 79’s residential units were 93.44% leased and 90.49% occupied. This quarter, 42.31% of expiring leases renewed with an average rent increase on renewals of 8.89%. Dock 79 is a joint venture between the Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 52.8% ownership.At the end of December, The Maren was 92.80% leased and 96.59% occupied. Average residential occupancy for the quarter was 95.45%, and 61.90% of expiring leases renewed with an average rent increase on renewals of 11.14%. The Maren is a joint venture between The Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 56.3% ownership.Stabilized Joint Venture Segment:
Calendar Year Operational Highlights
Calendar Year 2022 Segment Operating Results
Asset Management Segment:Net income attributable to the Company for 2022 was $4,565,000 or $.48 per share versus $28,215,000 or $3.00 per share in the same period last year. Net income for calendar year 2021 included a gain of $51.1 million on the remeasurement of investment in The Maren real estate partnership, which is included in Income before income taxes. This gain on remeasurement was mitigated by a $10.1 million provision for taxes and $14.0 million attributable to noncontrolling interest. The calendar year 2022 was impacted by the following items:
Stabilized Joint Venture Segment:In March 2021, we reached stabilization on Phase II (The Maren) of the development known as RiverFront on the Anacostia in Washington, DC. As such, as of March 31, 2021, the Company consolidated the assets (at current fair value based on appraisal), liabilities and operating results of the joint venture. Up through the first quarter of the prior year, accounting for The Maren was reflected in Equity in loss of joint ventures on the Consolidated Statements of Income. Starting April 1, 2021, all the revenue and expenses are accounted for in the same manner as Dock 79 in the stabilized joint venture segment.
At the end of December, The Maren was 92.80% leased and 96.59% occupied. The Maren’s average residential occupancy for calendar year 2022 was 95.69%, and 61.45% of expiring leases renewed with an average rent increase on renewals of 8.17%. The Maren is a joint venture between the Company and MRP and SIC, in which FRP Holdings, Inc. is the majority partner with 56.3% ownership.Mining Royalty Lands Segment:Calendar Year 2022 Consolidated Results of OperationsTotal revenues in this segment were $10,683,000 versus $9,465,000 in the same period last year. Total operating profit in this segment was $8,891,000, an increase of $651,000 versus $8,240,000 in the same period last year. This increase is primarily the result of the additional royalties from the acquisition in Astatula, Florida, which we completed at the beginning of the second quarter.
Mining royalties had its highest revenue quarter ever providing a fitting capstone to a year that saw both royalty revenue and NOI surpass $10 million for the first time. The extent to which royalty revenue in 2022 eclipsed the previous year (12.9% improvement) or any year (12.7% improvement over 2020, previously the segment’s highest revenue year) is due in large part to the purchase of the Bland property in April 2022. However, even without the addition of this latest royalty property, 2022 would have been the segment’s best revenue year. It is management’s belief that the performance of this segment this year and over the last several years (8.1% cumulative aggregate growth rate since 2017) speaks not only to the attractiveness of the aggregates industry as an investment, but also to the quality of our assets and operating tenants.
This year, 61.45% of expiring leases at Maren renewed with an average increase on renewals of 8.17%, and 61.40% of expiring leases renewed at Dock 79 with an average increase of 5.91%. When we could not renew an existing residential lease, we saw a year-to-date increase in rent on those “trade outs” of 7.4% at The Maren and 12.6% at Dock 79. With this being the first full year with The Maren in this segment, the 17% increase in NOI for this segment is mostly attributable to an additional quarter of The Maren operating versus last year. However, the ability to raise rents on renewals while retaining tenants at the rate that we did both Dock 79 and The Maren played a meaningful part in increasing NOI. As mentioned previously, Steuart Investment Company is now a 20% partner in these assets. We are enthusiastic about this partnership, and the combined valuation ($326.5 million) SIC placed on these assets through its investment demonstrates that our new partners have every bit as much faith in these assets as we do.
The Asset Management segment performed well in 2022. All of our industrial assets are 100% leased, and six of the seven buildings in service are 100% occupied. The uptick in occupancy, particularly at Cranberry, largely explains the increase in revenue, operating profit, and NOI in 2022, as well as the fact that this is the best year this segment has experienced since we sold the bulk of our industrial portfolio in 2018. Looking forward into 2023, we expect our last two buildings at Hollander (a build to suit, and a spec building currently 100% leased but 0% occupied) to achieve occupancy sometime in the first half of next year, which will increase our occupied square footage for industrial by 54.3% and will positively impact revenue, operating profit, and NOI for some time.We have continued operations throughout the pandemic and have made every effort to act in accordance with national, state, and local regulations and guidelines. We expect our business to be affected by the pandemic for as long as government intervention and regulation is deemed necessary to combat the threat.
On a macro level, the immediate future remains unclear. On any given day, we are treated with predictions and prognostications that cover every shade of the economic color wheel. Inflation and rising interest rates appear to be our reality for at least the immediate future, yet so do low unemployment and job growth. Regardless of whatever the immediate future holds, it is our belief that with the assets we have in place, the partners we have chosen, and the steps we have made to ensure deliberate, responsible growth over the long haul, your company is on its way to building something very special.
The Company will host a conference call on Wednesday, March 8, 2023 at 9:00 a.m. (EST). Analysts, stockholders and other interested parties may access the teleconference live by calling 1-800-225-9448 (passcode 30382) within the United States. International callers may dial 1-203-518-9708 (passcode 30382). Audio replay will be available until March 22, 2023 by dialing 1-800-839-5630 within the United States. International callers may dial 1-402-220-2557. No passcode needed. A recording of the call will also be available on the Company’s investor relations page ( https://www.frpdev.com/investor-relations/ ) following the call. The Company will also be posting a brief slideshow with financial highlights from the fourth quarter and year-to-date on our website on Tuesday, March 7. This will be available on the Company’s investor relations page under Investor Presentations. For information on our commitment to best practices in Environmental, Social, and Governance matters, please visit the ESG section of our website at https://www.frpdev.com/investor-relations/esg-report/. Hickory Creek DST was sold and The Company received $8.83 million from the sale on an investment of $6 million. Prior to the sale distributions to The Company were $332,000 for the year.
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited) THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, 2022 2021 2022 2021Revenues: Lease revenue$6,948 6,132 26,798 21,755 Mining lands lease revenue 2,904 2,267 10,683 9,465 Total Revenues 9,852 8,399 37,481 31,220 Cost of operations: Depreciation, depletion and amortization 2,707 3,110 11,217 12,737 Operating expenses 1,749 2,427 7,065 6,219 Property taxes 1,022 987 4,125 3,751 Management company indirect 871 1,031 3,416 3,168 Corporate expenses 786 585 3,662 3,071 Total cost of operations 7,135 8,140 29,485 28,946 Total operating profit 2,717 259 7,996 2,274 Net investment income 2,267 849 5,473 4,215 Interest expense (830) (519) (3,045) (2,304)Equity in loss of joint ventures (473) (1,757) (5,721) (5,754)Gain on remeasurement of investment in real estate partnership — — — 51,139 Gain on sale of real estate — — 874 805 Income (loss) before income taxes 3,681 (1,168) 5,577 50,375 Provision for (benefit from) income taxes 1,004 (219) 1,530 10,281 Net income (loss) 2,677 (949) 4,047 40,094 (Loss) gain attributable to noncontrolling interest (79) (357) (518) 11,879 Net income (loss) attributable to the Company$2,756 (592) 4,565 28,215 Earnings per common share: Net income (loss) attributable to the Company- Basic$0.29 (0.06) 0.49 3.02 Diluted$0.29 (0.06) 0.48 3.00 Number of shares (in thousands) used in computing: -basic earnings per common share 9,398 9,363 9,386 9,355 -diluted earnings per common share 9,444 9,363 9,435 9,397 Summary and Outlook December 31, 2022 December 31, 2021Assets: Real estate investments at cost: Land$141,579 123,397 Buildings and improvements 270,579 265,278 Projects under construction 12,208 8,668 Total investments in properties 424,366 397,343 Less accumulated depreciation and depletion 57,208 46,678 Net investments in properties 367,158 350,665 Real estate held for investment, at cost 10,182 9,722 Investments in joint ventures 140,525 145,443 Net real estate investments 517,865 505,830 Cash and cash equivalents 177,497 161,521 Cash held in escrow 797 752 Accounts receivable, net 1,166 793 Investments available for sale at fair value — 4,317 Federal and state income taxes receivable — 1,103 Unrealized rents 856 620 Deferred costs 2,343 2,726 Other assets 560 528 Total assets$701,084 678,190 Liabilities: Secured notes payable$178,557 178,409 Accounts payable and accrued liabilities 5,971 6,137 Other liabilities 1,886 1,886 Federal and state income taxes payable 18 — Deferred revenue 259 369 Deferred income taxes 67,960 64,047 Deferred compensation 1,354 1,302 Tenant security deposits 868 790 Total liabilities 256,873 252,940 Commitments and contingencies Equity: Common stock, $.10 par value
25,000,000 shares authorized,
9,459,686 and 9,411,028 shares issued
and outstanding, respectively 946 941 Capital in excess of par value 65,158 57,617 Retained earnings 342,317 337,752 Accumulated other comprehensive income (loss), net (1,276) 113 Total shareholders’ equity 407,145 396,423 Noncontrolling interest MRP 37,066 28,827 Total equity 444,211 425,250 Total liabilities and equity$701,084 678,190
Asset Management Segment: Three months ended December 31 (dollars in thousands)2022 % 2021 % Change % Lease revenue$995 100.0% 656 100.0% 339 51.7% Depreciation, depletion and amortization 224 22.5% 170 25.9% 54 31.8%Operating expenses 127 12.8% 99 15.1% 28 28.3%Property taxes 53 5.3% 39 6.0% 14 35.9%Management company indirect 102 10.2% 264 40.2% (162) -61.4%Corporate expense 136 13.7% 161 24.5% (25) -15.5% Cost of operations 642 64.5% 733 111.7% (91) -12.4% Operating profit (loss)$353 35.5% (77) -11.7% 430 -558.4%Conference Call Three months ended December 31 (dollars in thousands)2022 % 2021 % Change % Mining lands lease revenue$2,904 100.0% 2,267 100.0% 637 28.1% Depreciation, depletion and amortization 170 5.9% 38 1.7% 132 347.4%Operating expenses 17 0.6% 13 0.6% 4 30.8%Property taxes 59 2.0% 65 2.8% (6) -9.2%Management company indirect 117 4.0% 124 5.5% (7) -5.6%Corporate expense 89 3.1% 60 2.6% 29 48.3% Cost of operations 452 15.6% 300 13.2% 152 50.7% Operating profit$2,452 84.4% 1,967 86.8% 485 24.7%
Development Segment: Three months ended December 31(dollars in thousands)2022 2021 Change Lease revenue$471 394 77 Depreciation, depletion and amortization 50 49 1 Operating expenses 131 843 (712)Property taxes 359 356 3 Management company indirect 558 493 65 Corporate expense 490 290 200 Cost of operations 1,588 2,031 (443) Operating loss$(1,117) (1,637) 520 Equity in loss of Joint Venture (3,167) (1,887) (1,280)Interest earned 1,289 819 470 Loss from continuing operations before income taxes$(2,995) (2,705) (290)
Stabilized Joint Venture Segment: Three months ended December 31 (dollars in thousands)2022 % 2021 % Change % Lease revenue$5,482 100.0% 5,082 100.0% 400 7.9% Depreciation, depletion and amortization 2,263 41.3% 2,853 56.1% (590) -20.7%Operating expenses 1,474 26.9% 1,472 29.0% 2 0.1%Property taxes 551 10.0% 527 10.4% 24 4.6%Management company indirect 94 1.7% 150 3.0% (56) -37.3%Corporate expense 71 1.3% 74 1.4% (3) -4.1% Cost of operations 4,453 81.2% 5,076 99.9% (623) -12.3% Operating profit$1,029 18.8% 6 0.1% 1,023 17050.0%
Asset Management Segment: Twelve months ended December 31 (dollars in thousands)2022 % 2021 % Change % Lease revenue$3,681 100.0% 2,575 100.0% 1,106 43.0% Depreciation, depletion and amortization 907 24.6% 578 22.4% 329 56.9%Operating expenses 568 15.4% 388 15.1% 180 46.4%Property taxes 211 5.7% 156 6.1% 55 35.3%Management company indirect 403 11.0% 841 32.7% (438) -52.1%Corporate expense 632 17.2% 843 32.7% (211) -25.0% Cost of operations 2,721 73.9% 2,806 109.0% (85) -3.0% Operating profit (loss)$960 26.1% (231) -9.0% 1,191 -515.6%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 impact of the COVID-19 Pandemic on our operations and financial results; the possibility that we may be unable to find appropriate investment opportunities; 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. and Greenville, South Carolina; 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. Twelve months ended December 31 (dollars in thousands)2022 % 2021 % Change % Mining lands lease revenue$10,683 100.0% 9,465 100.0% 1,218 12.9% Depreciation, depletion and amortization 586 5.5% 199 2.1% 387 194.5%Operating expenses 67 0.6% 47 0.5% 20 42.6%Property taxes 262 2.5% 264 2.8% (2) -0.8%Management company indirect 463 4.3% 397 4.2% 66 16.6%Corporate expense 414 3.9% 318 3.3% 96 30.2% Cost of operations 1,792 16.8% 1,225 12.9% 567 46.3% Operating profit$8,891 83.2% 8,240 87.1% 651 7.9%
Development Segment: Twelve months ended December 31(dollars in thousands)2022 2021 Change Lease revenue$1,674 1,563 111 Depreciation, depletion and amortization 189 208 (19)Operating expenses 672 976 (304)Property taxes 1,425 1,438 (13)Management company indirect 2,179 1,489 690 Corporate expense 2,284 1,557 727 Cost of operations 6,749 5,668 1,081 Operating loss$(5,075) (4,105) (970) Equity in loss of Joint Venture (8,310) (5,427) (2,883)Interest earned 3,600 3,427 173 Loss from continuing operations before income taxes$(9,785) (6,105) (3,680)
Stabilized Joint Venture Segment: Twelve months ended December 31 (dollars in thousands)2022 % 2021 % Change % Lease revenue$21,443 100.0% 17,617 100.0% 3,826 21.7% Depreciation, depletion and amortization 9,535 44.5% 11,752 66.7% (2,217) -18.9%Operating expenses 5,758 26.9% 4,808 27.3% 950 19.8%Property taxes 2,227 10.4% 1,893 10.8% 334 17.6%Management company indirect 371 1.7% 441 2.5% (70) -15.9%Corporate expense 332 1.5% 353 2.0% (21) -5.9% Cost of operations 18,223 85.0% 19,247 109.3% (1,024) -5.3% Operating profit (loss)$3,220 15.0% (1,630) -9.3% 4,850 -297.5%
Non-GAAP Financial Measures.FRP HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data)Pro-Rata Net Operating Income Reconciliation Twelve months ended 12/31/22 (in thousands) Stabilized Asset Joint Mining Unallocated FRP Management Development Venture Royalties Corporate Holdings Segment Segment Segment Segment Expenses TotalsNet Income (loss)$700 (7,138) 1,938 7,093 1,454 4,047 Income Tax Allocation 260 (2,647) 910 2,630 377 1,530 Income (loss) before income taxes 960 (9,785) 2,848 9,723 1,831 5,577 Less: Gain on investment land sold — — — 874 — 874 Unrealized rents 236 — (71) 202 — 367 Interest income — 3,600 — — 1,873 5,473 Plus: Equity in (gain)/loss of Joint Venture — 8,310 (2,631) 42 — 5,721 Interest Expense — — 3,003 — 42 3,045 Depreciation/Amortization 907 189 9,535 586 — 11,217 Management Co. Indirect 403 2,179 371 463 — 3,416 Allocated Corporate Expenses 632 2,284 332 414 — 3,662 Net Operating Income (loss) 2,666 (423) 13,529 10,152 — 25,924 NOI of noncontrolling interest — — (4,595) — — (4,595)Pro-rata NOI from unconsolidated joint ventures — 2,366 535 — — 2,901 Pro-Rata net operating income$2,666 1,943 9,469 10,152 — 24,230 Net Operating Income Reconciliation Twelve months ended 12/31/21 (in thousands) Stabilized Asset Joint Mining Unallocated FRP Management Development Venture Royalties Corporate Holdings Segment Segment Segment Segment Expenses Totals Pro-Rata
Net Income (loss)$(187) (4,454) 37,472 6,587 676 40,094 Income Tax Allocation (70) (1,651) 9,490 2,443 69 10,281 Income (loss) before income taxes (257) (6,105) 46,962 9,030 745 50,375 Less: Gain on remeasurement of real estate investment — — 51,139 — — 51,139 Gain on investment land sold — — — 831 — 831 Unrealized rents 116 — 100 219 — 435 Interest income — 3,427 — — 788 4,215 Plus: Loss on sale of land 26 — — — — 26 Equity in loss of Joint Venture — 5,427 286 41 — 5,754 Interest Expense — — 2,261 — 43 2,304 Depreciation/Amortization 578 208 11,752 199 — 12,737 Management Co. Indirect 841 1,489 441 397 — 3,168 Allocated Corporate Expenses 843 1,557 353 318 — 3,071 Net Operating Income (loss) 1,915 (851) 10,816 8,935 — 20,815 NOI of noncontrolling interest — — (2,726) — — (2,726)Pro-rata NOI from unconsolidated joint ventures — (528) — — — (528) Pro-Rata net operating income$1,915 (1,379) 8,090 8,935 — 17,561
Contact: John D. Baker III Chief Financial Officer 904/858-9100