UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

or

 Commission File Number: 001-36769

_____________________

FRP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_____________________

904-396-5733

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [x]    No  [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  [x]    No  [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [_] 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  [_]    No  [x]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

FRP HOLDINGS, INC.

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 20172020

CONTENTS

Page No.

Preliminary Note Regarding Forward-Looking Statements.

This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by us, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “anticipate,” “estimate,” ”believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. Such statements reflect management’s current views with respect to financial results related to future events and are based on assumptions and expectations that may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ, perhaps materially, from the results discussed in the forward-looking statements. Risk factors discussed in Item 1A of this Form 10-Q and other factors that might cause differences, some of which could be material, 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,properties; demand for flexible warehouse/office facilitiesapartments in the Baltimore-Washington-Northern Virginia area,Washington D.C. and Richmond, Virginia; our ability to obtain zoning and entitlements necessary for property development,development; the impact of lending and capital market conditions on our liquidity, our ability to finance projects or repay our debt,debt; general real estate investment and development risks,risks; vacancies in our properties,properties; risks associated with developing and managing properties in partnership with others, competition,others; competition; our ability to renew leases or re-lease spaces as leases expire,expire; illiquidity of real estate investments,investments; bankruptcy or defaults of tenants,tenants; the impact of restrictions imposed by our credit facility,facility; the level and volatility of interest rates,rates; environmental liabilities,liabilities; inflation risks, cybersecurity risks,risks; cyber security 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. In addition, if we elect REIT status these risk factors also would include our ability to qualify or to remain qualified as a REIT, our ability to satisfy REIT distribution requirements, the impact of issuing equity, debt or both, and selling assets to satisfy our future distributions required as a REIT or to fund capital expenditures, future growth and expansion initiatives, the impact of the amount and timing of any future distributions, the impact from complying with REIT qualification requirements limiting our flexibility or causing us to forego otherwise attractive opportunities, our lack of experience operating as a REIT, legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the Internal Revenue Service, the possibility that our Board of Directors will unilaterally revoke our REIT election, the possibility that the anticipated benefits of qualifying as a REIT will not be realized, or will not be realized within the expected time period, 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.

These forward-looking statements are made as of the date hereof based on management’s current expectations, and the Company does not undertake an obligation to update such statements, whether as a result of new information, future events or otherwise. Additional information regarding these and other risk factors may be found in the Company’s other filings made from time to time with the Securities and Exchange Commission.

PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands, except share data)

See accompanying notes.

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share amounts)

(Unaudited)

See accompanying notes.

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands except per share amounts)

(Unaudited)

See accompanying notes

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 20172020 AND 20162019

(In thousands) (Unaudited)

See accompanying notes.

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(In thousands, except share amounts)

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 20172020

(Unaudited)

(1) Description of Business and Basis of Presentation.

FRP Holdings, Inc. (“FRP” or the “Company”) is a holding company engaged in the real estate business, namely (i) warehouse/office/residential building ownership, leasing and management, (ii) mining royalty land ownership and leasing, and (iii)(ii) land acquisition, entitlement and development primarily for future warehouse/office or residential building construction.construction, (iii) ownership, leasing, and management of a residential apartment building, and (iv) warehouse/office building ownership, leasing and management.

The accompanying consolidated financial statements include the accounts of FRP Holdings, Inc. (the “Company” or “FRP”) inclusive of our operating real estate subsidiaries, FRP Development Corp. (“Development”) and Florida Rock Properties, Inc. (”Properties”). and RiverFront Investment Partners I, LLC. Our investment in the Brooksville joint venture, and BC FRP Realty joint venture, RiverFront Holdings II joint venture, Bryant Street Partnerships, 1800 Half Street and Greenville/Woodfield are accounted for under the equity method of accounting (See Note 11).

Effective July 1, 2017 the Company consolidated the assets (at fair value), liabilities and operating results Our ownership of our RiverfrontRiverFront Investment Partners I, LLC partnership (“Dock 79”) which was previously accounted for underincludes a non-controlling interest representing the equity method. The ownership of Dock 79 attributableour partner. The Company uses the cost method to our partner MRP Realty is reflected on our consolidated balance sheet as a noncontrolling interest. Such noncontrolling interests are reported onaccount for its investment in DST Hickory Creek because it does not have significant influence over operating and financial policies.

On May 21, 2018, the Consolidated Balance Sheets within equity but separatelyCompany completed the disposition of 40 industrial warehouse properties and three additional land parcels to an affiliate of Blackstone Real Estate Partners VIII, L.P. for $347.2 million. One warehouse property valued at $11.7 million was excluded from shareholders' equity.the sale due to the tenant exercising its right of first refusal to purchase the property. On June 28, 2019, the Consolidated StatementsCompany completed the sale of Income,the excluded property to the same buyer for $11.7 million. This resulted in the disposition of all of the revenues and expenses from Dock 79 are reported in net income, including both the amounts attributableCompany’s industrial flex/office warehouse properties prior to the Companysale date and the noncontrolling interest.constituted a major strategic shift and as a result, these properties have been reclassified as discontinued operations for all periods presented. The amounts of consolidated net income attributable to the noncontrolling interest is clearly identified on the accompanying Consolidated Statements of Income.Asset Management segment currently contains three commercial properties.

These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair statement of the results for the interim periods have been included. Operating results for the nine months ended September 30, 20172020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2020. The accompanying consolidated financial statements and the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the Company's consolidated financial statements and related notes included in the Company’s Form 10-K for the year ended September 30, 2016.December 31, 2019.

On December 19, 2016, the Company changed its fiscal year end from September 30 to December 31. The quarter ended December 31, 2016 was a transition period.

(2) Recently Issued Accounting Standards.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”“Leases (Topic 842)”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election toThe Company is not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required.lessee. Lessors will account for leases using an approach that is substantially equivalent to existing accounting standards. The Company's existing leases will continue to be classified as operating leases. Leases entered into after the effective date of the new standard may be classified as operating or sales-type leases, based on specific classification criteria. Operating leases will become effective for the Company beginning with the first quarter 2019 and requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. As the Company is primarily a lessor the adoption of this guidance is not expectedcontinue to have a material impact on its financial statements.

In May 2014,similar pattern of recognition as under current GAAP. Sales-type lease accounting, however, will result in the FASB issued ASU No. 2014-09, “Revenue from Contractsrecognition of selling profit at lease commencement, with Customers”interest income recognized over the life of the lease. The new standard also includes a change to the treatment of internal leasing costs and legal costs, which replaces existing revenue recognition standards and significantly expandcan no longer be capitalized. Only incremental costs of a lease that would not have been incurred if the disclosure requirements for revenue arrangements. Itlease had not been obtained may be adopted either retrospectively or on a modified retrospective basisdeferred as initial direct costs. The new standard also requires lessors to new contracts and existing contracts withexclude from variable

remaining performance obligationspayments certain lessor costs, such as ofreal estate taxes, that the effective date. While lease contracts with customers, which constitutelessor contractually requires the lessee to pay directly to a vast majority of our revenues, are a specific scope exception, certain of our revenue streams may be impacted by the new guidance.third party on its behalf. The new standard requires our expected credit loss related to the collectability of lease receivables to be reflected as an adjustment to the line item Lease Revenue. For the year ended December 31, 2019, the credit loss related to the collectibility of lease receivables was recognized in the line item Operating expenses and was not significant. Additionally, the new standard requires lessors to allocate the consideration in a contract between the lease component (right to use an underlying asset) and non-lease component (transfer of a good or service that is effectivenot a lease). However, lessors are provided with a practical expedient, elected by class of underlying asset, to account for lease and non-lease components of a contract as a single lease component if certain criteria are met. The terms of the Company's leases generally provide that the Company is entitled to receive reimbursements from tenants for operating expenses such as real estate taxes, insurance and common area maintenance, in addition to the base rental payments for use of the underlying asset. Under the new standard, common area maintenance is considered a nonlease component of a lease contract, which would be accounted for under Topic 606. However, the Company will apply the practical expedient to account for its lease and non-lease components as a single, combined operating lease component. While the timing of recognition should remain the same, the Company is no longer presenting reimbursement revenue from tenants separately in our Consolidated Statements of Income beginning January 1, 2019. The new standard along with the first quarteradoption of 2018.ASU No. 2018-11, Leases - Targeted Improvements which the FASB issued in July 2018, was adopted effective January 1, 2019 and we have elected to use January 1, 2019 as our date of initial application. We elected the package of practical expedients permitted under the transition guidance within the new standard. By adopting these practical expedients, we were not required to reassess (1) whether an existing contract meets the definition of a lease; (2) the lease classification for existing leases; or (3) costs previously capitalized as initial direct costs. The Company currently does not expect the adoption of this guidance to result indid not have a material impact on itsour financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments are recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits were recorded in equity and as financing activity prior to adoption of this ASU. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The Company adopted this guidance prospectively as of October 1, 2016. As a result of this adoption in the nine months of 2017 we recorded a $14,000 reduction of income tax expense from excess tax benefits on stock option exercises.(3) Business Segments.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present. To be a business without outputs, there will now need to be an organized workforce. ASU 2017-01 further states that when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The Company adopted this guidance prospectively as of July 1, 2017. The Company expects this standard to result in building acquisitions being considered an asset rather than a business. This change will result in acquisition costs being capitalized as part of the asset acquisition, whereas prior treatment has them recognized in earnings in the period incurred.

(3) Business Segments.The Company is reporting its financial performance based on four reportable segments, Asset Management, Mining Royalty Lands, Land Development and Construction and RiverFront on the Anacostia,Stabilized Joint Venture, as described below.

The Asset Management segment owns, leases and manages warehouse/commercial properties. The flex/office buildings located predominatelywarehouses in the Baltimore/Northern Virginia/Washington, DC market area.Asset Management Segment were sold and reclassified to discontinued operations leaving only two commercial properties and one recent industrial acquisition, Cranberry Run, which we purchased in 2019. In July 2019 we sold our property located at 1801 62^nd Street, our most recent spec building in Hollander Business Park, which had joined Asset Management April 1, 2019.

Our Mining Royalty Lands segment owns several properties comprising approximately 15,000 acres currently under lease for mining rents or royalties (this does not include the 4,280 acres owned in our Brooksville joint venture with Vulcan Materials).  Other than one location in Virginia, all of these properties are located in Florida and Georgia.

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

In July 2017, PhaseThe Stabilized Joint Venture segment includes joint ventures which own, lease and manage buildings that have met our initial lease up criteria. One of our two joint ventures in the segment, Riverfront Investment Partners I, (Dock 79)LLC (“Dock 79”) is consolidated. The ownership of Dock 79 attributable to our partner MidAtlantic Realty Partners, LLC (MRP) is reflected on our consolidated balance sheet as a noncontrolling interest. Such noncontrolling interests are reported on the Consolidated Balance Sheets within equity but separately from shareholders' equity. On the Consolidated Statements of Income, all of the development known as RiverFront onrevenues and expenses from Dock 79 are reported in net income, including both the Anacostia in Washington, D.C., a 300,000 square foot residential apartment building developed by a joint venture betweenamounts attributable to the Company and MRP SE Waterfront Residential, LLC (“MRP”), reached stabilization, meaning 90%the noncontrolling interest. The amounts of consolidated net income attributable to the individual apartments have been leased and are occupied by third party tenants. Upon reaching stabilization, the Company has, for a period of one year, the exclusive right to (i) cause the joint venture to sell the property or (ii) cause the Company’s and MRP’s percentage interests in the joint venture to be adjusted so as to take into account the value of the development at the time of stabilization. The attainment of stabilization also resulted in a change of control for accounting purposes as the veto rights of the minority shareholder lapsed and the Company became the primary beneficiary. As such, beginning July 1, 2017, the Company consolidated the assets (at current fair value), liabilities and operating results of the joint venture as a new segment called RiverFrontnoncontrolling interest is clearly identified on the Anacostia.accompanying Consolidated Statements of Income.

Operating results and certain other financial data for the Company’s business segments are as follows (in thousands):

(4) Related Party Transactions.

The Company is a party to a Transition Services Agreement which resulted from our January 30, 2015 spin-off of Patriot Transportation Holding, Inc. (Patriot). The Transition Services Agreement sets forth the terms on which Patriot will provide to FRP certain services that were shared prior to the Spin-off, including the services of certain shared executive officers. The boards of the respective companies amended and extended this agreement for one year effective April 1, 2017.2020.

The consolidated statements of income reflect charges and/or allocation from Patriot for these services of $352,000$290,000 and $362,000$347,000 for the three months ended September 30, 20172020 and 2016,2019 and $1,229,000$870,000 and $1,156,000$976,000 for the nine months ended September 30, 20172020 and 2016,2019, respectively. Included in the charges above are amounts recognized for corporate executive stock-based compensation expense. These charges are reflected as part of corporate expenses.

To determine these allocations between FRP and Patriot as set forth in the Transition Services Agreement, we generally employed the same methodology historically used by the Company pre Spin-offemploy an allocation method to allocate said expenses and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations, but any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis as the terms were negotiated while Patriot was still a subsidiary of FRP.basis.

(5) Long-Term Debt.

Long-term debt is summarized as follows (in thousands):

On January 30, 2015,February 6, 2019, the Company entered into a five year credit agreementFirst Amendment to the 2015 Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”), effective February 6, 2019. The Credit Agreement modifies the Company’s prior Credit Agreement with Wells Fargo dated January 30, 2015. The Credit Agreement establishes a five-year revolving credit facility with a maximum facility amount of $20 million (the "Credit Agreement").million. The interest rate under the Credit Agreement will be a maximum of 1.50% over Daily 1 Month LIBOR, which may be reduced quarterly to 1.25% or 1.0% over Daily 1 Month LIBOR if the Company meets a specified ratio of consolidated debt to consolidated total capital, as defined which excludes FRP Riverfront. A commitment fee of 0.25% per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.20% or 0.15% if the Company meets a specified ratio of consolidated total debt to consolidated total capital. The Credit Agreement provides a revolving credit facility (the “Revolver”) with a $10 million sublimit available for standby letters of credit.contains certain conditions, affirmative financial covenants and negative covenants. As of September 30, 2017,2020, there was $5,687,000no debt outstanding on thethis revolver, $2,266,000$411,000 outstanding under letters of credit and $12,047,000$19,589,000 available for borrowing. The letters of credit were issued to guarantee certain obligations to state agencies related to real estate development. Most of the letters of credit are irrevocable for a period of one year and typically are automatically extended for additional one-year periods. The Revolver bearsletter of credit fee is 1% and applicable interest at a rate of 1.4% over the selected LIBOR, which may change quarterly basedwould have been 1.149% on the Company’s ratio of Consolidated Total Debt to Consolidated Total Capital, as defined which excludes FRP RiverFront. A commitment fee of 0.15% per annum is payable quarterly on the unused portion of the commitment. The commitment fee may also change quarterly based upon the ratio described above.September 30, 2020. The credit agreement contains certain conditions and financial covenants, including a minimum $110 million tangible net worth.worth and dividend restriction. As of September 30, 2017, the tangible net worth covenant2020, these covenants would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $77.5$219 million combined. The Company was in compliance with all covenants as of September 30, 2017.2020.

On July 24, 2015November 17, 2017, Riverfront Holdings I, LLC (the "Joint Venture") refinanced the Dock 79 project pursuant to a Loan Agreement and Deed of Trust Note entered into with EagleBank ("Loan Documents"). The Joint Venture, which was formed between the Company closed on a five year, $20 million secured revolverand MRP in 2014 in connection with First Tennessee Bank with a twenty-four month window to convert up to the full amountdevelopment of the facility into a ten year term loan. Interest accrues at 1.90% over one month LIBOR plus an annual commitment fee of 0.10%. As of September 30, 2017, there was $753,000 outstandingRiverfront on the revolver and $19,247,000 available for borrowing.Anacostia property, borrowed a principal sum of $90,000,000 in connection with the refinancing. The Company expects to close on a second facility with First Tennessee Bank with a $20 million ten year term loan is secured by to-be-determined collateral. The purposethe Dock 79 real property and improvements, bears a fixed interest rate of these loans is to facilitate growth through new construction4.125% per annum and has a term of 120 months. During the first 48 months of the loan term, the Joint Venture will make monthly payments of interest only, and thereafter, make monthly payments of principal and interest in the Land Development and Construction segment and/or acquisition of existing, operating buildings to be added to the Asset Management segment.equal installments based upon a 30-

Effective July 1, 2017 the Company consolidated the assets (at current fair value), liabilities and operating results of our Riverfront Investment Partners I, LLC partnership (“Dock 79”) which was previously accounted for under the equity method. As such the full amount of our construction loan and secondary financing were recorded in the consolidated financial statements and described below. Both these financing sources are non-recourse to FRP.

Effective August 7, 2014, the Dock 79 obtained a commitment for a construction loan from a financial institution in the principal amount of $65,000,000 to fund certain development and construction costs of the Dock 79. The initial maturity date of the loan is the earlier of (i) August 7, 2018, or (ii) the date to which the loan is accelerated pursuant to certain terms as outlined in the agreement. Dock 79 has the option to extend the initial maturity date for one extension period of four years (Extension Term) upon the compliance with and satisfaction of certain conditions as defined in the agreement. The interest rate on the loan through the initial maturity date is based on the 2.35% over one month LIBOR and the interest rate during the Extension Term (if any) until the maturity date will be based on a fixed-interest rate swap or interest rate cap, as applicable, for the applicable LIBOR-based rate on the then applicable market terms. Accrued interest is payable in arrears on the first day of each calendar month and on the maturity date. The outstanding principal balance on all loans shall be due and payable in full on the maturity date. After maturity, accrued interest on all loans shall be payable on demand.year amortization period. The loan is secureda non-recourse loan. However, all amounts due under the Loan Documents will become immediately due upon an event of default by any realthe Joint Venture, such events including, without limitation, Joint Venture's (i) failure to: pay, permit inspections or observe covenants under the Loan Documents, (ii) breach of representations made under the Loan Documents (iii) voluntary or involuntary bankruptcy, and personal property(iv) dissolution, or the dissolution of Dock 79. The agreement contains certain conditions, affirmative financial covenantsthe guarantor. MRP has executed a carve-out guaranty in connection with the loan.

Debt cost amortization of $34,000 and negative covenants including the maintenance of a debt service ratio of not less than 1.25 to 1.00$102,000 was recorded during the Extension Term.

Effective August 7, 2014, Dock 79 partnership member EB5 Capital-Jobs Fund 8, L.P. made an initial capital contribution of $17 million in cash into an escrow account with a financial institution all of which have been used for construction. Associated with the $17 million cash contribution, EB5 is entitled to earn an investment return. The investment return requires the Dock 79 to pay interest monthly based on an annual rate of 4.95% for the first 5 yearsthree and 8% thereafter, on the balance remaining of the initial capital contributed. Dock 79 is required to repay or redeem EB5's membership interest for a purchase price equal to the sum of the balance of EB5's contribution account, plus any accrued by unpaid investment return sixtynine months after the initial capital contribution, unless extended for an additional twelve months in accordance with the agreement. Subsequent to the repayment of the investment return, EB5 will no longer be a partner in the Dock 79. Due to the mandatory redemption requirements associated with the EB5 financing arrangement, the related investment is classified as a liability on the balance sheets.

ended September 30, 2020, respectively. During the three months ended September 30, 20172020 and September 30, 20162019 the Company capitalized interest costs of $210,000$948,000 and $382,000,$870,000, respectively. During the nine months ended September 30, 20172020 and September 30, 20162019 the Company capitalized interest costs of $812,000$2,823,000 and $864,000,$1,960,000, respectively.

(6) Earnings per Share.

The following details the computations of the basic and diluted earnings per common share (in thousands, except per share amounts):