UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
_________________
(Mark One) |
[X ] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
|
or
[ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) For the transition period from_________ to _________ |
Commission File Number: 001-36769
_____________________
FRP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
_____________________
Florida | 47-2449198 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 W. Forsyth St., 7th Floor, Jacksonville, FL | 32202 | |
(Address of principal executive offices) | (Zip Code) |
904-396-5733904-396-5733
(Registrant’s telephone number, including area code)
Title of each class | Trading Symbol | Name of each exchange on which registered | |||
Common Stock, $.10 par value | FRPH | NASDAQ |
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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_] | Accelerated filer [_] | |
Non-accelerated filer [x] | Smaller reporting company | |
Emerging growth company |
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.
Class | Outstanding at | |||||
Common Stock, $.10 par value per share | ||||||
FRP HOLDINGS, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 20202021
CONTENTS
Page No.
Preliminary Note Regarding Forward-Looking Statements | 3 | ||||
Part I. Financial Information | |||||
Item 1. | Financial Statements | ||||
Consolidated Balance Sheets | 4 | ||||
Consolidated Statements of Income | 5 | ||||
Consolidated Statements of Comprehensive Income | 6 | ||||
Consolidated Statements of Cash Flows | 7 | ||||
Consolidated Statements of Shareholders’ Equity | 8 | ||||
Condensed Notes to Consolidated Financial Statements | |||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risks | ||||
Item 4. | Controls and Procedures | ||||
Part II. Other Information | |||||
Item 1A. | Risk Factors | ||||
Item 2. | Purchase of Equity Securities by the Issuer | ||||
Item 6. | Exhibits | ||||
Signatures | |||||
Exhibit 31 | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
Exhibit 32 | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
2 |
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,“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-Q10-K 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; demand for flexible warehouse/office facilities in the Baltimore-Washington-Northern Virginia area; demand for apartments in Washington D.C., Richmond, Virginia and Richmond, Virginia;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; 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. 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.
3 |
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
September 30 | December 31 | September 30, 2021 | December 31, 2020 | |||||||||||||
Assets: | 2020 | 2019 | ||||||||||||||
Real estate investments at cost: | ||||||||||||||||
Land | $ | 80,494 | 84,383 | $ | 123,397 | 91,744 | ||||||||||
Buildings and improvements | 141,146 | 147,019 | 255,366 | 141,241 | ||||||||||||
Projects under construction | 2,442 | 1,056 | 13,799 | 4,879 | ||||||||||||
Total investments in properties | 224,082 | 232,458 | 392,562 | 237,864 | ||||||||||||
Less accumulated depreciation and depletion | 33,684 | 30,271 | 44,266 | 34,724 | ||||||||||||
Net investments in properties | 190,398 | 202,187 | 348,296 | 203,140 | ||||||||||||
Real estate held for investment, at cost | 9,101 | 8,380 | 9,559 | 9,151 | ||||||||||||
Investments in joint ventures | 167,586 | 160,452 | 145,975 | 167,071 | ||||||||||||
Net real estate investments | 367,085 | 371,019 | 503,830 | 379,362 | ||||||||||||
Cash and cash equivalents | 46,289 | 26,607 | 162,881 | 73,909 | ||||||||||||
Cash held in escrow | 15,259 | 186 | 502 | 196 | ||||||||||||
Accounts receivable, net | 923 | 546 | 991 | 923 | ||||||||||||
Investments available for sale at fair value | 104,624 | 137,867 | 4,315 | 75,609 | ||||||||||||
Federal and state income taxes receivable | 2,082 | 4,621 | ||||||||||||||
Unrealized rents | 530 | 554 | 580 | 531 | ||||||||||||
Deferred costs | 921 | 890 | 3,047 | 707 | ||||||||||||
Other assets | 499 | 479 | 525 | 502 | ||||||||||||
Total assets | $ | 536,130 | 538,148 | $ | 678,753 | 536,360 | ||||||||||
Liabilities: | ||||||||||||||||
Secured notes payable | $ | 89,027 | 88,925 | $ | 178,371 | 89,964 | ||||||||||
Accounts payable and accrued liabilities | 3,052 | 2,431 | 3,706 | 3,635 | ||||||||||||
Other liabilities | 1,886 | 1,978 | 1,886 | 1,886 | ||||||||||||
Deferred revenue | 609 | 790 | 470 | 542 | ||||||||||||
Federal and state income taxes payable | 164 | 504 | ||||||||||||||
Deferred income taxes | 52,532 | 50,111 | 65,379 | 56,106 | ||||||||||||
Deferred compensation | 1,240 | 1,436 | 1,247 | 1,242 | ||||||||||||
Tenant security deposits | 314 | 328 | 764 | 332 | ||||||||||||
Total liabilities | 148,824 | 146,503 | ||||||||||||||
��Total liabilities | 251,823 | 153,707 | ||||||||||||||
Commitments and contingencies | ||||||||||||||||
Equity: | ||||||||||||||||
Common stock, $.10 par value 25,000,000 shares authorized, 9,481,638 and 9,817,429 shares issued and outstanding, respectively | 948 | 982 | ||||||||||||||
Common stock, $ par valueshares authorized, and shares issued and outstanding, respectively | 941 | 936 | ||||||||||||||
Capital in excess of par value | 56,690 | 57,705 | 57,512 | 56,279 | ||||||||||||
Retained earnings | 313,103 | 315,278 | 338,344 | 309,764 | ||||||||||||
Accumulated other comprehensive income, net | 996 | 923 | 193 | 675 | ||||||||||||
Total shareholders’ equity | 371,737 | 374,888 | 396,990 | 367,654 | ||||||||||||
Noncontrolling interest MRP | 15,569 | 16,757 | 29,940 | 14,999 | ||||||||||||
Total equity | 387,306 | 391,645 | 426,930 | 382,653 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 536,130 | 538,148 | $ | 678,753 | 536,360 |
See accompanying notes.
4 |
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||||||||
SEPTEMBER 30, | SEPTEMBER 30, | ||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||
Lease revenue | $ | 3,591 | 3,581 | 10,636 | 10,796 | ||||||||||||||||||||||
Mining lands lease revenue | 2,507 | 2,302 | 7,094 | 7,164 | |||||||||||||||||||||||
Total Revenues | 6,098 | 5,883 | 17,730 | 17,960 | |||||||||||||||||||||||
Cost of operations: | |||||||||||||||||||||||||||
Depreciation, depletion and amortization | 1,438 | 1,431 | 4,406 | 4,390 | |||||||||||||||||||||||
Operating expenses | 892 | 952 | 2,598 | 2,744 | |||||||||||||||||||||||
Property taxes | 706 | 740 | 2,089 | 2,206 | |||||||||||||||||||||||
Management company indirect | 844 | 670 | 2,208 | 1,872 | |||||||||||||||||||||||
Corporate expenses | 637 | 732 | 2,850 | 1,928 | |||||||||||||||||||||||
Total cost of operations | 4,517 | 4,525 | 14,151 | 13,140 | |||||||||||||||||||||||
Total operating profit | 1,581 | 1,358 | 3,579 | 4,820 | |||||||||||||||||||||||
Net investment income, including realized gains of $55, $144, $297 and $591, respectively | 1,814 | 2,019 | 5,915 | 5,813 | |||||||||||||||||||||||
Interest expense | (46 | ) | (129 | ) | (142 | ) | (989 | ) | |||||||||||||||||||
Equity in loss of joint ventures | (1,788 | ) | (746 | ) | (3,773 | ) | (1,282 | ) | |||||||||||||||||||
Gain on sale of real estate | 5,732 | 126 | 9,329 | 662 | |||||||||||||||||||||||
Income from continuing operations before income taxes | 7,293 | 2,628 | 14,908 | 9,024 | |||||||||||||||||||||||
Provision for income taxes | 2,022 | 726 | 4,161 | 2,529 | |||||||||||||||||||||||
Income from continuing operations | 5,271 | 1,902 | 10,747 | 6,495 | |||||||||||||||||||||||
Income (loss) from discontinued operations, net | — | (13 | ) | — | 6,849 | ||||||||||||||||||||||
Net income | 5,271 | 1,889 | 10,747 | 13,344 | |||||||||||||||||||||||
Loss attributable to noncontrolling interest | (184 | ) | (112 | ) | (475 | ) | (380 | ) | |||||||||||||||||||
Net income attributable to the Company | $ | 5,455 | 2,001 | 11,222 | 13,724 | ||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||
Income from continuing operations- | |||||||||||||||||||||||||||
Basic | $ | 0.55 | 0.19 | 1.11 | 0.66 | ||||||||||||||||||||||
Diluted | $ | 0.55 | 0.19 | 1.11 | 0.65 | ||||||||||||||||||||||
Discontinued operations- | |||||||||||||||||||||||||||
Basic | $ | — | — | — | 0.69 | ||||||||||||||||||||||
Diluted | $ | — | — | — | 0.69 | ||||||||||||||||||||||
Net income attributable to the Company- | |||||||||||||||||||||||||||
Basic | $ | 0.57 | 0.20 | 1.16 | 1.39 | ||||||||||||||||||||||
Diluted | $ | 0.57 | 0.20 | 1.16 | 1.38 | ||||||||||||||||||||||
Number of shares (in thousands) used in computing: | |||||||||||||||||||||||||||
-basic earnings per common share | 9,517 | 9,843 | 9,646 | 9,903 | |||||||||||||||||||||||
-diluted earnings per common share | 9,545 | 9,886 | 9,681 | 9,945 | |||||||||||||||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenues: | ||||||||||||||||
Lease revenue | $ | 6,224 | 3,591 | 15,623 | 10,636 | |||||||||||
Mining lands lease revenue | 2,249 | 2,507 | 7,198 | 7,094 | ||||||||||||
Total Revenues | 8,473 | 6,098 | 22,821 | 17,730 | ||||||||||||
Cost of operations: | ||||||||||||||||
Depreciation, depletion and amortization | 3,796 | 1,438 | 9,627 | 4,406 | ||||||||||||
Operating expenses | 1,557 | 892 | 3,792 | 2,598 | ||||||||||||
Property taxes | 986 | 706 | 2,764 | 2,089 | ||||||||||||
Management company indirect | 745 | 844 | 2,137 | 2,208 | ||||||||||||
Corporate expenses | 657 | 637 | 2,486 | 2,850 | ||||||||||||
Total cost of operations | 7,741 | 4,517 | 20,806 | 14,151 | ||||||||||||
Total operating profit | 732 | 1,581 | 2,015 | 3,579 | ||||||||||||
Net investment income, including realized gains of $0, $55, $0 and $297, respectively | 943 | 1,814 | 3,366 | 5,915 | ||||||||||||
Interest expense | (414 | ) | (46 | ) | (1,785 | ) | (142 | ) | ||||||||
Equity in loss of joint ventures | (1,244 | ) | (1,788 | ) | (3,997 | ) | (3,773 | ) | ||||||||
Gain on remeasurement of investment in real estate partnership | 0 | 0 | 51,139 | 0 | ||||||||||||
Gain on sale of real estate | 0 | 5,732 | 805 | 9,329 | ||||||||||||
Income before income taxes | 17 | 7,293 | 51,543 | 14,908 | ||||||||||||
Provision for income taxes | 130 | 2,022 | 10,500 | 4,161 | ||||||||||||
Net income (loss) | (113 | ) | 5,271 | 41,043 | 10,747 | |||||||||||
Gain (loss) attributable to noncontrolling interest | (465 | ) | (184 | ) | 12,236 | (475 | ) | |||||||||
Net income attributable to the Company | $ | 352 | 5,455 | 28,807 | 11,222 | |||||||||||
Earnings per common share: | ||||||||||||||||
Net income attributable to the Company- | ||||||||||||||||
Basic | $ | 0.04 | 0.57 | 3.08 | 1.16 | |||||||||||
Diluted | $ | 0.04 | 0.57 | 3.07 | 1.16 | |||||||||||
Number of shares (in thousands) used in computing: | ||||||||||||||||
-basic earnings per common share | 9,363 | 9,517 | 9,352 | 9,646 | ||||||||||||
-diluted earnings per common share | 9,399 | 9,545 | 9,390 | 9,681 |
See accompanying notes.
5 |
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income | $ | 5,271 | 1,889 | 10,747 | 13,344 | |||||||||||
Other comprehensive income net of tax: | ||||||||||||||||
Minimum pension liability, net of income | ||||||||||||||||
tax effect of $53, $0, $53 and $0 | 143 | — | 143 | — | ||||||||||||
Unrealized gain (loss) on investments available for | ||||||||||||||||
sale, net of income tax effect of ($126), ($18), ($26) and $691 | (341 | ) | (49 | ) | (70 | ) | 1,862 | |||||||||
Comprehensive income | $ | 5,073 | 1,840 | 10,820 | 15,206 | |||||||||||
Less comp. income attributable to | ||||||||||||||||
Noncontrolling interest | $ | (184 | ) | (112 | ) | (475 | ) | (380 | ) | |||||||
Comprehensive income attributable to the Company | $ | 5,257 | 1,952 | 11,295 | 15,586 |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income (loss) | $ | (113 | ) | 5,271 | 41,043 | 10,747 | ||||||||||
Other comprehensive income net of tax: | ||||||||||||||||
Minimum pension liability, net of income tax effect of $0, $53, $0 and $53 | 0 | 143 | 0 | 143 | ||||||||||||
Unrealized gain (loss) on investments sale, net of income tax effect of $(28), $(126), $(179) and $(26) | (75 | ) | (341 | ) | (482 | ) | (70 | ) | ||||||||
Comprehensive income (loss) | $ | (188 | ) | 5,073 | 40,561 | 10,820 | ||||||||||
Less comp. income attributable to Noncontrolling interest | $ | (465 | ) | (184 | ) | 12,236 | (475 | ) | ||||||||
Comprehensive income attributable to the Company | $ | 277 | 5,257 | 28,325 | 11,295 |
See accompanying notes
6 |
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 20202021 AND 20192020
(In thousands) (Unaudited)
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 10,747 | 13,344 | |||||
Adjustments to reconcile net income to | ||||||||
net cash provided by continuing operating activities: | ||||||||
Income from discontinued operations, net | — | (6,849 | ) | |||||
Deferred income taxes | 2,421 | 23,123 | ||||||
Depreciation, depletion and amortization | 4,572 | 4,635 | ||||||
Equity in loss of joint ventures | 3,773 | 1,282 | ||||||
Gain on sale of equipment and property | (9,343 | ) | (657 | ) | ||||
Stock-based compensation | 1,241 | 206 | ||||||
Realized gain on available for sale investments | (297 | ) | (591 | ) | ||||
Net changes in operating assets and liabilities: | ||||||||
Accounts receivable | (377 | ) | (355 | ) | ||||
Deferred costs and other assets | (178 | ) | (922 | ) | ||||
Accounts payable and accrued liabilities | 440 | (1,252 | ) | |||||
Income taxes payable and receivable | (340 | ) | (17,335 | ) | ||||
Other long-term liabilities | 694 | 2,148 | ||||||
Net cash provided by operating activities of continuing operations | 13,353 | 16,777 | ||||||
Net cash used in operating activities of discontinued operations | — | (1,756 | ) | |||||
Net cash provided by operating activities | 13,353 | 15,021 | ||||||
Cash flows from investing activities: | ||||||||
Investments in properties | (3,200 | ) | (9,360 | ) | ||||
Investments in joint ventures | (10,911 | ) | (16,226 | ) | ||||
Purchases of investments available for sale | (24,584 | ) | (36,941 | ) | ||||
Proceeds from sales of investments available for sale | 57,240 | 89,260 | ||||||
Proceeds from the sale of assets | 19,257 | 8,405 | ||||||
Cash held in escrow | (15,073 | ) | (6,532 | ) | ||||
Net cash provided by investing activities of continuing operations | 22,729 | 28,606 | ||||||
Net cash provided by investing activities of discontinued operations | — | 11,525 | ||||||
Net cash provided by investing activities | 22,729 | 40,131 | ||||||
Cash flows from financing activities: | ||||||||
Distribution to noncontrolling interest | (713 | ) | (1,086 | ) | ||||
Repurchase of company stock | (15,687 | ) | (7,714 | ) | ||||
Exercise of employee stock options | — | 347 | ||||||
Net cash used in financing activities of continuing operations | (16,400 | ) | (8,453 | ) | ||||
Net cash used in financing activities of discontinued operations | — | — | ||||||
Net cash used in financing activities | (16,400 | ) | (8,453 | ) | ||||
Net increase in cash and cash equivalents | 19,682 | 46,699 | ||||||
Cash and cash equivalents at beginning of year | 26,607 | 22,547 | ||||||
Cash and cash equivalents at end of the period | $ | 46,289 | 69,246 |
2021 | 2020 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 41,043 | 10,747 | ||||||
Adjustments to reconcile net income to net cash provided by continuing operating activities: | |||||||||
Depreciation, depletion and amortization | 9,772 | 4,572 | |||||||
Deferred income taxes | 9,273 | 2,421 | |||||||
Equity in loss of joint ventures | 3,997 | 3,773 | |||||||
Gain on remeasurement of invest in real estate partnership | (51,139 | ) | 0 | ||||||
Gain on sale of equipment and property | (876 | ) | (9,343 | ) | |||||
Stock-based compensation | 1,006 | 1,241 | |||||||
Realized gain on available for sale investments | 0 | (297 | ) | ||||||
Net changes in operating assets and liabilities: | |||||||||
Accounts receivable | 639 | (377 | ) | ||||||
Deferred costs and other assets | 151 | (178 | ) | ||||||
Accounts payable and accrued liabilities | (442 | ) | 440 | ||||||
Income taxes payable and receivable | 2,539 | (340 | ) | ||||||
Other long-term liabilities | 437 | 694 | |||||||
Net cash provided by operating activities | 16,400 | 13,353 | |||||||
Cash flows from investing activities: | |||||||||
Investments in properties | (11,555 | ) | (3,200 | ) | |||||
Investments in joint ventures | (10,031 | ) | (12,297 | ) | |||||
Return of capital from investments in joint ventures | 20,100 | 1,386 | |||||||
Purchases of investments available for sale | 0 | (24,584 | ) | ||||||
Proceeds from sales of investments available for sale | 69,865 | 57,240 | |||||||
Cash at consolidation of real estate partnership | 3,704 | 0 | |||||||
Proceeds from the sale of assets | 934 | 19,257 | |||||||
Cash held in escrow | 30 | (15,073 | ) | ||||||
Net cash provided by investing activities | 73,047 | 22,729 | |||||||
Cash flows from financing activities: | |||||||||
Proceeds from long-term debt | 92,070 | 0 | |||||||
Repayment of long-term debt | (90,000 | ) | 0 | ||||||
Debt issue costs | (704 | ) | 0 | ||||||
Distribution to noncontrolling interest | (1,846 | ) | (713 | ) | |||||
Repurchase of company stock | (264 | ) | (15,687 | ) | |||||
Exercise of employee stock options | 269 | 0 | |||||||
Net cash used in financing activities | (475 | ) | (16,400 | ) | |||||
Net increase in cash and cash equivalents | 88,972 | 19,682 | |||||||
Cash and cash equivalents at beginning of year | 73,909 | 26,607 | |||||||
Cash and cash equivalents at end of the period | $ | 162,881 | 46,289 |
See accompanying notes.
7 |
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 20202021 AND 20192020
(In thousands, except share amounts)
Nine Months Ended September 30, 2020 | Accumulated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Total | Capital in | Other Comp- | Share | Non- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital in | Other Comp- | Share | Non- | Common Stock | Excess of | Retained | rehensive | holders’ | Controlling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Excess of | Retained | Rehensive | holders’ | Controlling | Total | Shares | Amount | Par Value | Earnings | Income, net | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 9,411,028 | $ | 941 | $ | 57,360 | $ | 337,992 | $ | 268 | $ | 396,561 | $ | 31,724 | $ | 428,285 | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Par Value | Earnings | Income, net | Equity | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | 9,817,429 | $ | 982 | $ | 57,705 | $ | 315,278 | $ | 923 | $ | 374,888 | $ | 16,757 | $ | 391,645 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock option grant compensation | — | 0 | 17 | 0 | 0 | 17 | 0 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock compensation | — | 0 | 135 | 0 | 0 | 135 | 0 | 135 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | 0 | 0 | 352 | 0 | 352 | (465 | ) | (113 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to partners | — | 0 | 0 | 0 | 0 | 0 | (1,319 | ) | (1,319 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on investment, net | — | 0 | 0 | 0 | (75 | ) | (75 | ) | 0 | (75 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to employees, value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to employees | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock award | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Directors value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Directors shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
minimum pension liability | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock award | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock award, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contributions from partners | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | 9,411,028 | $ | 941 | $ | 57,512 | $ | 338,344 | $ | 193 | $ | 396,990 | $ | 29,940 | $ | 426,930 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 9,363,717 | $ | 936 | $ | 56,279 | $ | 309,764 | $ | 675 | $ | 367,654 | $ | 14,999 | $ | 382,653 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock option grant compensation | — | 0 | 52 | 0 | 0 | 52 | 0 | 52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock compensation | — | 0 | 404 | 0 | 0 | 404 | 0 | 404 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Employees | 1,098 | 0 | 50 | 0 | 0 | 50 | 0 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock award | 27,778 | 3 | (3 | ) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Directors | 9,105 | 1 | 499 | 0 | 0 | 500 | 0 | 500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 15,334 | 1 | 268 | 0 | 0 | 269 | 0 | 269 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled | (6,004 | ) | 0 | (37 | ) | (227 | ) | 0 | (264 | ) | 0 | (264 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Contributions from partners | — | 0 | 0 | 0 | 0 | 0 | 4,551 | 4,551 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | 0 | 0 | 28,807 | 0 | 28,807 | 12,236 | 41,043 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to partners | — | 0 | 0 | 0 | 0 | 0 | (1,846 | ) | (1,846 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on investment, net | — | 0 | 0 | 0 | (482 | ) | (482 | ) | 0 | (482 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | 9,411,028 | $ | 941 | $ | 57,512 | $ | 338,344 | $ | 193 | $ | 396,990 | $ | 29,940 | $ | 426,930 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 9,563,144 | $ | 956 | $ | 57,107 | $ | 310,486 | $ | 1,194 | $ | 369,743 | $ | 16,058 | $ | 385,801 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock option grant compensation | — | 0 | 24 | 0 | 0 | 24 | 0 | 24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock compensation | — | 0 | 46 | 0 | 0 | 46 | 0 | 46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled | (81,506 | ) | (8 | ) | (487 | ) | (2,838 | ) | 0 | (3,333 | ) | 0 | (3,333 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | 0 | 0 | 5,455 | 0 | 5,455 | (184 | ) | 5,271 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to partners | — | 0 | 0 | 0 | 0 | 0 | (305 | ) | (305 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum pension liability, net | — | 0 | 0 | 0 | 143 | 143 | 0 | 143 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on investment, net | — | 0 | 0 | 0 | (341 | ) | (341 | ) | 0 | (341 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 9,481,638 | $ | 948 | $ | 56,690 | $ | 313,103 | $ | 996 | $ | 371,737 | $ | 15,569 | $ | 387,306 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 9,817,429 | $ | 982 | $ | 57,705 | $ | 315,278 | $ | 923 | $ | 374,888 | $ | 16,757 | $ | 391,645 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock option grant compensation | 71 | 71 | 71 | — | 0 | 71 | 0 | 0 | 71 | 0 | 71 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock compensation | 140 | 140 | 140 | — | 0 | 140 | 0 | 0 | 140 | 0 | 140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Employees | 11,448 | 1 | 529 | 530 | 530 | 11,448 | 1 | 529 | 0 | 0 | 530 | 0 | 530 | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Directors | 12,050 | 1 | 499 | 500 | 500 | 12,050 | 1 | 499 | 0 | 0 | 500 | 0 | 500 | |||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock award | 20,520 | 2 | (2 | ) | — | — | 20,520 | 2 | (2 | ) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled | (379,809 | ) | (38 | ) | (2,252 | ) | (13,397 | ) | (15,687 | ) | (15,687 | ) | (379,809 | ) | (38 | ) | (2,252 | ) | (13,397 | ) | 0 | (15,687 | ) | 0 | (15,687 | ) | ||||||||||||||||||||||||||||||||||||
Net income | 11,222 | 11,222 | (475 | ) | 10,747 | — | 0 | 0 | 11,222 | 0 | 11,222 | (475 | ) | 10,747 | ||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to partners | (713 | ) | (713 | ) | — | 0 | 0 | 0 | 0 | 0 | (713 | ) | (713 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Minimum pension liability, net | 143 | 143 | 143 | — | 0 | 0 | 0 | 143 | 143 | 0 | 143 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on investment, net | (70 | ) | (70 | ) | (70 | ) | — | 0 | 0 | 0 | (70 | ) | (70 | ) | 0 | (70 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 9,481,638 | $ | 948 | $ | 56,690 | $ | 313,103 | $ | 996 | $ | 371,737 | $ | 15,569 | $ | 387,306 | 9,481,638 | $ | 948 | $ | 56,690 | $ | 313,103 | $ | 996 | $ | 371,737 | $ | 15,569 | $ | 387,306 | ||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital in | Other Comp- | Share | Non- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Excess of | Retained | Rehensive | holders’ | Controlling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Par Value | Earnings | Income, net | Equity | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 1, 2020 | 9,563,144 | $ | 956 | $ | 57,107 | $ | 310,486 | $ | 1,194 | $ | 369,743 | $ | 16,058 | $ | 385,801 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock option grant compensation | 24 | 24 | 24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock compensation | 46 | 46 | 46 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled | (81,506 | ) | (8 | ) | (487 | ) | (2,838 | ) | (3,333 | ) | (3,333 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 5,455 | 5,455 | (184 | ) | 5,271 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to partners | (305 | ) | (305 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum pension liability, net | 143 | 143 | 143 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on investment, net | (341 | ) | (341 | ) | (341 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 9,481,638 | $ | 948 | $ | 56,690 | $ | 313,103 | $ | 996 | $ | 371,737 | $ | 15,569 | $ | 387,306 | |||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital in | Other Comp- | Share | Non- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Excess of | Retained | rehensive | holders’ | Controlling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Par Value | Earnings | Income, net | Equity | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2019 | 9,969,174 | $ | 997 | $ | 58,004 | $ | 306,307 | $ | (701 | ) | $ | 364,607 | $ | 18,648 | $ | 383,255 | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 11,304 | 1 | 346 | 347 | 347 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option grant compensation | 86 | 86 | 86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Employees | 1,012 | 50 | 50 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares granted to Directors | 1,460 | 70 | 70 | 70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares purchased and cancelled | (159,282 | ) | (16 | ) | (929 | ) | (6,769 | ) | (7,714 | ) | (7,714 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 13,724 | 13,724 | (380 | ) | 13,344 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to partners | (1,086 | ) | (1,086 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on investment, net | 1,862 | 1,862 | 1,862 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 9,823,668 | $ | 982 | $ | 57,627 | $ | 313,262 | $ | 1,161 | $ | 373,032 | $ | 17,182 | $ | 390,214 | |||||||||||||||||||||||||||||||||||||||||||||||
8 |
Three Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||
Accumulated | Total | ||||||||||||||||||||||||||||||
Capital in | Other Comp- | Share | Non- | ||||||||||||||||||||||||||||
Common Stock | Excess of | Retained | rehensive | holders’ | Controlling | Total | |||||||||||||||||||||||||
Shares | Amount | Par Value | Earnings | Income, net | Equity | Interest | Equity | ||||||||||||||||||||||||
Balance at July 1, 2019 | 9,863,451 | $ | 986 | $ | 57,562 | $ | 313,373 | $ | 1,210 | $ | 373,131 | $ | 17,870 | $ | 391,001 | ||||||||||||||||
Exercise of stock options | 6,500 | 1 | 201 | 202 | 202 | ||||||||||||||||||||||||||
Stock option grant compensation | 29 | 29 | 29 | ||||||||||||||||||||||||||||
Shares granted to Employees | 1,012 | 50 | 50 | 50 | |||||||||||||||||||||||||||
Shares granted to Directors | 1,460 | 70 | 70 | 70 | |||||||||||||||||||||||||||
Shares purchased and cancelled | (48,755 | ) | (5 | ) | (285 | ) | (2,112 | ) | (2,402 | ) | (2,402 | ) | |||||||||||||||||||
Net income | 2,001 | 2,001 | (112 | ) | 1,889 | ||||||||||||||||||||||||||
Distributions to partners | (576 | ) | (576 | ) | |||||||||||||||||||||||||||
Unrealized loss on investment, net | (49 | ) | (49 | ) | (49 | ) | |||||||||||||||||||||||||
Balance at September 30, 2019 | 9,823,668 | $ | 982 | $ | 57,627 | $ | 313,262 | $ | 1,161 | $ | 373,032 | $ | 17,182 | $ | 390,214 | ||||||||||||||||
FRP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20202021
(Unaudited)
(1) Description of Business and Basis of Presentation.Presentation.
FRP Holdings, Inc. is a holding company engaged in thevarious real estate business,businesses, namely (i) mining royalty land ownership and leasing, (ii) land acquisition, entitlement and development primarily for future warehouse/office or residential building construction, (iii) ownership, leasing, and management of a residential apartment building,buildings, 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, Riverfront Investment Partners I, LLC.LLC, and commencing March 31, 2021 also Riverfront Investment Partners II, LLC (See Note 12). Our investment in the Brooksville joint venture, BC FRP Realty joint venture, RiverFront HoldingsRiverfront Investment Partners II, joint venture,LLC prior to March 31, 2021, Bryant Street Partnerships, 1800 Half Street and Greenville/Woodfield are accounted for under the equity method of accounting (See Note 11). Our ownership of RiverFrontRiverfront Investment Partners I, LLC and Riverfront Investment Partners II, LLC includes a non-controlling interest representing the ownership of our partner. The Company uses the cost method to account for its investment in DST Hickory Creek because it does not have significant influence over operating and financial policies.
On May 21, 2018, the Company 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 the sale due to the tenant exercising its right of first refusal to purchase the property. On June 28, 2019, the Company completed the sale of the excluded property to the same buyer for $11.7 million. This resulted in the disposition of all of the Company’s industrial flex/office warehouse properties prior to the sale date and constituted a major strategic shift and as a result, these properties have been reclassified as discontinued operations for all periods presented. The 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, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021. 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 December 31, 2019.2020.
(2) Recently Issued Accounting Standards.Standards.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. The Company is not a significant 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 continue to have a similar pattern of recognition as under current GAAP. Sales-type lease accounting, however, will result in the recognition of selling profit at lease commencement, with 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 can no longer be capitalized. Only incremental costs of a lease that would not have been incurred if the lease had not been obtained may be deferred as initial direct costs. The new standard also requires lessors to exclude from variable
payments certain lessor costs, such as real estate taxes, that the lessor contractually requires the lessee to pay directly to a 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 not 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 adoption of 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 adoption of this guidance did not have a material impact on our financial statements.None.
(3) Business Segments.Segments.
The Company is reporting its financial performance based on four4 reportable segments, Asset Management, Mining Royalty Lands, Development and Stabilized Joint Venture, as described below.
The Asset Management segment owns, leases and manages commercial properties. The flex/office warehouses in the Asset Management Segment were sold and reclassified to discontinued operations leaving only two2 commercial properties and one1 recent industrial acquisition, Cranberry Run, which we purchased in 2019. In July 20192020 we sold our property located at 1801 62nd Street, our most recent spec building in Hollander Business Park, which had joined Asset Management April 1, 2019.
9 |
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 Development segment, we own and are continuously assessing for their highest and best 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.
The Stabilized Joint Venture segment includes joint ventures which own, lease and manage buildings that have met our initial lease up criteria. OneTwo of our two joint ventures in the segment, Riverfront Investment Partners I, LLC (“Dock 79”) isand Riverfront Investment Partners II, LLC (“The Maren”) are consolidated. The Maren was consolidated effective March 31, 2021 and prior periods are still reflected under the equity method. The ownership of Dock 79 and The Maren (commencing March 31, 2021) 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 revenues and expenses from Dock 79 are reported in net income, including both the amounts attributable to the Company and the noncontrolling interest. The Maren is reflected in Equity in loss of joint ventures on the Consolidated Statements of Income for the periods up to March 31, 2021 but is reflected like Dock 79 for periods commencing April 1, 2021. The amounts of consolidated net income attributable to the noncontrolling interest is clearly identified on the accompanying Consolidated Statements of Income.
Operating results and certain other financial data for the Company’s business segments are as follows (in thousands):
Three Months ended | Nine Months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||
Revenues: | |||||||||||||||||
Revenues | Asset management | $ | 619 | 721 | 1,919 | 2,089 | |||||||||||
Revenues | Mining royalty lands | 2,249 | 2,507 | 7,198 | 7,094 | ||||||||||||
Revenues | Development | 401 | 290 | 1,169 | 862 | ||||||||||||
Revenues | Stabilized Joint Venture | 5,204 | 2,580 | 12,535 | 7,685 | ||||||||||||
Revenues | 8,473 | 6,098 | 22,821 | 17,730 | |||||||||||||
Operating profit (loss): | |||||||||||||||||
Before corporate expenses: | |||||||||||||||||
Operating profit before corporate expenses | Asset management | $ | 169 | 200 | 528 | 700 | |||||||||||
Operating profit before corporate expenses | Mining royalty lands | 2,037 | 2,291 | 6,531 | 6,486 | ||||||||||||
Operating profit before corporate expenses | Development | (404 | ) | (659 | ) | (1,201 | ) | (2,136 | ) | ||||||||
Operating profit before corporate expenses | Stabilized Joint Venture | (413 | ) | 386 | (1,357 | ) | 1,379 | ||||||||||
Operating profit before corporate expenses | Operating profit before corporate expenses | 1,389 | 2,218 | 4,501 | 6,429 | ||||||||||||
Corporate expenses: | |||||||||||||||||
Corporate expenses | Allocated to asset management | (180 | ) | (165 | ) | (682 | ) | (738 | ) | ||||||||
Corporate expenses | Allocated to mining royalty lands | (69 | ) | (53 | ) | (258 | ) | (234 | ) | ||||||||
Corporate expenses | Allocated to development | (326 | ) | (381 | ) | (1,267 | ) | (1,710 | ) | ||||||||
Corporate expenses | Allocated to stabilized joint venture | (82 | ) | (38 | ) | (279 | ) | (168 | ) | ||||||||
Corporate expenses | Total corporate expenses | (657 | ) | (637 | ) | (2,486 | ) | (2,850 | ) | ||||||||
Operating profit | $ | 732 | 1,581 | 2,015 | 3,579 | ||||||||||||
Interest expense | $ | 414 | 46 | 1,785 | 142 | ||||||||||||
| Three Months ended | Nine Months ended | ||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Asset management | $ | 721 | 430 | 2,089 | 1,733 | |||||||||||
Mining royalty lands | 2,507 | 2,302 | 7,094 | 7,164 | ||||||||||||
Development | 290 | 307 | 862 | 892 | ||||||||||||
Stabilized Joint Venture | 2,580 | 2,844 | 7,685 | 8,171 | ||||||||||||
6,098 | 5,883 | 17,730 | 17,960 | |||||||||||||
Operating profit (loss): | ||||||||||||||||
Before corporate expenses: | ||||||||||||||||
Asset management | $ | 200 | 8 | 700 | 233 | |||||||||||
Mining royalty lands | 2,291 | 2,103 | 6,486 | 6,605 | ||||||||||||
Development | (659 | ) | (629 | ) | (2,136 | ) | (1,747 | ) | ||||||||
Stabilized Joint Venture | 386 | 608 | 1,379 | 1,657 | ||||||||||||
Operating profit before corporate expenses | 2,218 | 2,090 | 6,429 | 6,748 | ||||||||||||
Corporate expenses: | ||||||||||||||||
Allocated to asset management | (165 | ) | (168 | ) | (738 | ) | (470 | ) | ||||||||
Allocated to mining royalty lands | (53 | ) | (44 | ) | (234 | ) | (123 | ) | ||||||||
Allocated to development | (381 | ) | (479 | ) | (1,710 | ) | (1,219 | ) | ||||||||
Allocated to stabilized joint venture | (38 | ) | (41 | ) | (168 | ) | (116 | ) | ||||||||
Total corporate expenses | (637 | ) | (732 | ) | (2,850 | ) | (1,928 | ) | ||||||||
$ | 1,581 | 1,358 | 3,579 | 4,820 | ||||||||||||
Interest expense | $ | 46 | 129 | 142 | 989 | |||||||||||
Depreciation, depletion and amortization: | ||||||||||||||||
Asset management | $ | 137 | 154 | 529 | 527 | |||||||||||
Mining royalty lands | 60 | 36 | 160 | 130 | ||||||||||||
Development | 53 | 54 | 160 | 161 | ||||||||||||
Stabilized Joint Venture | �� | 1,188 | 1,187 | 3,557 | 3,572 | |||||||||||
$ | 1,438 | 1,431 | 4,406 | 4,390 | ||||||||||||
Capital expenditures: | ||||||||||||||||
Asset management | $ | 233 | 824 | 787 | 8,642 | |||||||||||
Mining royalty lands | — | — | — | — | ||||||||||||
Development | 1,754 | 167 | 2,371 | 415 | ||||||||||||
Stabilized Joint Venture | 46 | 194 | 42 | 304 | ||||||||||||
$ | 2,033 | 1,185 | 3,200 | 9,361 |
September 30, | December 31, | |||||||
Identifiable net assets | 2020 | 2019 | ||||||
Asset management | $ | 11,323 | 18,468 | |||||
Mining royalty lands | 37,617 | 38,409 | ||||||
Development | 182,567 | 179,357 | ||||||
Stabilized Joint Venture | 136,679 | 133,956 | ||||||
Investments available for sale at fair value | 104,624 | 137,867 | ||||||
Cash items | 61,548 | 26,793 | ||||||
Unallocated corporate assets | 1,772 | 3,298 | ||||||
$ | 536,130 | 538,148 |
Depreciation, depletion and amortization: | |||||||||||||||||
Depreciation, depletion and amortization | Asset management | $ | 137 | 137 | 408 | 529 | |||||||||||
Depreciation, depletion and amortization | Mining royalty lands | 38 | 60 | 161 | 160 | ||||||||||||
Depreciation, depletion and amortization | Development | 53 | 53 | 159 | 160 | ||||||||||||
Depreciation, depletion and amortization | Stabilized Joint Venture | 3,568 | 1,188 | 8,899 | 3,557 | ||||||||||||
Depreciation, depletion and amortization | $ | 3,796 | 1,438 | 9,627 | 4,406 | ||||||||||||
Capital expenditures: | |||||||||||||||||
Capital expenditures | Asset management | $ | 100 | 233 | 318 | 787 | |||||||||||
Capital expenditures | Mining royalty lands | 0 | 0 | 0 | 0 | ||||||||||||
Capital expenditures | Development | 4,237 | 1,754 | 10,443 | 2,371 | ||||||||||||
Capital expenditures | Stabilized Joint Venture | 373 | 46 | 794 | 42 | ||||||||||||
Capital expenditures | $ | 4,710 | 2,033 | 11,555 | 3,200 |
Identifiable net assets
September 30, | December 31, | ||||||||
Identifiable net assets | 2021 | 2020 | |||||||
Assets | Asset management | $ | 11,127 | 11,172 | |||||
Assets | Mining royalty lands | 37,205 | 37,387 | ||||||
Assets | Development | 185,500 | 196,212 | ||||||
Assets | Stabilized Joint Venture | 268,907 | 130,472 | ||||||
Investments available for sale | Investments available for sale at fair value | 4,315 | 75,609 | ||||||
Cash | Cash items | 163,383 | 74,105 | ||||||
Assets | Unallocated corporate assets | 8,316 | 11,403 | ||||||
Assets | $ | 678,753 | 536,360 |
(4) Related Party Transactions.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, 2020.2021.
The consolidated statements of income reflect charges and/or allocation from Patriot for these services of $290,000$260,000 and $347,000$290,000 for the three months ended September 30, 2021 and 2020 and 2019$772,000 and $870,000 and $976,000$870,000 for the nine months ended September 30, 2021 and 2020, and 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 employ 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.
(5) Long-Term Debt.Debt.
Long-termThe Company’s Outstanding Debt, net of unamortized debt is summarized as followsissuance costs, consisted of the following (in thousands):
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Riverfront permanent loan | $ | 89,027 | 88,925 | |||||
Less portion due within one year | — | — | ||||||
$ | 89,027 | 88,925 |
September 30, | December 31, | ||||||||
2021 | 2020 | ||||||||
Fixed rate mortgage loans, 3.03% interest only, matures 4/1/2033 | $ | 178,371 | 89,964 | ||||||
Credit agreement | 0 | 0 | |||||||
Long-term debt | $ | 178,334 | 89,964 |
On February 6, 2019, the Company entered into a First 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-yearfive-year revolving credit facility with a maximum facility amount of $20 million.$20 million. The interest rate under the Credit Agreement will be a maximum of 1.50%1.50% over Daily 1 Month1-Month LIBOR, which may be reduced quarterly to 1.25%1.25% or 1.0%1.0% over Daily 1 Month1-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%0.25% per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.20%0.20% or 0.15%0.15% if the Company meets a specified ratio of consolidated total debt to consolidated total capital. The Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants. As of September 30, 2020,2021, there was no0 debt outstanding on this revolver, $411,000$506,000 outstanding under letters of credit and $19,589,000$19,494,000 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 letter of credit fee is 1%1% and applicable interest rate would have been 1.149%1.08238% on September 30, 2020.2021. The credit agreement contains certain conditions and financial covenants, including a minimum tangible net worth and dividend restriction. As of September 30, 2020,2021, these covenants would have limited our ability to pay dividends to a maximum of $219$228 million combined. The Company was in compliance with all covenants as of September 30, 2020.
On November 17, 2017, Riverfront Holdings I, LLC (the "Joint Venture") refinanced the Dock 79 projectborrowed a principal sum of $90,000,000 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 and MRP in 2014 in connection with the development of the Riverfront on the Anacostia property, borrowed a principal sum of $90,000,000 in connection with the refinancing.EagleBank. The loan iswas secured by the Dock 79 real property and improvements, bearsbore a fixed interest rate of 4.125%4.125% per annum and hashad a term of 120 months. Duringmonths. The loan was paid in full on March 19, 2021. A prepayment penalty of $900,000 was recorded into interest expense in the first 48 monthsquarter ending March 31, 2021.
Effective March 31, 2021, the Company consolidated the assets (at current fair value), liabilities and operating results of our Riverfront Investment Partners II, LLC partnership (“The Maren”) which was previously accounted for under the equity method. As such the full amount of our mortgage loan term,was recorded in the Joint Venture will makeconsolidated financial statements.
On March 19, 2021, the Company refinanced Dock 79 and The Maren projects pursuant to separate Loan Agreements and Deed of Trust Notes entered into with Teachers Insurance and Annuity Association of America, LLC. Dock 79 and The Maren borrowed principal sums of $92,070,000 and $88,000,000 respectively, in connection with the refinancing. The loans are separately secured by the Dock 79 and The Maren real property and improvements, bear a fixed interest rate of 3.03% per annum, and require monthly payments of interest only and thereafter, make monthly payments of principal and interest in equal installments based upon a 30-
year amortization period. The loan is a non-recourse loan. However, all amounts due under the Loan Documents will become immediately due upon an event of default by the 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 (iv) dissolution, or the dissolution of the guarantor. MRP has executed a carve-out guaranty in connection with the loan.principal in full due April 1, 2033. Either loan may be prepaid subsequent to April 1, 2024, subject to yield maintenance premiums. Either loan may be transferred to a qualified buyer as part of a one-time sale subject to a 60% loan to value, minimum of 7.5% debt yield and a 0.75% transfer fee.
Debt cost amortization of $34,000$37,000 and $102,000$113,000 was recorded during the three and nine months ended September 30, 2020,2021, respectively. During the three months ended September 30, 20202021 and September 30, 20192020 the Company capitalized interest costs of $948,000$999,000 and $870,000,$948,000, respectively. During the nine months ended September 30, 20202021 and September 30, 20192020 the Company capitalized interest costs of $2,823,000$2,892,000 and $1,960,000,$2,823,000, respectively.
The Company was in compliance with all debt covenants as of September 30, 2021.
Three Months ended | Nine Months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Weighted average common shares | |||||||||||||||
outstanding during the period | |||||||||||||||
- shares used for basic | |||||||||||||||
earnings per common share | 9,517 | 9,843 | 9,646 | 9,903 | |||||||||||
Common shares issuable under | |||||||||||||||
share based payment plans | |||||||||||||||
which are potentially dilutive | 28 | 43 | 35 | 42 | |||||||||||
Common shares used for diluted | |||||||||||||||
earnings per common share | 9,545 | 9,886 | 9,681 | 9,945 | |||||||||||
Income from continuing operations | $ | 5,271 | 1,902 | 10,747 | 6,495 | ||||||||||
Discontinued operations | $ | — | (13 | ) | — | 6,849 | |||||||||
Net income attributable to the Company | $ | 5,455 | 2,001 | 11,222 | 13,724 | ||||||||||
Basic earnings per common share: | |||||||||||||||
Income from continuing operations | $ | 0.55 | 0.19 | 1.11 | 0.66 | ||||||||||
Discontinued operations | $ | — | — | — | 0.69 | ||||||||||
Net income attributable to the Company | $ | 0.57 | 0.20 | 1.16 | 1.39 | ||||||||||
Diluted earnings per common share: | |||||||||||||||
Income from continuing operations | $ | 0.55 | 0.19 | 1.11 | 0.65 | ||||||||||
Discontinued operations | $ | — | — | — | 0.69 | ||||||||||
Net income attributable to the Company | $ | 0.57 | 0.20 | 1.16 | 1.38 |
Three Months ended | Nine Months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Weighted average common shares outstanding during the period – shares used for basic earnings per common share | 9,363 | 9,517 | 9,352 | 9,646 | ||||||||||||
Common shares issuable under share-based payment plans which are potentially dilutive | 36 | 28 | 38 | 35 | ||||||||||||
Common shares used for diluted earnings per common share | 9,399 | 9,545 | 9,390 | 9,681 | ||||||||||||
Net income attributable to the Company | $ | 352 | 5,455 | 28,807 | 11,222 | |||||||||||
Earnings per common share: | ||||||||||||||||
-basic | $ | 0.04 | 0.57 | 3.08 | 1.16 | |||||||||||
-diluted | $ | 0.04 | 0.57 | 3.07 | 1.16 |
For the three and nine months ended September 30, 2020, 74,065 and 53,5452021, shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the three and nine months ended September 30, 2019, 19,9502020, and shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
During the first nine months of 2021 the Company repurchased 379,809 shares at an average cost of $41.30.$ . During the first nine months of 2020 the Company repurchased shares at an average cost of $ .
The Company has two2 Stock Option Plans (the 2006 Stock Incentive Plan and the 2016 Equity Incentive Option Plan) under which options for shares of common stock were granted to directors, officers and key employees. The 2016 plan permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, or stock awards. The options awarded under the plans have similar characteristics. All stock options are non-qualified and expire years from the date of grant. Stock based compensation awarded to directors, officers and employees are at the end of each year following the date of grant. When stock options are exercised, the Company issues new shares after receipt of exercise proceeds and taxes due, if any, from the grantee.
The Company utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant. The assumptions were no dividend yield, expected volatility between 29% % and 41% %, risk-free interest rate of 1.0% % to 2.9% % and expected life of to years.
The dividend yield of
is based on the fact that the Company does not pay cash dividends and has no present intention to pay cash dividends. Expected volatility is estimated based on the Company’s historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.
In March 2020, 20,520January 2021, shares of restricted stock were granted to employees that will vest over the next . In January 2021, shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next . In March 2020, shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next . The number of common shares available for future issuance was 443,820 at September 30, 2020.2021. In March 2021 and March 2020, and shares of stock, respectively, were granted to employees rather than stock options as in prior years.
The Company recorded the following stock compensation expenseStock Compensation Expense in its consolidated statements of income (in thousands):
Three Months ended | Nine Months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Stock option grants | $ | 24 | 29 | 71 | 86 | |||||||||||
Restricted stock awards granted in 2020 | 46 | — | 140 | — | ||||||||||||
Employee stock grant | — | — | 530 | — | ||||||||||||
Unrestricted employee stock award | — | 50 | — | 50 | ||||||||||||
Annual director stock award | — | 70 | 500 | 70 | ||||||||||||
$ | 70 | 149 | 1,241 | 206 |
Three Months ended | Nine Months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||
Stock option grants | $ | 17 | 24 | 52 | 71 | ||||||||||||
Restricted stock awards | 135 | 46 | 404 | 140 | |||||||||||||
Employee stock grant | 0 | 0 | 50 | 530 | |||||||||||||
Annual director stock award | — | — | 500 | 500 | |||||||||||||
Stock compensation | $ | 152 | 70 | 1,006 | 1,241 |
Weighted | Weighted | Weighted | ||||||||||||
Number | Average | Average | Average | |||||||||||
Of | Exercise | Remaining | Grant Date | |||||||||||
Options | Shares | Price | Term (yrs) | Fair Value(000's) | ||||||||||
Outstanding at January 1, 2020 | 132,504 | $ | 33.82 | 5.8 | $ | 1,631 | ||||||||
Granted | — | $ | — | $ | — | |||||||||
Exercised | — | $ | — | $ | — | |||||||||
Outstanding at September 30, 2020 | 132,504 | $ | 33.82 | 5.0 | $ | 1,631 | ||||||||
Exercisable at September 30, 2020 | 114,189 | $ | 32.11 | 4.5 | $ | 1,333 | ||||||||
Vested during nine months ended | ||||||||||||||
September 30, 2020 | — | $ | — |
Weighted | Weighted | Weighted | ||||||||||||
Number | Average | Average | Average | |||||||||||
Of | Exercise | Remaining | Grant Date | |||||||||||
Options | Shares | Price | Term (yrs) | Fair Value(000's) | ||||||||||
Outstanding at December 31, 2020 | 120,089 | $ | 35.33 | 5.3 | $ | 1,531 | ||||||||
Exercised | (15,334 | ) | $ | 17.54 | $ | (115 | ) | |||||||
Outstanding at September 30, 2021 | 104,755 | $ | 37.93 | 5.1 | $ | 1,416 | ||||||||
Exercisable at September 30, 2021 | 92,407 | $ | 36.87 | 4.8 | $ | 1,212 | ||||||||
Vested during nine months ended September 30, 2021 | 0 | $ | 0 |
The aggregate intrinsic value of exercisable in-the-money options was $1,216,000$ and the aggregate intrinsic value of outstanding in-the-money options was $1,234,000$ based on the market closing price of $41.67$ on September 30, 20202021 less exercise prices.
The unrecognized compensation cost of options granted to FRP employees but not yet vested as of September 30, 20202021 was $219,000,$ , which is expected to be recognized over a weighted-average period of 3.1 years. .
Gains of $
were realized by option holders during the nine months ended September 30, 2021.
Weighted | Weighted | Weighted | ||||||||||||
Number | Average | Average | Average | |||||||||||
Of | Exercise | Remaining | Grant Date | |||||||||||
Restricted stock | Shares | Price | Term (yrs) | Fair Value(000's) | ||||||||||
Outstanding at January 1, 2020 | 0 | |||||||||||||
Granted | 20,520 | $ | 46.30 | $ | 950 | |||||||||
Outstanding at September 30, 2020 | 20,520 | $ | 46.30 | 3.7 | $ | 950 | ||||||||
Weighted | Weighted | Weighted | ||||||||||||
Number | Average | Average | Average | |||||||||||
Of | Exercise | Remaining | Grant Date | |||||||||||
Restricted stock | Shares | Price | Term (yrs) | Fair Value(000's) | ||||||||||
Non-vested at December 31, 2020 | 20,520 | $ | 46.30 | 3.4 | $ | 950 | ||||||||
Time-based awards granted | 8,896 | 45.55 | 405 | |||||||||||
Performance-based awards granted | 18,882 | 45.55 | 860 | |||||||||||
Non-vested at September 30, 2021 | 48,298 | $ | 45.87 | 3.3 | $ | 2,215 | ||||||||
Total compensation cost of restricted stock granted but not yet vested as of September 30, 20202021 was $809,000$ which is expected to be recognized over a weighted-average period of 3.7 years. .
14 |
(8) Contingent Liabilities.
(8) Contingent Liabilities.
Certain of the Company’s subsidiaries areThe Company may be involved in litigation on a number of matters and areis subject to certain claims which arise in the normal course of business. The Company has retained certain self-insurance risks with respect to losses for third party liability and property damage. The liability at any point in time depends upon the relative ages and amounts of the individual open claims. In the opinion of management, none of these matters are expected to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.
The Company executedis subject to numerous environmental laws and regulations. The Company believes that the ultimate disposition of currently known environmental matters will not have a letter of intentmaterial effect on its financial position, liquidity, or operations. The Company can give no assurance that previous environmental studies with MRP in May 2016respect to develop Phase IIits properties have revealed all potential environmental contaminants; that any previous owner, occupant or tenant did not create any material environmental condition not known to the Company; that the current environmental condition of the Riverfront onproperties will not be affected by tenants and occupants, by the Anacostia projectcondition of nearby properties, or by unrelated third parties; and recorded an estimatedthat changes in applicable environmental remediation expenselaws and regulations or their interpretation will not result in additional environmental liability to the Company.
As of $2.0 million for the Company’s estimated liability under the proposed agreement. The Company substantially completed the remediation and reduced the estimated liability in the quarter ending September 30, 2018 by $465,000 and further reduced the liability $92,0002021, there was $506,000 outstanding under letters of credit. The letters of credit were issued to zero in 2020. The Company has no obligationguarantee certain obligations to remediate any known contamination on Phases III and IV of the development until such time as it makes a commitmentstate agencies related to commence construction on each phase.real estate development.
(9) Concentrations.
The mining royalty lands segment has a total of five5 tenants currently leasing mining locations and one lessee that accounted for 32.1%23.8% of the Company’s consolidated revenues during the nine months ended September 30, 20202021, and $374,000$294,000 of accounts receivable at September 30, 2020.2021. The termination of these lessees’ underlying leases could have a material adverse effect on the Company. The Company places its cash and cash equivalents with Wells Fargo Bank and First Horizon Bank. At times, such amounts may exceed FDIC limits.
(10) Fair Value Measurements.Measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level 3 means the use of inputs are those that are unobservable and significant to the overall fair value measurement.
At September 30, 20202021, the Company was invested in 462 corporate bonds with individual maturities ranging from 2020 throughin January 2022. The unrealized gain on these bonds of $1,117,000$16,000 was recorded as part of comprehensive income and was based on the estimated market value by National Financial Services, LLC (“NFS”) obtained from sources that may include pricing vendors, broker/dealers who clear through NFS and/or other sources (Level 2). The Company recorded a realized gain of $297,000 in its net investment income related to bonds that were sold in 2020. The amortized cost of the investments was $103,507,000$4,299,000 and the carrying amount and fair value of such bonds were $104,624,000$4,315,000 as of September 30, 2020.2021.
At September 30, 20202021 and 2019,2020, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents and revolving credit approximate their fair value based upon the short-term nature of these items.
The fair values of the Company’s other mortgage notes payable were estimated based on current rates available to the Company for debt of the same remaining maturities. At September 30, 2021, the carrying amount and fair value of such other long-term debt was $178,371,000 and $173,634,000, respectively. At September 30, 2020, the carrying amount and fair value of such other long-term debt was $89,027,000$89,027,000 and $95,138,000, respectively. At September 30, 2019, the carrying amount and fair value of such other long-term debt was $88,891,000 and $94,658,000,$95,138,000, respectively.
15 |
(11) Investments in Joint Ventures.Ventures.
Brooksville. In 2006, the Company entered into a Joint Venture Agreement with Vulcan Materials Company to jointly own and develop approximately 4,300 acres of land near Brooksville, Florida. Under the terms of the joint venture, FRP contributed its fee interest in approximately 3,443 acres formerly leased to Vulcan under a long-term mining lease which had a net book value of $2,548,000. Vulcan is entitled to mine a portion of the property until 2032 and pay royalties to the Company. FRP also contributed $3,018,000 for one-half of the acquisition costs of a 288-acre contiguous parcel. Vulcan contributed 553 acres that it owned as well as its leasehold interest in the 3,443 acres that it leased from FRP and $3,018,000 for one-half of the acquisition costs of the 288-acre contiguous parcel. The joint venture is jointly controlled by Vulcan and FRP. Distributions will be made on a 50-50 basis except for royalties and depletion specifically allocated to the Company. Other income for the nine months ended September 30, 2020 includes a loss of $33,000 representing the Company’s portion of the loss of this joint venture.
BC FRP Realty (Windlass Run). In 2016, the Company entered into an agreement with a Baltimore development company (St. John Properties, Inc.) to jointly develop the remaining lands of our Windlass Run Business Park. The 50/50 partnership initially calls for FRP to combine its 25 acres (valued at $7,500,000) with St. John Properties’ adjacent 10 acres fronting on a major state highway (valued at $3,239,536) which resulted in an initial cash distribution of $2,130,232 to FRP in May 2016. Thereafter, the venture will jointly develop the combined properties into a multi-building business park to consist of approximately 329,000 square feet of single-story office space. On September 28, 2017 BC FRP Realty, LLC obtained $17,250,000 of construction financing commitments for four buildings through September 15, 2022 from TRUIST BANK at 2.5% over Daily 1 Month LIBOR. The balance outstanding on these loans at September 30, 2020 was $12,211,000.
RiverFront Holdings II, LLC. On May 4, 2018, the Company and MRP formed a partnership to develop Phase II of our RiverFront on the Anacostia project and closed on construction financing with Eagle Bank. The Company has contributed its landinvestments in joint ventures, primarily with an agreed valueother real estate developers. 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 $16.3 million (cost basisjoint ventures” on the income statement. The assets of $4.6 million)these joint ventures are restricted to use by the joint ventures and $6.2 milliontheir obligations can only be settled by their assets or additional contributions by the partners.
The following table summarizes the Company’s Investments in unconsolidated joint ventures (in thousands):
The | |||||||||||||||
Company's | |||||||||||||||
Share of Profit | |||||||||||||||
Common | Total | Total Assets of | Profit (Loss) | (Loss) of the | |||||||||||
Ownership | Investment | The Partnership | Of the Partnership | Partnership (1) | |||||||||||
As of September 30, 2021 | |||||||||||||||
Brooksville Quarry, LLC | 50.00 | % | $ | 7,463 | 14,332 | (66 | ) | (32 | ) | ||||||
BC FRP Realty, LLC | 50.00 | % | 5,454 | 22,612 | (227 | ) | (113 | ) | |||||||
Riverfront Holdings II, LLC (1) | 0 | 0 | (760 | ) | (628 | ) | |||||||||
Bryant Street Partnerships | 61.36 | % | 59,899 | 201,144 | (3,566 | ) | (3,234 | ) | |||||||
Hyde Park | 0 | 0 | 0 | 0 | |||||||||||
DST Hickory Creek | 26.65 | % | 6,000 | 46,560 | (325 | ) | 257 | ||||||||
Amber Ridge Loan | 12,471 | 12,471 | 0 | 0 | |||||||||||
1800 Half St. Owner, LLC | 61.37 | % | 38,456 | 76,829 | 19 | 25 | |||||||||
Greenville/Woodfield Partnerships | 40.00 | % | 16,232 | 80,476 | (680 | ) | (272 | ) | |||||||
Total | $ | 145,975 | 454,424 | (5,605 | ) | (3,997 | ) | ||||||||
| |||||||||||||||
| The | ||||||||||||||
Company's | |||||||||||||||
Share of Profit | |||||||||||||||
Common | Total | Total Assets of | Profit (Loss) | (Loss) of the | |||||||||||
Ownership | Investment | The Partnership | Of the Partnership | Partnership (1) | |||||||||||
As of December 31, 2020 | |||||||||||||||
Brooksville Quarry, LLC | 50.00 | % | $ | 7,499 | 14,347 | (78 | ) | (39 | ) | ||||||
BC FRP Realty, LLC | 50.00 | % | 5,184 | 22,747 | (411 | ) | (207 | ) | |||||||
Riverfront Holdings II, LLC | 80.00 | % | 23,533 | 108,538 | (4,573 | ) | (3,907 | ) | |||||||
Bryant Street Partnerships | 61.36 | % | 60,159 | 173,814 | (836 | ) | (2,130 | ) | |||||||
Hyde Park | 591 | 591 | 0 | 0 | |||||||||||
DST Hickory Creek | 26.65 | % | 6,000 | 47,761 | (367 | ) | 339 | ||||||||
Amber Ridge Loan | 10,026 | 10,026 | 0 | 0 | |||||||||||
1800 Half St. Owner, LLC | 61.37 | % | 37,875 | 54,275 | 158 | 164 | |||||||||
Greenville/Woodfield Partnerships | 40.00 | % | 16,204 | 46,457 | 182 | 90 | |||||||||
Total | $ | 167,071 | 478,556 | (5,925 | ) | (5,690 | ) | ||||||||
(1): | Riverfront Holdings II, LLC was consolidated on March 31, 2021. Bryant Street Partnerships includes $674,000 in 2021 and $1,146,000 in 2020 for the Company’s share of preferred interest and $354,000 in 2021 and $471,000 in 2020 for amortization of guarantee liability related to the Bryant Street loan. |
The Major classes of cash. MRP contributed capital of $5.6 million to the partnership including development costs paid prior to the formationassets, liabilities and equity of the partnershipCompany’s Investments in Joint Ventures as of September 30, 2021 are summarized in the following two tables (in thousands):
16 |
Investments in Apartment/Mixed Use Joint Ventures as of September 30, 2021
As of September 30, 2021 | 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 | 198,039 | 44,224 | 73,580 | 80,261 | $ | 396,104 | |||||||||||||||
Cash and cash equivalents | 0 | 848 | 978 | 439 | 207 | 2,472 | |||||||||||||||||
Unrealized rents & receivables | 0 | 1,892 | 1,004 | 0 | 8 | 2,904 | |||||||||||||||||
Deferred costs | 0 | 365 | 354 | 2,810 | 0 | 3,529 | |||||||||||||||||
Total Assets | $ | 0 | 201,144 | 46,560 | 76,829 | 80,476 | $ | 405,009 | |||||||||||||||
| |||||||||||||||||||||||
Secured notes payable | $ | 0 | 116,705 | 29,325 | 0 | 35,879 | $ | 181,909 | |||||||||||||||
Other liabilities | 0 | 7,620 | 162 | 15,766 | 5,370 | 28,918 | |||||||||||||||||
Capital - FRP | 0 | 58,014 | 4,550 | 37,483 | 15,691 | 115,738 | |||||||||||||||||
Capital – Third Parties | 0 | 18,805 | 12,523 | 23,580 | 23,536 | 78,444 | |||||||||||||||||
Total Liabilities and Capital | $ | 0 | 201,144 | 46,560 | 76,829 | 80,476 | $ | 405,009 |
Investments in Joint Ventures as of September 30, 2021
As of September 30, 2021 | |||||||||||||||||||||||
Brooksville | BC FRP | Amber Ridge | Apartment/ | Grand | |||||||||||||||||||
Quarry, LLC | Realty, LLC | Hyde Park | Loan | Mixed Use | Total | ||||||||||||||||||
Investments in real estate, net. | $ | 14,283 | 21,627 | 0 | 12,471 | 396,104 | $ | 444,485 | |||||||||||||||
Cash and cash equivalents | 49 | 231 | 0 | 0 | 2,472 | 2,752 | |||||||||||||||||
Unrealized rents & receivables | 0 | 470 | 0 | 0 | 2,904 | 3,374 | |||||||||||||||||
Deferred costs | 0 | 284 | 0 | 0 | 3,529 | 3,813 | |||||||||||||||||
Total Assets | $ | 14,332 | 22,612 | 0 | 12,471 | 405,009 | $ | 454,424 | |||||||||||||||
Secured notes payable | $ | 0 | 11,524 | 0 | 0 | 181,909 | $ | 193,433 | |||||||||||||||
Other liabilities | 81 | 138 | 0 | 0 | 28,918 | 29,137 | |||||||||||||||||
Capital - FRP | 7,463 | 5,475 | 0 | 12,471 | 115,738 | 141,147 | |||||||||||||||||
Capital - Third Parties | 6,788 | 5,475 | 0 | 0 | 78,444 | 90,707 | |||||||||||||||||
Total Liabilities and Capital | $ | 14,332 | 22,612 | 0 | 12,471 | 405,009 | $ | 454,424 | |||||||||||||||
The Company’s capital recorded by the unconsolidated Joint Ventures is $4,828,000 less than the Investment in Joint Ventures reported in the Company’s consolidated balance sheet due primarily to capitalized interest.
The major classes of assets, liabilities and a $725,000 development fee. The Company further agreed to fund $13.75 million preferred equity financing at 7.5% interest rate all of which was advanced through June 30, 2019. The Company records interestthe Company’s Investments in Joint Ventures as of December 31, 2020 are summarized in the following two tables (in thousands):
Investments in Apartment/Mixed Use Joint Ventures as of December 31, 2020
As of December 31, 2020 | 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 | $ | 105,737 | 173,560 | 45,379 | 37,452 | 42,668 | $ | 404,796 | |||||||||||||||
Cash and cash equivalents | 2,626 | 111 | 1,202 | 14,011 | 3,554 | 21,504 | |||||||||||||||||
Unrealized rents & receivables | 13 | 58 | 775 | 2 | 0 | 848 | |||||||||||||||||
Deferred costs | 162 | 85 | 405 | 2,810 | 235 | 3,697 | |||||||||||||||||
Total Assets | $ | 108,538 | 173,814 | 47,761 | 54,275 | 46,457 | $ | 430,845 | |||||||||||||||
| |||||||||||||||||||||||
Secured notes payable | $ | 64,982 | 72,471 | 29,291 | 0 | 1,776 | $ | 168,520 | |||||||||||||||
Other liabilities | 4,189 | 22,952 | 107 | 1,953 | 4,774 | 33,975 | |||||||||||||||||
Capital - FRP | 34,667 | 58,559 | 4,894 | 37,466 | 15,963 | 151,549 | |||||||||||||||||
Capital - Third Parties | 4,700 | 19,832 | 13,469 | 14,856 | 23,944 | 76,801 | |||||||||||||||||
Total Liabilities and Capital | $ | 108,538 | 173,814 | 47,761 | 54,275 | 46,457 | $ | 430,845 |
17 |
Investments in Joint Ventures as of December 31, 2020
As of December 31, 2020 | |||||||||||||||||||||||
Brooksville | BC FRP | Amber Ridge | Apartment/ | Grand | |||||||||||||||||||
Quarry, LLC | Realty, LLC | Hyde Park | Loan | Mixed Use | Total | ||||||||||||||||||
Investments in real estate, net. | $ | 14,287 | 22,067 | 591 | 10,026 | 404,796 | $ | 451,767 | |||||||||||||||
Cash and cash equivalents | 55 | 90 | 0 | 0 | 21,504 | 21,649 | |||||||||||||||||
Unrealized rents & receivables | 0 | 254 | 0 | 0 | 848 | 1,102 | |||||||||||||||||
Deferred costs | 5 | 336 | 0 | 0 | 3,697 | 4,038 | |||||||||||||||||
Total Assets | $ | 14,347 | 22,747 | 591 | 10,026 | 430,845 | $ | 478,556 | |||||||||||||||
Secured notes payable | $ | 0 | 12,370 | 0 | 0 | 168,520 | $ | 180,890 | |||||||||||||||
Other liabilities | 28 | 123 | 0 | 0 | 33,975 | 34,126 | |||||||||||||||||
Capital - FRP | 7,499 | 5,127 | 591 | 10,026 | 151,549 | 174,792 | |||||||||||||||||
Capital - Third Parties | 6,820 | 5,127 | 0 | 0 | 76,801 | 88,748 | |||||||||||||||||
Total Liabilities and Capital | $ | 14,347 | 22,747 | 591 | 10,026 | 430,845 | $ | 478,556 | |||||||||||||||
The amount of consolidated retained earnings (accumulated deficit) for these joint ventures was $(7,660,000) and $(8,278,000) as of September 30, 2021 and December 31, 2020, respectively.
��
The income statements of the Bryant Street Partnerships are as follows (in thousands):
Bryant Street | Bryant Street | |||||||
Partnerships | Partnerships | |||||||
Total JV | Company Share | |||||||
Nine Months ended | Nine Months ended | |||||||
September 30, | September 30, | |||||||
2021 | 2021 | |||||||
Revenues: | ||||||||
Rental Revenue | $ | 1,153 | $ | 707 | ||||
Revenue – other | 190 | 117 | ||||||
Total Revenues | 1,343 | 824 | ||||||
Cost of operations: | ||||||||
Depreciation and amortization | 1,482 | 909 | ||||||
Operating expenses | 1,938 | 1,190 | ||||||
Property taxes | 255 | 156 | ||||||
Total cost of operations | 3,675 | 2,255 | ||||||
Total operating profit | (2,332 | ) | (1,431 | ) | ||||
Interest expense | (1,234 | ) | (1,803 | ) | ||||
Net loss before tax | (3,566 | ) | (3,234 | ) | ||||
(12) Consolidation of Riverfront Investment Partners II, LLC. Riverfront Holdings II, LLC.
On May 4, 2018, the Company and MRP Realty formed a Joint Venture to develop the second phase only of the four phase master development known as Riverfront on the Anacostia in Washington, D.C. The purpose of the Joint Venture is to develop and own a 250,000-square-foot mixed-use development which supports 264 residential units and 6,937 square feet of retail. The Company contributed land with an agreed to value of $16,300,000 (cost basis of $4.6 million) and $6.2 million of cash to the Joint Venture for this loanan 80% stake in the venture. MRP contributed capital of $5.6 million to the joint venture including development costs paid prior to formation of the joint venture and a loss in$725,000 development fee. The Company further agreed to fund $13.75 million preferred equity in ventures for our 80% equity in the partnership. The loan from Eagle Bank allows draws of up to $71 million during constructionfinancing at an7.5% interest rate all of 3.25% over Daily 1 Month LIBOR. The loan iswhich was advanced and repaid with interest only and matures in 36 months with a 12-month extension assuming completion of construction and at least one occupancy. There is a provision for an additional 60 months extension with a 30-year amortization of principal at 2.15% over seven-year US Treasury Constant if NOI is sufficient for a 9% yield. The loan balance at September 30, 2020 was $63,466,000.March 2021. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting through the construction and lease up period as MRP acts as the administrative agent of the joint venture and oversees and controls the day to day operations of the project.
Bryant Street Partnerships. On December 24, 2018 the Company and MRP formed four partnerships to purchase and develop approximately five acres of land at 500 Rhode Island Ave NE, Washington, D.C. This property is the first phase of the Bryant Street Master Plan. The property is located in an Opportunity Zone, which provides tax benefits in the new communities development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed cash of $32 million in exchange for a 61.36% common equity in the partnership. The Company also contributed cash of $23 million as preferred equity financing at 8.0% interest rate. The Company records interest income for this loan and a loss in equity in ventures for our 61.36% equity in the partnership. On March 13, 2019 the partnerships closed on a construction loan with a group of lenders for up to $132 million at an interest rate of 2.25% over Daily 1 Month LIBOR. The loan matures March 13, 2023 with up to two extensions of one year each upon certain conditions including, for the first, a debt service coverage of at least 1.10 and a loan-to-value that does not exceed 65% and for the second, a debt service coverage of 1.25 and a maximum loan-to-value of 65%. Borrower may prepay a portion of the unpaid principal to satisfy such tests. The loan balance at September 30, 2020 was $60,342,000. The Company and MRP guaranteed $26 million of the loan in exchange for a 1% lower interest rate. The Company and MRP have a side agreement limiting the Company’s guarantee to its proportionate ownership. The value of the guarantee was calculated at $1.9 million based on the present value of the 1% interest savings over the anticipated 48-month term. This amount is included as part of the Company’s investment basis and is amortized to expense over the 48 months. The Company’s equity interest in the joint venture ispreviously accounted for under the equity method of accounting as allMRP acts as the major decisions are shared equally.administrative agent of the
18 |
joint venture and oversees and controls the day-to-day operations of the project.
Hyde Park. In March 2021, Phase II (The Maren) reached stabilization. Stabilization in this case means 90% of 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 contractual payouts assuming a sale at the value of the development at the time of this “Conversion election”.
Reaching stabilization results 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 March 31, 2021, the Company consolidated the assets (at fair value), liabilities and operating results of the joint venture. This consolidation resulted in a gain on remeasurement of investment in real estate partnership of $51,139,000 of which $13,965,000 was attributed to the noncontrolling interest. In accordance with the terms of the Joint Venture agreements, the Company used the fair value amount at date of conversion and calculated an adjusted ownership under the Conversion election. As such for financial reporting purposes effective March 31, 2021, the Company ownership is based upon this substantive profit sharing arrangement and is 70.41% on a prospective basis as agreed to by FRP and MRP.
Maren consolidation at stabilization
As of March 31, 2021 | ||||||||||||||||
Riverfront | Gain on | |||||||||||||||
Holdings II, LLC | Remeasurement | Revised | ||||||||||||||
Land | $ | 6,472 | $ | 22,858 | $ | 29,330 | ||||||||||
Building and improvements, net | 87,269 | 23,531 | 110,800 | |||||||||||||
Project under construction | 258 | 0 | 258 | |||||||||||||
Value of leases in place | 0 | 4,750 | 4,750 | |||||||||||||
Cash | 3,704 | 0 | 3,704 | |||||||||||||
Cash held in escrow | 336 | 0 | 336 | |||||||||||||
Accounts receivable | 707 | 0 | 707 | |||||||||||||
Prepaid expenses | 197 | 0 | 197 | |||||||||||||
Total Assets | $ | 98,943 | $ | 51,139 | $ | 150,082 | ||||||||||
Long-term Debt | $ | 88,000 | $ | 0 | $ | 88,000 | ||||||||||
Amortizable debt costs | (1,072 | ) | 0 | (1,072 | ) | |||||||||||
Other liabilities | 441 | 0 | 441 | |||||||||||||
Equity – FRP | 7,026 | 37,174 | 44,200 | |||||||||||||
Equity - MRP | 4,548 | 13,965 | 18,513 | |||||||||||||
Total Liabilities and Capital | $ | 98,943 | $ | 51,139 | $ | 150,082 | ||||||||||
(13) Subsequent Event.
On January 27, 2018October 8, 2021, the Company entered into a loan agreement with a Baltimore developer to be the principal capital source of a residential development venture in Essexshire nowHarford County, Maryland to be known as “Hyde Park.“Aberdeen Station.” We have committed up to $3.5$31.1 million in exchange for an interest rate of 10% and a preferred return of 20% after which the Company is also entitled to10% plus a portion of the sales proceeds from sale. Entitlements forbased upon the development of the property are complete, a homebuilder is under contract to purchase all of the 126 recorded building lots. The first phase of settlement occurred in May 2020, resulting in a $2.67 million principal and interest payment, with subsequent payments of $1.26 million in principal and interest payments in the third quarter.
DST Hickory Creek. In July 2019, the Company invested $6 million in 1031 proceeds from two sales in 2019 into a Delaware Statutory Trust (DST) known as CS1031 Hickory Creek Apartments, DST. The Company is 26.65% beneficial owner and receives monthly distributions. The DST owns a 294-unit garden-style apartment community consisting of 19 three-story apartment buildings containing 273,940 rentable square feet on approximately 20.4 acres of land. The property was constructed in 1984 and substantially renovated in 2016. The DST purchased the property in April, 2019 for $45,600,000 with ten-year financing obtained for $29,672,000 at 3.74% with a 30 year amortization period, interest only for five years. The Company’s equity interest in the trust is accounted for under the cost method because we do not have significant influence over the operating and financial policies. Monthly distributions are recorded as equity in gain or loss of joint ventures. Distributions of $254,000 were received in the first nine months of 2020.
Amber Ridge. On June 26, 2019 the Company entered into a loan agreement with a Baltimore developer to be the principal capital source of a residential development venture in Prince Georges County, Maryland known as “Amber Ridge.” We have committed up to $18.5 million in exchange for an interest rate of 10% and a preferred return of 20% after which the Company is also entitled to a portion of proceeds from sale.project IRR. This project will hold 187 single-family town homes.344 residential lots. We are currently pursuing entitlements and have two homebuilders under contractthe loan agreements anticipates taking the development to purchase all of the 187 units upon completion of development infrastructure.
1800 Half Street. On December 20, 2019 the Company and MRP formed a joint venture to acquire and develop a
mixed-use project located at 1800 Half Street, Washington, D.C. This property is located in the Buzzard Point area of Washington, DC, less than half a mile downriver from Dock 79 and the Maren. It lies directly between our two acres on the Anacostia currently under lease to Vulcan and Audi Field, the home stadium of the DC United. The project is located in an Opportunity Zone, which provides tax benefits in the new communities’ development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed cash of $37.3 million. MRP will contribute the remainder of its equity in 2020. The land was acquiredrecord plat in two pieces over first half of 2020. Onphases potentially through June 26, 2020 the partnership closed on a construction loan with Truist Bank for up to $74 million at an interest rate of 2.25% over Daily 1 Month LIBOR. The loan matures June 26, 2024 with one extension of two years requiring a .25% fee, paying principal monthly under a 30-year amortization schedule, and meeting a 9.9% debt yield after the first year. The ten-story structure will have 344 apartments and 11,246 square feet of ground floor retail. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting because all major decisions are shared equally.30, 2026.
Greenville/Woodfield Partnerships. On December 23, 2019 the Company and Woodfield Development formed a joint venture to develop a mixed-use project in Greenville SC known as .408 Jackson located across the street from Greenville’s minor league baseball stadium. The project will hold 227 multifamily units and 4,700 square feet of retail space. It is located in an Opportunity Zone, which provides tax benefits in the new communities’ development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed cash of $9.7 million in exchange for a 40% common equity in the joint venture. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting through the construction and lease up period. Woodfield personally guaranteed the loan and will be managing the projects day to day operations. Major decisions for the entity must be made unanimously between both members.
On December 23, 2019 the Company and Woodfield formed a joint venture to develop a 200-unit multifamily apartment project located at 1430 Hampton Avenue, Greenville, SC. The project is located in an Opportunity Zone, which provides tax benefits in the new communities’ development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed $6.2 million in exchange for a 40% common equity in the joint venture. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting through the construction and lease up period. Woodfield personally guaranteed the loan and will be managing the projects day to day operations. Major decisions for the entity must be made unanimously between both members.
Investments in Joint Ventures (in thousands):
The | |||||||||||||||
Company's | |||||||||||||||
Share of Profit | |||||||||||||||
Common | Total | Total Assets of | Profit (Loss) | (Loss) of the | |||||||||||
Ownership | Investment | The Partnership | Of the Partnership | Partnership | |||||||||||
As of September 30, 2020 | |||||||||||||||
Brooksville Quarry, LLC | 50.00 | % | $ | 7,463 | 14,306 | (66 | ) | (33 | ) | ||||||
BC FRP Realty, LLC | 50.00 | % | 5,233 | 22,726 | (311 | ) | (157 | ) | |||||||
RiverFront Holdings II, LLC | 80.00 | % | 24,429 | 106,289 | (3,116 | ) | (2,749 | ) | |||||||
Bryant Street Partnerships | 61.36 | % | 60,059 | 156,638 | (126 | ) | (1,317 | ) | |||||||
Hyde Park | 591 | 591 | — | — | |||||||||||
DST Hickory Creek | 26.65 | % | 6,000 | 48,303 | (255 | ) | 254 | ||||||||
Amber Ridge Loan | 9,970 | 9,970 | — | — | |||||||||||
1800 Half St. Owner, LLC | 61.37 | % | 37,748 | 52,933 | 147 | 141 | |||||||||
Greenville/Woodfield Partnerships | 40.00 | % | 16,093 | 44,896 | 176 | 88 | |||||||||
Total | $ | 167,586 | 456,652 | (3,551 | ) | (3,773 | ) | ||||||||
As of December 31, 2019 | |||||||||||||||
Brooksville Quarry, LLC | 50.00 | % | $ | 7,499 | 14,316 | (84 | ) | (42 | ) | ||||||
BC FRP Realty, LLC | 50.00 | % | 5,391 | 22,969 | (1,114 | ) | (591 | ) | |||||||
RiverFront Holdings II, LLC | 80.00 | % | 25,975 | 88,235 | (95 | ) | (871 | ) | |||||||
Bryant Street Partnerships | 61.36 | % | 58,353 | 96,477 | 260 | (573 | ) | ||||||||
Hyde Park | 3,492 | 3,492 | — | — | |||||||||||
DST Hickory Creek | 26.65 | % | 6,000 | 49,369 | (168 | ) | 123 | ||||||||
Amber Ridge Loan | 509 | 509 | — | — | |||||||||||
1800 Half St. Owner, LLC | 59.73 | % | 37,314 | 40,161 | — | — | |||||||||
Greenville/Woodfield Partnerships | 40.00 | % | 15,919 | 19,214 | — | — | |||||||||
Total | $ | 160,452 | 334,742 | (1,201 | ) | (1,954 | ) | ||||||||
19 |
Summarized Financial Information for the Investments in Joint Ventures (in thousands):
As of September 30, 2020 | 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 | $ | 104,647 | 156,022 | 45,787 | 32,358 | 32,768 | $ | 371,582 | |||||||||||||||
Cash and cash equivalents | 1,330 | 483 | 1,397 | 17,765 | 11,754 | 32,729 | |||||||||||||||||
Unrealized rents & receivables | 81 | 110 | 697 | 0 | 0 | 888 | |||||||||||||||||
Deferred costs | 231 | 23 | 422 | 2,810 | 374 | 3,860 | |||||||||||||||||
Total Assets | $ | 106,289 | 156,638 | 48,303 | 52,933 | 44,896 | $ | 409,059 | |||||||||||||||
| |||||||||||||||||||||||
Secured notes payable | $ | 63,082 | 57,792 | 29,279 | 0 | 0 | $ | 150,153 | |||||||||||||||
Other liabilities | 2,670 | 20,213 | 229 | 2,969 | 4,996 | 31,077 | |||||||||||||||||
Capital – FRP | 35,550 | 58,527 | 5,009 | 37,481 | 15,960 | 152,527 | |||||||||||||||||
Capital - Third Parties | 4,987 | 20,106 | 13,786 | 12,483 | 23,940 | 75,302 | |||||||||||||||||
Total Liabilities and Capital | $ | 106,289 | 156,638 | 48,303 | 52,933 | 44,896 | $ | 409,059 |
As of September 30, 2020 | |||||||||||||||||||||||
Brooksville | BC FRP | Amber Ridge | Apartment/ | Grand | |||||||||||||||||||
Quarry, LLC | Realty, LLC | Hyde Park | Loan | Mixed Use | Total | ||||||||||||||||||
Investments in real estate, net. | $ | 14,289 | 22,063 | 591 | 9,970 | 371,582 | $ | 418,495 | |||||||||||||||
Cash and cash equivalents | 17 | 82 | 0 | 0 | 32,729 | 32,965 | |||||||||||||||||
Unrealized rents & receivables | 0 | 235 | 0 | 0 | 888 | 1,123 | |||||||||||||||||
Deferred costs | 0 | 346 | 0 | 0 | 3,860 | 4,069 | |||||||||||||||||
Total Assets | $ | 14,306 | 22,726 | 591 | 9,970 | 409,059 | $ | 456,652 | |||||||||||||||
Secured notes payable | $ | 0 | 12,268 | 0 | 0 | 150,153 | $ | 162,421 | |||||||||||||||
Other liabilities | 62 | 104 | 0 | 0 | 31,077 | 31,243 | |||||||||||||||||
Capital – FRP | 7,463 | 5,177 | 591 | 9,970 | 152,527 | 175,728 | |||||||||||||||||
Capital - Third Parties | 6,781 | 5,177 | 0 | 0 | 75,302 | 87,260 | |||||||||||||||||
Total Liabilities and Capital | $ | 14,306 | 22,726 | 591 | 9,970 | 409,059 | $ | 456,652 |
As of December 31, 2019 | 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 | $ | 87,521 | 95,903 | 46,685 | 14,391 | 1,889 | $ | 246,389 | |||||||||||||||
Cash and cash equivalents | 630 | 387 | 1,764 | 25,770 | 17,325 | 45,876 | |||||||||||||||||
Unrealized rents & receivables | 82 | 158 | 446 | 0 | 0 | 686 | |||||||||||||||||
Deferred costs | 2 | 29 | 474 | 0 | 0 | 505 | |||||||||||||||||
Total Assets | $ | 88,235 | 96,477 | 49,369 | 40,161 | 19,214 | $ | 293,456 | |||||||||||||||
| |||||||||||||||||||||||
Secured notes payable | $ | 38,564 | 1,660 | 29,246 | 0 | 0 | $ | 69,470 | |||||||||||||||
Other liabilities | 6,771 | 17,183 | 120 | 1,363 | 1,889 | 27,326 | |||||||||||||||||
Capital - FRP | 37,284 | 57,479 | 6,000 | 37,314 | 15,919 | 153,996 | |||||||||||||||||
Capital - Third Parties | 5,616 | 20,155 | 14,003 | 1,484 | 1,406 | 42,664 | |||||||||||||||||
Total Liabilities and Capital | $ | 88,235 | 96,477 | 49,369 | 40,161 | 19,214 | $ | 293,456 |
As of December 31, 2019 | |||||||||||||||||||||||
Brooksville | BC FRP | Amber Ridge | Apartment/ | Grand | |||||||||||||||||||
Quarry, LLC | Realty, LLC | Hyde Park | Loan | Mixed Use | Total | ||||||||||||||||||
Investments in real estate, net. | $ | 14,293 | 22,423 | 3,492 | 509 | 246,389 | $ | 287,106 | |||||||||||||||
Cash and cash equivalents | 18 | 15 | 0 | 0 | 45,876 | 45,909 | |||||||||||||||||
Unrealized rents & receivables | 0 | 220 | 0 | 0 | 686 | 906 | |||||||||||||||||
Deferred costs | 5 | 311 | 0 | 0 | 505 | 821 | |||||||||||||||||
Total Assets | $ | 14,316 | 22,969 | 3,492 | 509 | 293,456 | $ | 334,742 | |||||||||||||||
Secured notes payable | $ | 0 | 12,103 | 0 | 0 | 69,470 | $ | 81,573 | |||||||||||||||
Other liabilities | 2 | 196 | 0 | 0 | 27,326 | 27,524 | |||||||||||||||||
Capital - FRP | 7,500 | 5,335 | 3,492 | 509 | 153,996 | 170,832 | |||||||||||||||||
Capital - Third Parties | 6,814 | 5,335 | 0 | 0 | 42,664 | 54,813 | |||||||||||||||||
Total Liabilities and Capital | $ | 14,316 | 22,969 | 3,492 | 509 | 293,456 | $ | 334,742 |
The Company’s capital recorded by the unconsolidated Joint Ventures is $8,199,000 more than the Investment in Joint Ventures reported in the Company’s consolidated balance sheet due to the lower basis in property contributed.
The amount of consolidated retained earnings for these joint ventures was $(6,879,000) and $(4,127,000) as of September 30, 2020 and December 31, 2019 respectively.
(12) Discontinued Operations.
On May 21, 2018, the Company 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 the sale due to the tenant exercising its right of first refusal to purchase the property. These properties comprised substantially all the assets of our Asset Management segment and have been reclassified as discontinued operations for all periods presented. On June 28, 2019, the Company completed the sale of the excluded property to the same buyer for $11.7 million. The results of operations associated with discontinued operations for the three and nine months ended September 30, 2019 were as follows (in thousands):
Three months ended | Nine months ended | |||||||
September 30, | September 30, | |||||||
2019 | 2019 | |||||||
Lease Revenue | $ | — | 460 | |||||
Cost of operations: | ||||||||
Depreciation, depletion and amortization | (24 | ) | 17 | |||||
Operating expenses | 12 | 246 | ||||||
Property taxes | — | 46 | ||||||
Management company indirect | — | — | ||||||
Corporate expenses | — | — | ||||||
Total cost of operations | (12 | ) | 309 | |||||
Total operating profit | 12 | 151 | ||||||
Interest expense | — | — |
Gain (loss) on sale of buildings | (30 | ) | 9,238 | |||||
Income (loss) before income taxes | (18 | ) | 9,389 | |||||
Provision for (benefit from) income taxes | (5 | ) | 2,540 | |||||
Income (loss) from discontinued operations | $ | (13 | ) | 6,849 | ||||
Earnings per common share: | ||||||||
Income (loss) from discontinued operations- | ||||||||
Basic | $ | 0.00 | 0.69 | |||||
Diluted | $ | 0.00 | 0.69 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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 holdingreal estate development, asset management and operating company engagedbusinesses. Our properties are located in the real estate business, namely (i) mining royalty land ownershipMid-Atlantic and leasing, (ii) land acquisition, entitlement and development primarily for future warehouse/office or residential building construction, (iii) ownership, leasing, and management of a residential apartment building, and (iv) warehouse/office building ownership, leasing and management.
The Company’s operations are influenced by a number of external and internal factors. External factors include levels of economic and industrial activity in thesoutheastern United States and the Southeast, construction activity and costs, aggregates sales by lessees from the Company’sconsist of:
Lands leased to mining companies, some of which will have second lives as development properties;
Residential apartments in Washington, D.C.;
Warehouse or office properties interest rates, market conditions in the Baltimore/Northern Virginia/Washington DC area, and our ability to obtain zoning and entitlements necessary for property development. Internal factors include administrative costs, success in leasing efforts and construction cost management.Mid-Atlantic states either existing or under development;
On May 21, 2018, the CompanyMixed 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 the dispositionprojects, existing cash, owned-land, partner capital and financing arrangements. We do not anticipate immediate benefits from investments. Timing of 40 industrial warehouse properties and three additional land parcelsprojects may be subject 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 the sale due to the tenant exercising its right of first refusal to purchase the property. On June 28, 2019, the Company completed the sale of the excluded property to the same buyer for $11.7 million. These properties comprised substantiallydelays caused by factors beyond our control.
Reportable Segments
We conduct primarily all the assets of our Asset Management segmentbusiness in the following four reportable segments: (1) asset management (2) mining royalty lands (3) development and constituted a strategic shift for the Company and have been reclassified as discontinued operations for all periods presented.(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.
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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 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 September 30, 2020,2021, the Asset Management Segment owned three 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. 21st21st 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 OfficeRun Business Park in Hartford County, Maryland consists of five office buildings totaling 268,010267,737 square feet which are 78.6%68.6% occupied at September 30, 2020.and 96.6% leased. The property is subject to commercial leases with various tenants.
To take advantage of market cycles and attract a wide range of top tier buyers, managementManagement focuses on several factors to measure our success on a comparative basis in this segment to facilitate a successful and profitable sale.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 15,000 acres currently under lease for mining rents or royalties (this does not include(excluding the 4,280 acres owned inby our Brooksville joint venture with Vulcan Materials). Other than one location in Virginia, all of these properties are located in Florida and Georgia. 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. Our mining properties had estimated remaining reserves of 516506 million tons as of December 31, 20192020, after a total of 8.18.5 million tons were consumed in 2019.2020.
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 areinclude Vulcan Materials, Martin Marietta, Cemex, Argos and The Concrete Company.
Additionally, these locations provide us with opportunities for valuable “second lives” for these assets through proper land planning and entitlement.
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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.
Since 1990, one of our primary strategies in this segment has been to acquire, entitle and ultimately develop commercial/industrial business parks providing 5–15 building pads which we typically convert into warehouse/office buildings. To date, our management team has converted 30 of these pads into developed buildings. Our typical practice has been to transfer these assets to the Asset Management segment on the earlier to occur of (i) commencement of rental revenue or (ii) issuance of the certificate of occupancy. We have also occasionally sold several of these pad sites over time to third parties.
Development Segment – Warehouse/Office Land.
At September 30, 20202021, this segment owned the following future development parcel:
parcels:
1) |
2) | 55 acres of land that will be capable of supporting over 625,000 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 250,000 square feet of industrial development. |
We will continue to actively monitor these submarkets where we have lots ready for construction and take advantage of the opportunities presented to us. We will also look for new parcels to place into development.
We 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:
Location | Approx. Acreage | Status |
NBV | Approx. Acreage | Status |
NBV |
RiverFront on the Anacostia Phases III-IV | 2.5 | Conceptual design program ongoing. | $6,068,000 | |||
Riverfront on the Anacostia Phases III-IV | 2.5 | Conceptual design program ongoing | $6,126,000 | |||
Hampstead Trade Center, MD | 73 | Residential conceptual design program ongoing | $8,969,000 | 73 | Residential zoning applied for in preparation for sale | $9,545,000 |
Square 664E,on the Anacostia River in DC | 2 | Under lease to Vulcan Materials as a concrete batch plant through 2021 with one 5-year renewal option. | $7,885,000 | |||
Square 664E, on the Anacostia River in DC | 2 | Under lease to Vulcan Materials as a concrete batch plant through 2026 | $7,719,000 | |||
Total | 77.5 | $22,922,000 | 77.5 | $23,390,000 |
RIVERFRONT ON THE ANACOSTIA PHASES III-IV: This property consists of 2.5 acres on the Anacostia River and is immediately adjacent to the Washington National’s baseball park in the SE Central Business District of Washington, DC. Once zoned for industrial use and under a ground lease, this property is no longer under lease and has been rezoned for the construction of approximately 600,000 square feet of “mixed-use” development in two phases. See “Stabilized Joint Venture Segment” below for discussion on Phase I and Development Joint Ventures below for discussion of Phase II. Phases III and IV are slated for office, and hotel/residential buildings, respectively,
all with permitted first floor retail uses.
On August 24, 2015,Development Segment - Investments in anticipation of commencing construction of the new Frederick Douglass bridge at a location immediately to the west of the existing bridge, the District of Columbia filed a Declaration of Taking for a total of 7,390 square feet of permanent easement and a 5,022-square-foot temporary construction easement on land along the western boundary of the land that will ultimately hold Phase III and IV. Previously, the Company and the District had conceptually agreed to a land swap with no compensation that would have permitted the proposed new bridge, including construction easements, to be on property wholly owned by the District. As a result, the Planned Unit Development was designed and ultimately approved by the Zoning Commission as if the land swap would occur once the District was ready to move forward with the new bridge construction. In September 2016 the Company received $1,115,400 as settlement for the easement. The Company will continue to seek an agreement from the District that the existing bridge easement will terminate when the new bridge has been placed in service and the existing bridge has been removed. The Company’s position is that otherwise Phase IV will be adversely impacted, and additional compensation or other relief will be due the Company.
HAMPSTEAD TRADE CENTER: We purchased this 118-acre tract in 2005 for $4.3 million in a Section 1031 exchange with plans of developing it as a commercial business park. The “great recession” caused us to reassess our plans for this property. As a result, Management has determined that the prudent course of action is to attempt to rezone the property for residential uses and sell the entire tract to another developer such that we can redeploy this capital into assets with more near-term income producing potential. On December 22, 2018, The Town of Hampstead re-awarded FRP its request for rezoning with a 30-day appeal period. No appeal was filed, therefore, FRP can now move forward with its residential concept plan. We are fully engaged in the formal process of seeking PUD entitlements for this 118-acre tract in Hampstead, Maryland, now known as “Hampstead Overlook”.
SQUARE 664E, WASHINGTON, DC: This property sits on the Anacostia River at the base of South Capitol Street in an area known as Buzzard Point, less than half a mile down river from our RiverFront on the Anacostia property. The Square 664E property is approximately two acres and is currently under lease to Vulcan Materials for use as a concrete batch plant. The lease terminates on August 31, 2021 and Vulcan has exercised its option to renew for one additional period of five years. In July 2018, Audi Field, the home of the DC United professional soccer club, opened its doors to patrons in Buzzard Point. Under normal circumstances the 20,000 seat stadium hosts 17 home games each year in addition to other outdoor events. The stadium is separated from our property by 1800 Half Street, the property acquired in a joint venture between the Company and MRP in December 2019.Joint Ventures
The third leg of our Development Segment consists of investments in joint ventureventures for properties in development as describeddevelopment. The Company has investments in joint ventures, primarily with other real estate developers which are summarized below:
Property | JV Partner | Status | % Ownership |
Brooksville Quarry, LLC near Brooksville, Florida | Vulcan Materials Company | Future planned residential development of 3,500 acres which are currently subject to mining lease | 50% |
BC FRP Realty, LLC for 35 acres in Maryland | St John Properties | Development of 329,000 square feet multi-building business park in progress | 50% |
Bryant Street Partnerships for 5 acres of land in Washington, D.C. | MRP Realty | Mixed-use development with 487 residential units and 85,681 square feet of retail partially completed | 61.36% |
Hyde Park residential development in Essexshire, MD | Property sold, $3.5 million investment in exchange for an interest rate of 10% and a preferred return of 20% | Financing | |
Amber Ridge residential development in Prince George’s County, Maryland | $18.5 million in exchange for an interest rate of 10% and a preferred return of 20% after which the Company is also entitled to a portion of proceeds from sale | Financing | |
1800 Half Street property in Buzzard Point area of Washington, D.C. | MRP Realty | Construction of ten-story structure with 344 apartments and 11,246 square feet of ground floor retail underway | 61.37% |
.408 Jackson property in Greenville, SC | Woodfield Development | Construction of mixed-use project with 227 multifamily units and 4,700 square feet of retail space began in May 2020 | 40% |
Riverside property 1430 Hampton Avenue, Greenville, SC | Woodfield Development | Construction of 200-unit apartment project began in February 2020 | 40% |
Development Segment - InvestmentsJoint ventures where FRP is not the primary beneficiary are reflected in Joint Ventures (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):
As of September 30, 2020 | 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 | $ | 104,647 | 156,022 | 45,787 | 32,358 | 32,768 | $ | 371,582 | |||||||||||||||
Cash and cash equivalents | 1,330 | 483 | 1,397 | 17,765 | 11,754 | 32,729 | |||||||||||||||||
Unrealized rents & receivables | 81 | 110 | 697 | 0 | 0 | 888 | |||||||||||||||||
Deferred costs | 231 | 23 | 422 | 2,810 | 374 | 3,860 | |||||||||||||||||
Total Assets | $ | 106,289 | 156,638 | 48,303 | 52,933 | 44,896 | $ | 409,059 | |||||||||||||||
| |||||||||||||||||||||||
Secured notes payable | $ | 63,082 | 57,792 | 29,279 | 0 | 0 | $ | 150,153 | |||||||||||||||
Other liabilities | 2,670 | 20,213 | 229 | 2,969 | 4,996 | 31,077 | |||||||||||||||||
Capital – FRP | 35,550 | 58,527 | 5,009 | 37,481 | 15,960 | 152,527 | |||||||||||||||||
Capital - Third Parties | 4,987 | 20,106 | 13,786 | 12,483 | 23,940 | 75,302 | |||||||||||||||||
Total Liabilities and Capital | $ | 106,289 | 156,638 | 48,303 | 52,933 | 44,896 | $ | 409,059 |
The | |||||||||||||||
Company's | |||||||||||||||
Share of Profit | |||||||||||||||
Common | Total | Total Assets of | Profit (Loss) | (Loss) of the | |||||||||||
Ownership | Investment | The Partnership | Of the Partnership | Partnership (1) | |||||||||||
As of September 30, 2021 | |||||||||||||||
Brooksville Quarry, LLC | 50.00 | % | $ | 7,463 | 14,332 | (66 | ) | (32 | ) | ||||||
BC FRP Realty, LLC | 50.00 | % | 5,454 | 22,612 | (227 | ) | (113 | ) | |||||||
RiverFront Holdings II, LLC (1) | — | — | (760 | ) | (628 | ) | |||||||||
Bryant Street Partnerships | 61.36 | % | 59,899 | 201,144 | (3,566 | ) | (3,234 | ) | |||||||
Hyde Park | — | — | — | — | |||||||||||
DST Hickory Creek | 26.65 | % | 6,000 | 46,560 | (325 | ) | 257 | ||||||||
Amber Ridge Loan | 12,471 | 12,471 | — | — | |||||||||||
1800 Half St. Owner, LLC | 61.37 | % | 38,456 | 76,829 | 19 | 25 | |||||||||
Greenville/Woodfield Partnerships | 40.00 | % | 16,232 | 80,476 | (680 | ) | (272 | ) | |||||||
Total | $ | 145,975 | 454,424 | (5,605 | ) | (3,997 | ) | ||||||||
(1) Riverfront Holdings II, LLC was consolidated on March 31, 2021, and reflected in Stabilized Joint Ventures.
As of September 30, 2020 | |||||||||||||||||||||||
Brooksville | BC FRP | Amber Ridge | Apartment/ | Grand | |||||||||||||||||||
Quarry, LLC | Realty, LLC | Hyde Park | Loan | Mixed Use | Total | ||||||||||||||||||
Investments in real estate, net. | $ | 14,289 | 22,063 | 591 | 9,970 | 371,582 | $ | 418,495 | |||||||||||||||
Cash and cash equivalents | 17 | 82 | 0 | 0 | 32,729 | 32,965 | |||||||||||||||||
Unrealized rents & receivables | 0 | 235 | 0 | 0 | 888 | 1,123 | |||||||||||||||||
Deferred costs | 0 | 346 | 0 | 0 | 3,860 | 4,069 | |||||||||||||||||
Total Assets | $ | 14,306 | 22,726 | 591 | 9,970 | 409,059 | $ | 456,652 | |||||||||||||||
Secured notes payable | $ | 0 | 12,268 | 0 | 0 | 150,153 | $ | 162,421 | |||||||||||||||
Other liabilities | 62 | 104 | 0 | 0 | 31,077 | 31,243 | |||||||||||||||||
Capital – FRP | 7,463 | 5,177 | 591 | 9,970 | 152,527 | 175,728 | |||||||||||||||||
Capital - Third Parties | 6,781 | 5,177 | 0 | 0 | 75,302 | 87,260 | |||||||||||||||||
Total Liabilities and Capital | $ | 14,306 | 22,726 | 591 | 9,970 | 409,059 | $ | 456,652 |
The major classes of assets, liabilities and equity of the Company’s Investments in Joint Ventures as of September 30, 2021, are summarized in the following two tables (in thousands):
As of September, 2021 | 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 | 198,039 | 44,224 | 73,580 | 80,261 | $ | 396,104 | |||||||||||||||
Cash and cash equivalents | 0 | 848 | 978 | 439 | 207 | 2,472 | |||||||||||||||||
Unrealized rents & receivables | 0 | 1,892 | 1,004 | 0 | 8 | 2,904 | |||||||||||||||||
Deferred costs | 0 | 365 | 354 | 2,810 | 0 | 3,529 | |||||||||||||||||
Total Assets | $ | 0 | 201,144 | 46,560 | 76,829 | 80,476 | $ | 405,009 | |||||||||||||||
| |||||||||||||||||||||||
Secured notes payable | $ | 0 | 116,705 | 29,325 | 0 | 35,879 | $ | 181,909 | |||||||||||||||
Other liabilities | 0 | 7,620 | 162 | 15,766 | 5,370 | 28,918 | |||||||||||||||||
Capital - FRP | 0 | 58,014 | 4,550 | 37,483 | 15,691 | 115,738 | |||||||||||||||||
Capital – Third Parties | 0 | 18,805 | 12,523 | 23,580 | 23,536 | 78,444 | |||||||||||||||||
Total Liabilities and Capital | $ | 0 | 201,144 | 46,560 | 76,829 | 80,476 | $ | 405,009 |
As of September 30, 2021 | |||||||||||||||||||||||
Brooksville | BC FRP | Amber Ridge | Apartment/ | Grand | |||||||||||||||||||
Quarry, LLC | Realty, LLC | Hyde Park | Loan | Mixed Use | Total | ||||||||||||||||||
Investments in real estate, net. | $ | 14,283 | 21,627 | 0 | 12,471 | 396,104 | $ | 444,485 | |||||||||||||||
Cash and cash equivalents | 49 | 231 | 0 | 0 | 2,472 | 2,752 | |||||||||||||||||
Unrealized rents & receivables | 0 | 470 | 0 | 0 | 2,904 | 3,374 | |||||||||||||||||
Deferred costs | 0 | 284 | 0 | 0 | 3,529 | 3,813 | |||||||||||||||||
Total Assets | $ | 14,332 | 22,612 | 0 | 12,471 | 405,009 | $ | 454,424 | |||||||||||||||
Secured notes payable | $ | 0 | 11,524 | 0 | 0 | 181,909 | $ | 193,433 | |||||||||||||||
Other liabilities | 81 | 138 | 0 | 0 | 28,918 | 29,137 | |||||||||||||||||
Capital - FRP | 7,463 | 5,475 | 0 | 12,471 | 115,738 | 141,147 | |||||||||||||||||
Capital - Third Parties | 6,788 | 5,475 | 0 | 0 | 78,444 | 90,707 | |||||||||||||||||
Total Liabilities and Capital | $ | 14,332 | 22,612 | 0 | 12,471 | 405,009 | $ | 454,424 | |||||||||||||||
Brooksville Quarry, LLC.. In 2006, the Company entered into a Joint Venture Agreement with Vulcan Materials Company to jointly own and develop approximately 4,300 acres of land near Brooksville, Florida. Under the terms of the joint venture, FRP contributed its fee interest in approximately 3,443 acres formerly leased to Vulcan under a long-term mining lease which had a net book value of $2,548,000. Vulcan is entitled to mine a portion of the property until 2032 and pay royalties to the Company. FRP also contributed $3,018,000 for one-half of the acquisition costs of a 288-acre contiguous parcel. Vulcan contributed 553 acres that it owned as well as its leasehold interest in the 3,443 acres that it leased from FRP and $3,018,000 for one-half of the acquisition costs of the 288-acre contiguous parcel. The joint venture is jointly controlled by Vulcan and FRP. Distributions will be made on a 50-50 basis except for royalties and depletion specifically allocated to the Company. Other income for the year ended September 30, 2020 includes a loss of $33,000 representing the Company’s portion of the loss of this joint venture (not including FRP’s royalty revenues).
BC Realty, LLC (Windlass Run). In March 2016, we entered into an agreement with a Baltimore development company (St. John Properties, Inc.) to jointly develop the remaining lands of our Windlass Run Business Park. The 50/50 partnership initially calls for FRP to combine its 25 acres (valued at $7,500,000) with St. John Properties’ adjacent 10 acres fronting on a major state highway (valued at $3,239,536) which resulted in an initial cash distribution of $2,130,232 to FRP in May 2016. Thereafter, the venture will jointly develop the combined properties into a multi-building business park to consist of approximately 329,000 square feet of single-story office space. The project will take place in several phases, with construction of the first phase, which includes two office buildings and two retail buildings totaling 100,030-square-feet (inclusive of 27,950 retail), commenced in the fourth quarter of 2017 and was completed in December 2018. On September 28, 2017 BC FRP Realty, LLC obtained $17,250,000 of construction financing commitments for 4 buildings through September 15, 2022 from TRUIST BANK at 2.5% over Daily 1 Month LIBOR. The balance outstanding on these loans at September 30, 2020 was $12,211,000.
RiverFront Holdings II, LLC. On May 4, 2018, the Company and MRP formed a Joint Venture to develop Phase II and closed on construction financing with Eagle Bank. Phase II on the Anacostia known as The Maren is a 250,000-square-foot mixed-use development which supports 264 residential units and 6,937 SF of retail. The Company has contributed its land with an agreed value of $16.3 million (cost basis of $4.6 million) and $6.2 million of cash. MRP contributed capital of $5.6 million to the joint venture including development costs paid prior to the formation of the joint venture and a $725,000 development fee. The Company further agreed to fund $13.75 million preferred equity financing at 7.5% interest rate all of which was advanced through December 31, 2019. The loan from Eagle Bank allows draws of up to $71 million during construction at an interest rate of 3.25% over Daily 1 Month LIBOR. The loan is interest only and matures in 36 months with a 12-month extension assuming completion of construction and at least one occupancy. There is a provision for an additional 60 months extension with a 30-year amortization of principal at 2.15% over seven-year US Treasury Constant if NOI is sufficient for a 9% yield. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting as MRP acts as the administrative agent of the
joint venture and oversees and controls the day to day operations of the project. Construction began in April 2018,
with substantial completion in March 2020, and stabilization (meaning 90% of the individual apartments are leased and occupied by third party tenants) in early 2021.
Bryant Street Partnerships: On December 24, 2018 the Company and MRP formed four partnerships to purchase and develop approximately five acres of land at 500 Rhode Island Ave NE, Washington, D.C. This property is the first phase of the Bryant Street Master Plan. The property is located in an Opportunity Zone, which provides tax benefits in the new communities development program as established by Congress in the Tax Cuts and Jobs Act of 2017. This first phase is a mixed-use development which supports 487 residential units and 85,681 SF of first floor and stand-alone retail on approximately five acres of the roughly 12-acre site. The Company contributed cash of $32 million in exchange for a 61.36% common equity in the partnership. The Company also contributed cash of $23 million as preferred equity financing at 8.0% interest rate. The Company records interest income for this loan and a loss in equity in joint ventures for our 61.36% equity in the partnership. On March 13, 2019 the partnerships closed on a construction loan with a group of lenders for up to $132 million at an interest rate of 2.25% over Daily 1 Month LIBOR. The loan matures March 13, 2023 with up to two extensions of one year each upon certain conditions including, for the first, a debt service coverage of at least 1.1 and a loan-to-value that does not exceed 65% and for the second, a debt service coverage of 1.25 and a maximum loan-to-value of 65%. The Company and MRP guaranteed $26 million of the loan in exchange for a 1% lower interest rate. The Company and MRP have a side agreement limiting the Company’s guarantee to its proportionate ownership. The value of the guarantee was calculated at $1.9 million based on the present value of the 1% interest savings over the anticipated 48-month term. This amount is included as part of the Company’s investment basis and is amortized to expense over the 48 months. The Company will evaluate the guarantee liability based upon the success of the project and assuming no payments are made under the guarantee the Company will have a gain for $1.9 million when the loan is paid in full. Borrower may prepay a portion of the unpaid principal to satisfy such tests. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting as all the major decisions are shared equally. Construction began in February 2019, with substantial completion estimated in 3rd quarter 2021, and stabilization (meaning 88% of the individual apartments and retail are leased and occupied by third party tenants) in late 2022.
Hyde Park. On January 27, 2018 the Company entered into a loan agreement with a Baltimore developer to be the principal capital source of a residential development venture in Essexshire now known as “Hyde Park.” We have committed up to $3.5 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. Entitlements for the development of the property are complete and a homebuilder is under contract to purchase all of the 126 recorded building lots. The first phase of settlement occurred in May 2020, resulting in a $2.67 million principal and interest payment, with subsequent payments of $1.26 million in principal and interest payments in the third quarter.
Amber Ridge. On June 26, 2019 the Company entered into a loan agreement with a Baltimore developer to be the principal capital source of a residential development venture in Prince Georges County, Maryland known as “Amber Ridge.” We have committed up to $18.5 million in exchange for an interest rate of 10% and a preferred return of 20% after which the Company is also entitled to a portion of proceeds from sale. This project will hold 187 single-family town homes. We are currently pursuing entitlements and have two homebuilders under contract to purchase all of the 187 units upon completion of infrastructure development.
1800 Half Street. On December 20, 2019 the Company and MRP formed a joint venture to acquire and develop a mixed-use project located at 1800 Half Street, Washington, D.C. This property is located in the Buzzard Point area of Washington, DC, less than half a mile downriver from Dock 79 and the Maren. It lies directly between our two acres on the Anacostia currently under lease by Vulcan and Audi Field, the home stadium of the DC United. The project is located in an Opportunity Zone, which provides tax benefits in the new communities’ development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed cash of $37.3 million. The land was acquired in two pieces over first half of 2020. On June 26, 2020 the partnership closed on a construction loan with Truist Bank for up to $74 million at an interest rate of 2.25% over Daily 1 Month LIBOR. The loan matures June 26, 2024 with one extension of two years requiring a .25% fee, paying principal monthly under a 30 year amortization schedule, and meeting a 9.9% debt yield after the first year. The ten-story structure will have 344 apartments and 11,246 square feet of ground floor retail. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting as all major decisions are shared equally.
Greenville Partnerships. On December 23, 2019 the Company and Woodfield Development formed a joint venture to develop a mixed-use project in Greenville SC known as ..408 Jackson located across the street from Greenville’s minor league baseball stadium. The project will hold 227 multifamily units and 4,700 square feet of retail space. It is located in an Opportunity Zone, which provides tax benefits in the new communities’ development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed cash of $9.7 million in exchange for a 40% common equity in the joint venture. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting through the construction and lease up period. Woodfield personally guaranteed the loan and will be managing the projects day to day operations. Major decisions for the entity must be made unanimously between both members.
On December 23, 2019 the Company and Woodfield formed a joint venture to develop a 200-unit multifamily apartment project located at 1430 Hampton Avenue, Greenville, SC. The project is located in an Opportunity Zone, which provides tax benefits in the new communities’ development program as established by Congress in the Tax Cuts and Jobs Act of 2017. The Company contributed $6.2 million in exchange for a 40% common equity in the joint venture. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting through the construction and lease up period. Woodfield personally guaranteed the loan and will be managing the projects day to day operations. Major decisions for the entity must be made unanimously between both members.
Stabilized Joint Venture Segment.
Currently the segment includes twothree 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 major cash outlays incurred in this segment are for property taxes, full service maintenance, property management, utilities marketing and our management.marketing. The three stabilized joint venture properties are as follows:
Dock 79. This first phase of our RiverFront on The Anacostia project is a joint venture owned by the Company (66%) and our partner, MRP Realty (34%) and is a 305-unit residential apartment building with approximately 18,000 sq. ft. of first floor retail space. For financial reporting purposes the Company consolidates this venture as it is considered the primary beneficiary of the Variable Interest Entity. As of September 30, 2020, the residential units were 94.43% occupied and 90.49% leased, while retail units are 76% leased with just one space remaining.
Property and Occupancy | JV Partner | Method of Accounting |
% Ownership |
Dock 79 apartments Washington, D.C. 305 apartment units and 18,000 square feet of retail | MRP Realty | Consolidated | 66% |
The Maren apartments Washington, D.C. 264 residential units and 6,937 square feet of retail | MRP Realty | Consolidated as of March 31, 2021 | 70.41% |
DST Hickory Creek 294 apartment units in Henrico County, MD | Capital Square | Cost Method | 26.6% |
24 |
Third Quarter Operational Highlights
Comparative Results of Operations for the Three months ended September 30, 20202021 and 20192020
Consolidated Results
(dollars in thousands) | Three Months Ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % | ||||||||||||||
Revenues: | |||||||||||||||||
Lease Revenue | $ | 3,591 | $ | 3,581 | $ | 10 | 0.3 | % | |||||||||
Mining lands lease revenue | 2,507 | 2,302 | 205 | 8.9 | % | ||||||||||||
Total Revenues | 6,098 | 5,883 | 215 | 3.7 | % | ||||||||||||
Cost of operations: | |||||||||||||||
Depreciation/Depletion/Amortization | 1,438 | 1,431 | 7 | 0.5 | % | ||||||||||
Operating Expenses | 892 | 952 | (60 | ) | -6.3 | % | |||||||||
Property Taxes | 706 | 740 | (34 | ) | -4.6 | % | |||||||||
Management company indirect | 844 | 670 | 174 | 26.0 | % | ||||||||||
Corporate Expense | 637 | 732 | (95 | ) | -13.0 | % | |||||||||
Total cost of operations | 4,517 | 4,525 | (8 | ) | -0.2 | % | |||||||||
Total operating profit | 1,581 | 1,358 | 223 | 16.4 | % | ||||||||||
Net investment income, including realized gains | |||||||||||||||
of $55 and $144 | 1,814 | 2,019 | (205 | ) | -10.2 | % | |||||||||
Interest Expense | (46 | ) | (129 | ) | 83 | -64.3 | % | ||||||||
Equity in loss of joint ventures | (1,788 | ) | (746 | ) | (1,042 | ) | 139.7 | % | |||||||
Gain on sale of real estate | 5,732 | 126 | 5,606 | 4449.2 | % | ||||||||||
Income before income taxes | 7,293 | 2,628 | 4,665 | 177.5 | % | ||||||||||
Provision for income taxes | 2,022 | 726 | 1,296 | 178.5 | % | ||||||||||
Income from continuing operations | 5,271 | 1,902 | 3,369 | 177.1 | % | ||||||||||
Loss from discontinued operations, net | — | (13 | ) | 13 | -100.0 | % | |||||||||
Net income | 5,271 | 1,889 | 3,382 | 179.0 | % | ||||||||||
Loss attributable to noncontrolling interest | (184 | ) | (112 | ) | (72 | ) | 64.3 | % | |||||||
Net income attributable to the Company | $ | 5,455 | $ | 2,001 | $ | 3,454 | 172.6 | % | |||||||
(dollars in thousands) | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | Change | % | |||||||||||||
Revenues: | ||||||||||||||||
Lease Revenue | $ | 6,224 | $ | 3,591 | $ | 2,633 | 73.3 | % | ||||||||
Mining lands lease revenue | 2,249 | 2,507 | (258 | ) | -10.3 | % | ||||||||||
Total Revenues | 8,473 | 6,098 | 2,375 | 38.9 | % | |||||||||||
Cost of operations: | ||||||||||||||||
Depreciation/Depletion/Amortization | 3,796 | 1,438 | 2,358 | 164.0 | % | |||||||||||
Operating Expenses | 1,557 | 892 | 665 | 74.6 | % | |||||||||||
Property Taxes | 986 | 706 | 280 | 39.7 | % | |||||||||||
Management company indirect | 745 | 844 | (99 | ) | -11.7 | % | ||||||||||
Corporate Expense | 657 | 637 | 20 | 3.1 | % | |||||||||||
Total cost of operations | 7,741 | 4,517 | 3,224 | 71.4 | % | |||||||||||
Total operating profit | 732 | 1,581 | (849 | ) | -53.7 | % | ||||||||||
Net investment income, including realized gains | ||||||||||||||||
of $0 and $55 | 943 | 1,814 | (871 | ) | -48.0 | % | ||||||||||
Interest Expense | (414 | ) | (46 | ) | (368 | ) | 800.0 | % | ||||||||
Equity in loss of joint ventures | (1,244 | ) | (1,788 | ) | 544 | -30.4 | % | |||||||||
Gain on sale of real estate | — | 5,732 | (5,732 | ) | -100.0 | % | ||||||||||
Income before income taxes | 17 | 7,293 | (7,276 | ) | -99.8 | % | ||||||||||
Provision for income taxes | 130 | 2,022 | (1,892 | ) | -93.6 | % | ||||||||||
Net income (loss) | (113 | ) | 5,271 | (5,384 | ) | -102.1 | % | |||||||||
Loss attributable to noncontrolling interest | (465 | ) | (184 | ) | (281 | ) | 152.7 | % | ||||||||
Net income attributable to the Company | $ | 352 | $ | 5,455 | $ | (5,103 | ) | -93.5 | % | |||||||
Net income attributable to the Company for the third quarter of 20202021 was $352,000 or $.04 per share versus $5,455,000 or $.57 per share versus $2,001,000 or $.20 per share in the same period last year. The third quarter of 20202021 was impacted by the following items:
Loss from discontinued operations fora gain of $5,732,000 in the third quarter of 2019 was ($13,000) or $.00 per share. The third2020 and there were no such gains this quarter of 2019 included a $144,000 realized gain on bonds called early.
Asset Management Segment Results
Three months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2020 | % | 2019 | % | Change | % | ||||||||||||||||||
Lease revenue | $ | 721 | 100.0 | % | 430 | 100.0 | % | 291 | 67.7 | % | ||||||||||||||
Depreciation, depletion and amortization | 137 | 19.0 | % | 154 | 35.8 | % | (17 | ) | -11.0 | % | ||||||||||||||
Operating expenses | 139 | 19.3 | % | 108 | 25.1 | % | 31 | 28.7 | % | |||||||||||||||
Property taxes | 43 | 5.9 | % | 70 | 16.3 | % | (27 | ) | -38.6 | % | ||||||||||||||
Management company indirect | 202 | 28.0 | % | 90 | 20.9 | % | 112 | 124.4 | % | |||||||||||||||
Corporate expense | 165 | 22.9 | % | 168 | 39.1 | % | (3 | ) | -1.8 | % | ||||||||||||||
Cost of operations | 686 | 95.1 | % | 590 | 137.2 | % | 96 | 16.3 | % | |||||||||||||||
Operating profit | $ | 35 | 4.9 | % | (160 | ) | -37.2 | % | 195 | -121.9 | % |
Most of the
Asset Management Segment Results
Three months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2021 | % | 2020 | % | Change | % | ||||||||||||||||||
Lease revenue | $ | 619 | 100.0 | % | 721 | 100.0 | % | (102 | ) | -14.1 | % | |||||||||||||
Depreciation, depletion and amortization | 137 | 22.1 | % | 137 | 19.0 | % | — | 0.0 | % | |||||||||||||||
Operating expenses | 76 | 12.3 | % | 139 | 19.3 | % | (63 | ) | -45.3 | % | ||||||||||||||
Property taxes | 37 | 6.0 | % | 43 | 5.9 | % | (6 | ) | -14.0 | % | ||||||||||||||
Management company indirect | 200 | 32.3 | % | 202 | 28.0 | % | (2 | ) | -1.0 | % | ||||||||||||||
Corporate expense | 180 | 29.1 | % | 165 | 22.9 | % | 15 | 9.1 | % | |||||||||||||||
Cost of operations | 630 | 101.8 | % | 686 | 95.1 | % | (56 | ) | -8.2 | % | ||||||||||||||
Operating profit (loss) | $ | (11 | ) | -1.8 | % | 35 | 4.9 | % | (46 | ) | -131.4 | % |
Total revenues in this segment were $619,000, down $102,000 or 14.1%, over the same period last year due to the sale of our warehouse 1801 62nd Street in July 2020 which had $59,000 of revenues in the same quarter last year. Operating loss was reclassified$(11,000), down $46,000 from an operating profit of $35,000 in the same quarter last year primarily due to discontinued operations leaving two commercial properties as well asthe sale of 1801 62nd Street. Cranberry Run, which we purchased in the first quarter of 2019, and 1801 62nd Street which joined this segment on April 1 of 2019 and sold this quarter. Cranberry Run is a five-building industrial park in Harford County, MDMaryland totaling 268,010267,737 square feet of industrial/ flex space and at quarter end was 96.6% leased and 68.6% occupied compared to 78.6% leased and occupied. Total revenues in this segment were $721,000, up $291,000 or 67.7%, overoccupied at the same period last year. Operating profit was $35,000, up $195,000 from an operating lossend of ($160,000) in the same quarter last year due to 1801 62nd St beingyear. Our other two properties remain substantially leased during both periods, with 34 Loveton 95.1% occupied and Vulcan’s former Jacksonville office (now a vacant lot), fully leased and occupied, improved leasing at Cranberry offset by the sale of 7030 Dorsey Road in June 2019.through March 2026.
Mining Royalty Lands Segment Results
Three months ended September 30 | Three months ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2020 | % | 2019 | % | Change | % | 2021 | % | 2020 | % | Change | % | ||||||||||||||||||||||||||||||||||||
Mining lands lease revenue | $ | 2,507 | 100.0 | % | 2,302 | 100.0 | % | 205 | 8.9 | % | $ | 2,249 | 100.0 | % | 2,507 | 100.0 | % | (258 | ) | -10.3 | % | |||||||||||||||||||||||||||
Depreciation, depletion and amortization | 60 | 2.4 | % | 36 | 1.6 | % | 24 | 66.7 | % | 38 | 1.7 | % | 60 | 2.4 | % | (22 | ) | -36.7 | % | |||||||||||||||||||||||||||||
Operating expenses | 16 | 0.6 | % | 44 | 1.9 | % | (28 | ) | -63.6 | % | 11 | 0.5 | % | 16 | 0.6 | % | (5 | ) | -31.3 | % | ||||||||||||||||||||||||||||
Property taxes | 59 | 2.4 | % | 66 | 2.9 | % | (7 | ) | -10.6 | % | 68 | 3.0 | % | 59 | 2.4 | % | 9 | 15.3 | % | |||||||||||||||||||||||||||||
Management company indirect | 81 | 3.2 | % | 53 | 2.3 | % | 28 | 52.8 | % | 95 | 4.2 | % | 81 | 3.2 | % | 14 | 17.3 | % | ||||||||||||||||||||||||||||||
Corporate expense | 53 | 2.1 | % | 44 | 1.9 | % | 9 | 20.5 | % | 69 | 3.1 | % | 53 | 2.1 | % | 16 | 30.2 | % | ||||||||||||||||||||||||||||||
Cost of operations | 269 | 10.7 | % | 243 | 10.6 | % | 26 | 10.7 | % | 281 | 12.5 | % | 269 | 10.7 | % | 12 | 4.5 | % | ||||||||||||||||||||||||||||||
Operating profit | $ | 2,238 | 89.3 | % | 2,059 | 89.4 | % | 179 | 8.7 | % | $ | 1,968 | 87.5 | % | 2,238 | 89.3 | % | (270 | ) | -12.1 | % |
Total revenues in this segment were $2,507,000$2,249,000 versus $2,302,000$2,507,000 in the same period last year. Total operating profit in this segment was $2,238,000, an increase$1,968,000, a decrease of $179,000$270,000 versus $2,059,000$2,238,000 in the same period last year. This decrease is a result of Vulcan temporarily shifting operations off of our land in Manassas this quarter as part of their mining plan.
Development Segment Results
Three months ended September 30 | |||||||||||||
(dollars in thousands) | 2020 | 2019 | Change | ||||||||||
Lease revenue | $ | 290 | 307 | (17 | ) | ||||||||
Depreciation, depletion and amortization | 53 | 54 | (1 | ) | |||||||||
Operating expenses | 62 | 105 | (43 | ) | |||||||||
Property taxes | 330 | 300 | 30 | ||||||||||
Management company indirect | 504 | 477 | 27 | ||||||||||
Corporate expense | 381 | 479 | (98 | ) | |||||||||
Cost of operations | 1,330 | 1,415 | (85 | ) | |||||||||
Operating loss | $ | (1,040 | ) | (1,108 | ) | 68 |
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:
Development Segment Results
Three months ended September 30 | |||||||||||||
(dollars in thousands) | 2021 | 2020 | Change | ||||||||||
Lease revenue | $ | 401 | 290 | 111 | |||||||||
Depreciation, depletion and amortization | 53 | 53 | — | ||||||||||
Operating expenses | 62 | 62 | — | ||||||||||
Property taxes | 355 | 330 | 25 | ||||||||||
Management company indirect | 335 | 504 | (169 | ) | |||||||||
Corporate expense | 326 | 381 | (55 | ) | |||||||||
Cost of operations | 1,131 | 1,330 | (199 | ) | |||||||||
Operating loss | $ | (730 | ) | (1,040 | ) | 310 |
With respect to developments in February 2020, and the project is currently under Preliminary Plan review with the governing agencies.
Stabilized Joint Venture Segment Results
Three months ended September 30 | Three months ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2020 | % | 2019 | % | Change | % | 2021 | % | 2020 | % | Change | % | ||||||||||||||||||||||||||||||||||||
Lease revenue | $ | 2,580 | 100.0 | % | 2,844 | 100.0 | % | (264 | ) | -9.3 | % | $ | 5,204 | 100.0 | % | 2,580 | 100.0 | % | 2,624 | 101.7 | % | |||||||||||||||||||||||||||
Depreciation, depletion and amortization | 1,188 | 46.0 | % | 1,187 | 41.7 | % | 1 | 0.1 | % | 3,568 | 68.6 | % | 1,188 | 46.0 | % | 2,380 | 200.3 | % | ||||||||||||||||||||||||||||||
Operating expenses | 675 | 26.2 | % | 695 | 24.4 | % | (20 | ) | -2.9 | % | 1,408 | 27.0 | % | 675 | 26.2 | % | 733 | 108.6 | % | |||||||||||||||||||||||||||||
Property taxes | 274 | 10.6 | % | 304 | 10.7 | % | (30 | ) | -9.9 | % | 526 | 10.1 | % | 274 | 10.6 | % | 252 | 92.0 | % | |||||||||||||||||||||||||||||
Management company indirect | 57 | 2.2 | % | 50 | 1.8 | % | 7 | 14.0 | % | 115 | 2.2 | % | 57 | 2.2 | % | 58 | 101.8 | % | ||||||||||||||||||||||||||||||
Corporate expense | 38 | 1.5 | % | 41 | 1.5 | % | (3 | ) | -7.3 | % | 82 | 1.6 | % | 38 | 1.5 | % | 44 | 115.8 | % | |||||||||||||||||||||||||||||
Cost of operations | 2,232 | 86.5 | % | 2,277 | 80.1 | % | (45 | ) | -2.0 | % | 5,699 | 109.5 | % | 2,232 | 86.5 | % | 3,467 | 155.3 | % | |||||||||||||||||||||||||||||
Operating profit | $ | 348 | 13.5 | % | 567 | 19.9 | % | (219 | ) | -38.6 | % | |||||||||||||||||||||||||||||||||||||
Operating profit (loss) | $ | (495 | ) | -9.5 | % | 348 | 13.5 | % | (843 | ) | -242.2 | % |
In March 2021, we reached stabilization on Phase II (The Maren) of the development known as RiverFront on the Anacostia in Washington, D.C., a 250,000-square-foot mixed-use development which supports 264 residential units and 6,937 square feet of retail developed by a joint venture between the Company and MRP. Stabilization in this case means 90% of the individual apartments had been leased and 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 contractual payouts assuming a sale at the value of the development at the time of this “Conversion Election”. Reaching stabilization 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, 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 this 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’s average79 in the stabilized joint venture segment.
Total revenues in this segment were $5,204,000, an increase of $2,624,000 versus $2,580,000 in the same period last year. The Maren’s revenue was $2,428,000 and Dock 79 revenues increased $196,000. Total operating loss in this segment was $(495,000), a decrease of $843,000 versus a profit of $348,000 in the same period last year. The quarter includes $1,373,000 amortization expense of the $4,750,000 fair value of The Maren’s leases-in-place established when we booked this asset as part of the gain on remeasurement upon consolidation of this Joint Venture. Net Operating Income this quarter for this segment was $3,113,000, up $1,479,000 or 90.51% compared to the same quarter last year due to The Maren’s consolidation into this segment.
At the end of September, The Maren was 93.56% leased and 95.45% occupied. Average residential occupancy for the quarter was 93.29%95.92%, and at the end of the quarter, Dock 79’s residential units were 90.49% leased and 94.43% occupied. This quarter, 52.31%71.91% of expiring leases renewed with no increase in rent due to the mandated rent freeze on renewals in DC. The Maren is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 70.41% ownership.
Dock 79’s average residential occupancy for the quarter was 95.94%, and at the end of the quarter, Dock 79’s residential units were 93.11% leased and 94.75% occupied. This quarter, 57.75% of expiring leases renewed with no increase in rent due to the mandated rent freeze on renewals in DC. Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 66% ownership.
Third quarter distributions from our CS1031 Hickory Creek DST investment were $86,000.
Nine Months Operational Highlights
28 |
Comparative Results of Operations for the Nine months ended September 30, 2021 and 2020
Consolidated Results
(dollars in thousands) | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | Change | % | |||||||||||||
Revenues: | ||||||||||||||||
Lease Revenue | $ | 15,623 | $ | 10,636 | $ | 4,987 | 46.9 | % | ||||||||
Mining lands lease revenue | 7,198 | 7,094 | 104 | 1.5 | % | |||||||||||
Total Revenues | 22,821 | 17,730 | 5,091 | 28.7 | % | |||||||||||
Cost of operations: | ||||||||||||||||
Depreciation/Depletion/Amortization | 9,627 | 4,406 | 5,221 | 118.5 | % | |||||||||||
Operating Expenses | 3,792 | 2,598 | 1,194 | 46.0 | % | |||||||||||
Property Taxes | 2,764 | 2,089 | 675 | 32.3 | % | |||||||||||
Management company indirect | 2,137 | 2,208 | (71 | ) | -3.2 | % | ||||||||||
Corporate Expense | 2,486 | 2,850 | (364 | ) | -12.8 | % | ||||||||||
Total cost of operations | 20,806 | 14,151 | 6,655 | 47.0 | % | |||||||||||
Total operating profit | 2,015 | 3,579 | (1,564 | ) | -43.7 | % | ||||||||||
Net investment income, including realized gains | ||||||||||||||||
of $0 and $297 | 3,366 | 5,915 | (2,549 | ) | -43.1 | % | ||||||||||
Interest Expense | (1,785 | ) | (142 | ) | (1,643 | ) | 1157.0 | % | ||||||||
Equity in loss of joint ventures | (3,997 | ) | (3,773 | ) | (224 | ) | 5.9 | % | ||||||||
Gain on remeasurement of investment in real estate partnership | 51,139 | — | 51,139 | 0.0 | % | |||||||||||
Gain on sale of real estate | 805 | 9,329 | (8,524 | ) | -91.4 | % | ||||||||||
Income before income taxes | 51,543 | 14,908 | 36,635 | 245.7 | % | |||||||||||
Provision for income taxes | 10,500 | 4,161 | 6,339 | 152.3 | % | |||||||||||
Net income | 41,043 | 10,747 | 30,296 | 281.9 | % | |||||||||||
Gain (loss) attributable to noncontrolling interest | 12,236 | (475 | ) | 12,711 | -2676.0 | % | ||||||||||
Net income attributable to the Company | $ | 28,807 | $ | 11,222 | $ | 17,585 | 156.7 | % | ||||||||
Net income attributable to the Company for the first nine months of 2021 was $28,807,000 or $3.07 per share versus $11,222,000 or $1.16 per share in the same period last year. The first nine months of 2021 was impacted by the following items:
29 |
Asset Management Segment Results
Nine months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2021 | % | 2020 | % | Change | % | ||||||||||||||||||
Lease revenue | $ | 1,919 | 100.0 | % | 2,089 | 100.0 | % | (170 | ) | -8.1 | % | |||||||||||||
Depreciation, depletion and amortization | 408 | 21.3 | % | 529 | 25.3 | % | (121 | ) | -22.9 | % | ||||||||||||||
Operating expenses | 289 | 15.0 | % | 332 | 15.9 | % | (43 | ) | -13.0 | % | ||||||||||||||
Property taxes | 117 | 6.1 | % | 91 | 4.4 | % | 26 | 28.6 | % | |||||||||||||||
Management company indirect | 577 | 30.1 | % | 437 | 20.9 | % | 140 | 32.0 | % | |||||||||||||||
Corporate expense | 682 | 35.5 | % | 738 | 35.3 | % | (56 | ) | -7.6 | % | ||||||||||||||
Cost of operations | 2,073 | 108.0 | % | 2,127 | 101.8 | % | (54 | ) | -2.5 | % | ||||||||||||||
Operating loss | $ | (154 | ) | -8.0 | % | (38 | ) | -1.8 | % | (116 | ) | 305.3 | % |
Total revenues in this segment were $1,919,000, down $170,000 or 8.1%, over the same period last year due to the sale of our warehouse 1801 62nd Street in July 2020 which had $423,000 of revenues in the same period last year. Operating loss was ($154,000), down $116,000 from an operating loss of ($38,000) in the same period last year primarily due to the sale of 1801 62nd Street.
Mining Royalty Lands Segment Results
Nine months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2021 | % | 2020 | % | Change | % | ||||||||||||||||||
Mining lands lease revenue | $ | 7,198 | 100.0 | % | 7,094 | 100.0 | % | 104 | 1.5 | % | ||||||||||||||
Depreciation, depletion and amortization | 161 | 2.2 | % | 160 | 2.3 | % | 1 | 0.6 | % | |||||||||||||||
Operating expenses | 34 | 0.5 | % | 43 | 0.6 | % | (9 | ) | -20.9 | % | ||||||||||||||
Property taxes | 199 | 2.8 | % | 191 | 2.7 | % | 8 | 4.2 | % | |||||||||||||||
Management company indirect | 273 | 3.8 | % | 214 | 3.0 | % | 59 | 27.6 | % | |||||||||||||||
Corporate expense | 258 | 3.6 | % | 234 | 3.3 | % | 24 | 10.3 | % | |||||||||||||||
Cost of operations | 925 | 12.9 | % | 842 | 11.9 | % | 83 | 9.9 | % | |||||||||||||||
Operating profit | $ | 6,273 | 87.1 | % | 6,252 | 88.1 | % | 21 | 0.3 | % |
Total revenues in this segment were $7,198,000 versus $7,094,000 in the same period last year. Total operating profit in this segment was $6,273,000, an increase of $21,000 versus $6,252,000 in the same period last year.
Development Segment Results
Nine months ended September 30 | |||||||||||||
(dollars in thousands) | 2021 | 2020 | Change | ||||||||||
Lease revenue | $ | 1,169 | 862 | 307 | |||||||||
Depreciation, depletion and amortization | 159 | 160 | (1 | ) | |||||||||
Operating expenses | 133 | 415 | (282 | ) | |||||||||
Property taxes | 1,082 | 1,019 | 63 | ||||||||||
Management company indirect | 996 | 1,404 | (408 | ) | |||||||||
Corporate expense | 1,267 | 1,710 | (443 | ) | |||||||||
Cost of operations | 3,637 | 4,708 | (1,071 | ) | |||||||||
Operating loss | $ | (2,468 | ) | (3,846 | ) | 1,378 |
30 |
Stabilized Joint Venture Segment Results
Nine months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2021 | % | 2020 | % | Change | % | ||||||||||||||||||
Lease revenue | $ | 12,535 | 100.0 | % | 7,685 | 100.0 | % | 4,850 | 63.1 | % | ||||||||||||||
Depreciation, depletion and amortization | 8,899 | 71.0 | % | 3,557 | 46.3 | % | 5,342 | 150.2 | % | |||||||||||||||
Operating expenses | 3,336 | 26.6 | % | 1,808 | 23.5 | % | 1,528 | 84.5 | % | |||||||||||||||
Property taxes | 1,366 | 11.0 | % | 788 | 10.2 | % | 578 | 73.4 | % | |||||||||||||||
Management company indirect | 291 | 2.3 | % | 153 | 2.0 | % | 138 | 90.2 | % | |||||||||||||||
Corporate expense | 279 | 2.2 | % | 168 | 2.2 | % | 111 | 66.1 | % | |||||||||||||||
Cost of operations | 14,171 | 113.1 | % | 6,474 | 84.2 | % | 7,697 | 118.9 | % | |||||||||||||||
Operating profit (loss) | $ | (1,636 | ) | -13.1 | % | 1,211 | 15.8 | % | (2,847 | ) | -235.1 | % |
Total revenues in this segment were $12,535,000, an increase of $4,850,000 versus $7,685,000 in the same period last year. The Maren’s revenue was $4,591,000 and Dock 79 revenues increased $260,000. Total operating loss in this segment was ($1,636,000), a decrease of $2,847,000 versus a profit of $1,211,000 in the same period last year. The period includes $3,241,000 amortization expense of the $4,750,000 fair value of The Maren’s leases-in-place established when we booked this asset as part of the gain on remeasurement upon consolidation of this Joint Venture. Net Operating Income this quarter for this segment was $1,634,000, down $215,000$7,684,000, up $2,584,000 or 11.63%50.67% compared to the same quarterperiod last year.year due to The Maren’s consolidation into this segment.
Since The Maren achieved stabilization on the last day of March, average residential occupancy is 94.86% and 68.15% of expiring leases have renewed with no increase in rent due to the mandated rent freeze on renewals in DC. The Maren is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 70.41% ownership.
Dock 79’s average residential occupancy for the first nine months of 2021 was 95.43%. Through the first nine months of the year, 59.33% of expiring leases renewed with no increase in rent due to the mandated rent freeze on renewals in DC. Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 66% ownership.
In July 2019, the CompanyMarch, we completed a like-kind exchange by reinvesting $6,000,000 into a Delaware Statutory Trust (DST) knownrefinancing of Dock 79 as well as securing permanent financing for The Maren. This $180 million loan ($92 million for Dock 79, $88 million for The Maren) lowers the interest rate at Dock 79 from 4.125% to 3.03%, defers any principal payments for 12 years for both properties, and repays the $13.75 million in preferred equity along with $2.3 million in accrued interest.
Distributions from our CS1031 Hickory Creek DST. The DST owns a 294-unit garden-style apartment community known as Hickory Creek consisting of 19 three-story apartment buildings containing 273,940 rentable square feet. Hickory Creek was constructed in 1984 and substantially renovated in 2016 and is located in suburban Richmond, Virginia. The Company is 26.649% beneficial owner and receives monthly distributions. Third quarter distributionsinvestment were $86,000. The project is a qualified 1031 like-kind exchange investment and will defer $790,000 in taxes associated with the sales of 7030 Dorsey Road and 1502 Quarry Drive.
Comparative Results of Operations for the Nine months ended September 30, 2020 and 2019
Consolidated Results
(dollars in thousands) | Nine Months Ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % | ||||||||||||||
Revenues: | |||||||||||||||||
Lease Revenue | $ | 10,636 | $ | 10,796 | $ | (160 | ) | -1.5 | % | ||||||||
Mining lands lease revenue | 7,094 | 7,164 | (70 | ) | -1.0 | % | |||||||||||
Total Revenues | 17,730 | 17,960 | (230 | ) | -1.3 | % | |||||||||||
Cost of operations: | |||||||||||||||||
Depreciation/Depletion/Amortization | 4,406 | 4,390 | 16 | 0.4 | % | ||||||||||||
Operating Expenses | 2,598 | 2,744 | (146 | ) | -5.3 | % | |||||||||||
Property Taxes | 2,089 | 2,206 | (117 | ) | -5.3 | % | |||||||||||
Management company indirect | 2,208 | 1,872 | 336 | 17.9 | % | ||||||||||||
Corporate Expense | 2,850 | 1,928 | 922 | 47.8 | % | ||||||||||||
Total cost of operations | 14,151 | 13,140 | 1,011 | 7.7 | % | ||||||||||||
Total operating profit | 3,579 | 4,820 | (1,241 | ) | -25.7 | % | |||||||||||
Net investment income, including realized gains | |||||||||||||||||
of $297 and $591 | 5,915 | 5,813 | 102 | 1.8 | % | ||||||||||||
Interest Expense | (142 | ) | (989 | ) | 847 | -85.6 | % | ||||||||||
Equity in loss of joint ventures | (3,773 | ) | (1,282 | ) | (2,491 | ) | 194.3 | % | |||||||
Gain on real estate investments | 9,329 | 662 | 8,667 | 1309.2 | % | ||||||||||
Income before income taxes | 14,908 | 9,024 | 5,884 | 65.2 | % | ||||||||||
Provision for income taxes | 4,161 | 2,529 | 1,632 | 64.5 | % | ||||||||||
Income from continuing operations | 10,747 | 6,495 | 4,252 | 65.5 | % | ||||||||||
Income from discontinued operations, net | — | 6,849 | (6,849 | ) | -100.0 | % | |||||||||
Net income | 10,747 | 13,344 | (2,597 | ) | -19.5 | % | |||||||||
Loss attributable to noncontrolling interest | (475 | ) | (380 | ) | (95 | ) | 25.0 | % | |||||||
Net income attributable to the Company | $ | 11,222 | $ | 13,724 | $ | (2,502 | ) | -18.2 | %` | ||||||
Net income for first nine months of 2020 was $11,222,000 or $1.16 per share versus $13,724,000 or $1.38 per share in the same period last year. Income from discontinued operations$257,000 for the first nine months of 2019 was $6,849,000 or $.69 per share. Income from continuing operations increased $4,252,000 or 66% and was impacted by the following items:year.
Asset Management Segment Results
Nine months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2020 | % | 2019 | % | Change | % | ||||||||||||||||||
Lease revenue | $ | 2,089 | 100.0 | % | 1,733 | 100.0 | % | 356 | 20.5 | % | ||||||||||||||
Depreciation, depletion and amortization | 529 | 25.3 | % | 527 | 30.4 | % | 2 | 0.4 | % | |||||||||||||||
Operating expenses | 332 | 15.9 | % | 492 | 28.4 | % | (160 | ) | -32.5 | % | ||||||||||||||
Property taxes | 91 | 4.4 | % | 216 | 12.5 | % | (125 | ) | -57.9 | % | ||||||||||||||
Management company indirect | 437 | 20.9 | % | 265 | 15.3 | % | 172 | 64.9 | % | |||||||||||||||
Corporate expense | 738 | 35.3 | % | 470 | 27.1 | % | 268 | 57.0 | % | |||||||||||||||
Cost of operations | 2,127 | 101.8 | % | 1,970 | 113.7 | % | 157 | 8.0 | % | |||||||||||||||
Operating profit | $ | (38 | ) | -1.8 | % | (237 | ) | -13.7 | % | 199 | -84.0 | % |
Most of the Asset Management Segment was reclassified to discontinued operations leaving two commercial properties as well as Cranberry Run, which we purchased in the first quarter of 2019, and 1801 62nd Street which joined this segment on April 1 of 2019, but was sold in July 2020. Cranberry Run is a five-building industrial park in Harford County, MD totaling 268,010 square feet of industrial/ flex space and at quarter end was 78.6% leased and occupied. Total revenues in this segment were $2,089,000, up $356,000 or 20.5%, over the same period last year. Operating loss was ($38,000), down $199,000 from an operating loss of ($237,000) in the same period last year due to
higher allocation of corporate expenses.
Mining Royalty Lands Segment Results
Nine months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2020 | % | 2019 | % | Change | % | ||||||||||||||||||
Mining lands lease revenue | $ | 7,094 | 100.0 | % | 7,164 | 100.0 | % | (70 | ) | -1.0 | % | |||||||||||||
Depreciation, depletion and amortization | 160 | 2.3 | % | 130 | 1.8 | % | 30 | 23.1 | % | |||||||||||||||
Operating expenses | 43 | 0.6 | % | 75 | 1.1 | % | (32 | ) | -42.7 | % | ||||||||||||||
Property taxes | 191 | 2.7 | % | 203 | 2.8 | % | (12 | ) | -5.9 | % | ||||||||||||||
Management company indirect | 214 | 3.0 | % | 151 | 2.1 | % | 63 | 41.7 | % | |||||||||||||||
Corporate expense | 234 | 3.3 | % | 123 | 1.7 | % | 111 | 90.2 | % | |||||||||||||||
�� | ||||||||||||||||||||||||
Cost of operations | 842 | 11.9 | % | 682 | 9.5 | % | 160 | 23.5 | % | |||||||||||||||
Operating profit | $ | 6,252 | 88.1 | % | 6,482 | 90.5 | % | (230 | ) | -3.5 | % |
Total revenues in this segment were $7,094,000 versus $7,164,000 in the same period last year. Total operating profit in this segment was $6,252,000, a decrease of $230,000 versus $6,482,000 in the same period last year. The primary reason for this decrease is that we are no longer receiving double minimums at our Lake Louisa property, because our tenant, Cemex, received its final permit to begin mining the property in July 2019.
Development Segment Results
Nine months ended September 30 | |||||||||||||
(dollars in thousands) | 2020 | 2019 | Change | ||||||||||
Lease revenue | $ | 862 | 892 | (30 | ) | ||||||||
Depreciation, depletion and amortization | 160 | 161 | (1) | ||||||||||
Operating expenses | 415 | 246 | 169 | ||||||||||
Property taxes | 1,019 | 918 | 101 | ||||||||||
Management company indirect | 1,404 | 1,314 | 90 | ||||||||||
Corporate expense | 1,710 | 1,219 | 491 | ||||||||||
Cost of operations | 4,708 | 3,858 | 850 | ||||||||||
Operating loss | $ | (3,846 | ) | (2,966 | ) | (880 | ) |
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.
Stabilized Joint Venture Segment Results
Nine months ended September 30 | ||||||||||||||||||||||||
(dollars in thousands) | 2020 | % | 2019 | % | Change | % | ||||||||||||||||||
Lease revenue | $ | 7,685 | 100.0 | % | 8,171 | 100.0 | % | (486 | ) | -5.9 | % | |||||||||||||
Depreciation, depletion and amortization | 3,557 | 46.3 | % | 3,572 | 43.7 | % | (15 | ) | -0.4 | % | ||||||||||||||
Operating expenses | 1,808 | 23.5 | % | 1,931 | 23.6 | % | (123 | ) | -6.4 | % | ||||||||||||||
Property taxes | 788 | 10.2 | % | 869 | 10.6 | % | (81 | ) | -9.3 | % | ||||||||||||||
Management company indirect | 153 | 2.0 | % | 142 | 1.8 | % | 11 | 7.7 | % | |||||||||||||||
Corporate expense | 168 | 2.2 | % | 116 | 1.4 | % | 52 | 44.8 | % | |||||||||||||||
Cost of operations | 6,474 | 84.2 | % | 6,630 | 81.1 | % | (156 | ) | -2.4 | % | ||||||||||||||
Operating profit | $ | 1,211 | 15.8 | % | 1,541 | 18.9 | % | (330 | ) | -21.4 | % |
Dock 79’s average residential occupancy for the first nine months was 92.80%, and at the end of the third quarter, Dock 79’s residential units were 90.49% leased and 94.43% occupied. For the first nine months, 56.22% of expiring leases renewed with an average increase in rent on those renewals of 0.41% due to the mandated rent freeze on renewals that went into effect in March. Net Operating Income for this segment was $5,100,000, down $246,000 or 4.6% compared to the same period last year. Dock 79 is a joint venture between the Company and MRP, in which FRP Holdings, Inc. is the majority partner with 66% ownership.
Distributions for Hickory Creek were $254,000 for the first nine months. The project is a qualified 1031 like-kind exchange investment in a Delaware Statutory Trust of which the Company is a 26.659% beneficial owner.
Liquidity and Capital Resources. The growth of the Company’s businesses requires significant cash needs to acquire and develop land or operating buildings and to construct new buildings and tenant improvements. As of September 30, 2020,2021, we had $61,548,000$163,383,000 of cash and cash equivalents along with $104,624,000$4,315,000 of investments available for sale. As of September 30, 2020,2021, we had no debt borrowed under our $20 million Wells Fargo revolver, $411,000$506,000 outstanding under letters of credit and $19,589,000$19,494,000 available to borrow under the revolver. In November 2017, we secured $90 million in permanent financing forOn March 19, 2021, the Company refinanced Dock 79 from EagleBank,and The Maren projects pursuant to separate Loan Agreements and Deed of Trust Notes entered into with Teachers Insurance and Annuity Association of America, LLC. Dock 79 and The Maren borrowed principal sums of $92,070,000 and $88,000,000 respectively, in connection with the proceeds of which were used to pay off $79 million of construction and mezzanine debt. The remainder was distributed pari passu between the Company and our partners.refinancing.
Cash Flows - The following table summarizes our cash flows from operating, investing and financing activities for
31 |
each of the periods presented (in thousands of dollars):
Nine months | ||||||
Ended September 30, | ||||||
2020 | 2019 | |||||
Total cash provided by (used for): | ||||||
Operating activities | $ | 13,353 | 15,021 | |||
Investing activities | 22,729 | 40,131 | ||||
Financing activities | (16,400 | ) | (8,453 | ) | ||
Increase (decrease) in cash and cash equivalents | $ | 19,682 | 46,699 | |||
Outstanding debt at the beginning of the period | $ | 88,925 | 88,789 | |||
Outstanding debt at the end of the period | $ | 89,027 | 88,891 |
Nine months | ||||||||
Ended September 30, | ||||||||
2021 | 2020 | |||||||
Total cash provided by (used for): | ||||||||
Operating activities | $ | 16,400 | 13,353 | |||||
Investing activities | 73,047 | 22,729 | ||||||
Financing activities | (475 | ) | (16,400 | ) | ||||
Increase in cash and cash equivalents | $ | 88,972 | 19,682 | |||||
Outstanding debt at the beginning of the period | 89,964 | 88,925 | ||||||
Outstanding debt at the end of the period | 178,371 | 89,027 |
Operating Activities - Net cash provided by operating activities for the nine months ended September 30, 20202021 was $13,353,000$16,400,000 versus $15,021,000$13,353,000 in the same period last year. NetThe Gain on remeasurement of investment in real estate partnership and related deferred income taxes were both non-cash adjustments to net income to arrive at net cash used inprovided by operating activities of discontinued operations for the nine months ended September 30, 2019 was $1,756,000.activities.
Investing Activities - Net cash provided by investing activities for the nine months ended September 30, 20202021 was $22,729,000$73,047,000 versus $40,131,000$22,729,000 in the same period last year. The $50 million increase was primarily due to a return of our preferred equity financing with interest of $16.1 million from The Maren, $24.6 million decrease wasin purchases of corporate bonds due primarily to the proceedslack of attractive investment opportunities, a $12.6 million increase on maturities and sales of our corporate bond portfolio, and $3.7 million for cash on the sale investments available for sale offset by the purchasebooks of investments available for sale, while the prior year included the acquisition of Cranberry Business Park, and the preferred equity contribution to the RiverFront Holdings II joint venture.The Maren upon consolidation.
At September 30, 20202021, the Company was invested in 46two corporate bonds with individual maturities ranging from 2020 throughin January 2022. The unrealized gain on these bonds of $1,117,000$16,000 was recorded as part of comprehensive income and was based on the estimated market value by National Financial Services, LLC (“NFS”) obtained from sources that may include pricing vendors, broker/dealers who clear through NFS and/or other sources (Level 2). The Company
recorded ano realized gain of $297,000 in its net investment income related togains or losses on bonds that matured or were sold in 2020.2021.
Financing Activities – Net cash used in investing activities was $16,400,000$475,000 versus $8,453,000$16,400,000 in the same period last year due primarily due to the increased purchaserefinancing of Dock 79 for $1.4 million more net of debt issuance costs than the amount matured and $15.4 million lower repurchases of company stock in the nine months ended September 30, 2020.stock.
Credit Facilities - On February 6, 2019, the Company entered into a First 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 (“Revolver”) with a maximum facility amount of $20 million. The interest rate under the Credit Agreement will be a maximum of 1.50% over Daily 1 Month1-Month LIBOR, which may be reduced quarterly to 1.25% or 1.0% over Daily 1 Month1-Month LIBOR if the Company meets a specified ratio of consolidated total debt to consolidated total capital. 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 contains certain conditions and financial covenants, including a minimum tangible net worth and dividend restriction. As of September 30, 2020,2021, these covenants would have limited our ability to pay dividends to a maximum of $219$228 million combined.
On November 17, 2017, Riverfront Holdings I, LLC (the "Joint Venture")March 19, 2021, the Company refinanced the Dock 79 projectand The Maren projects pursuant to aseparate Loan AgreementAgreements and Deed of Trust NoteNotes entered into with EagleBank ("Loan Documents").Teachers Insurance and Annuity Association of America, LLC. Dock 79 and The Joint Venture, which was formed between the CompanyMaren borrowed principal sums of $92,070,000 and MRP in 2014 in connection with the development of the Riverfront on the Anacostia property, borrowed a principal sum of $90,000,000$88,000,000 respectively, in connection with the refinancing. The loan isloans are separately secured by the Dock 79 and The Maren real property and improvements, bearsbear a fixed interest rate of 4.125%3.03% per annum, and has a term of 120 months. During the first 48 months of the loan term, the Joint Venture will makerequire monthly payments of interest only with the principal in full due April 1, 2033. Either loan may be prepaid subsequent to April 1, 2024, subject to yield maintenance premiums. Either loan may be transferred to a qualified buyer as part of a one-time sale subject to a 60% loan to value, minimum of 7.5% debt yield and thereafter, make monthly paymentsa 0.75% transfer fee. Effective March 31, 2021, the Company consolidated the assets (at current
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fair value), liabilities and operating results of principal and interest in equal installments based upon a 30-year amortization period. The loan is a non-recourse loan. However, all amounts dueour Riverfront Investment Partners II, LLC partnership (The Maren) which was previously accounted for under the Loan Documents will become immediately due upon an eventequity method. As such the full amount of default byour mortgage loan was recorded in the 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 (iv) dissolution, or the dissolution of the guarantor. MRP has executed a carve-out guaranty in connection with the loan.consolidated financial statements.
Cash Requirements – The Board of Directors has authorized Management to repurchase shares of the Company’s common stock from time to time as opportunities arise. On May 6, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On August 26, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. As of September 30, 2020, $15,252,000 was authorized for future repurchases of common stock. The Company does not currently pay any cash dividends on common stock.
The Company currently expects its capital expenditures for the remainder of 20202021 to include approximately $19.7$9.3 million for real estate including investments in joint ventures, which will be funded mostly out of cash and investments on hand, cash generated from operations and property sales, or borrowings under our credit facilities.
Impact of the COVID-19 Pandemic. The COVID-19 pandemic is having an extraordinary impact on the world economy and the markets in which we operate. As an essential business, we have continued to operate throughout the pandemic in accordance with White House guidance and orders issued by state and local authorities. We have implemented social distancing and other measures to protect the health of our employees and customers. While we recognizeOur Dock 79 and The Maren properties in Washington, D.C. suffered the importance of social distancing, stay at home and telework measuresprincipal impacts to protect human health, these measures will adversely affectour business from the pandemic during 2020 due to our retail tenants as long as they remainbeing unable to operate at capacity, the lack of attendance at the Washington Nationals baseball park and the rent freeze imposed by the District. It is possible that some of these same conditions may impact our ability to lease retail spaces in place. We are negotiating with our retail tenants on rent abatementsWashington, D.C. and cash flow adjustments that will adversely affect our NOI.Greenville. We anticipate that the pandemicthese impacts will continue to have negative impacts onfor at least the overall economy that is likely to have a negative impact on manyremainder of our tenants. During this period, we will continue to fulfill our duty to operate while managing our business in a prudent fashion.2021.
Summary and Outlook. As we have settled into a post-COVID world, we remain fortunate and pleasantly surprised with how well our assets have responded. Aggregates royaltiesAlthough royalty revenue is down this quarter were well aheadcompared to the same quarter last year, royalty revenue for the first nine months was $7,198,000, an increase of 1.46% over the same period last year and the highest revenue total for the first nine months in the segment’s history. Revenue for the last twelve months was $9,581,000, an increase of 1.09% over calendar year 2020. This marks the third straight quarter where the last twelve months’ revenue exceeded $9.5 million.
For the fourth quarter in a row, Dock 79’s occupancy has been above 94% at quarter end. This is the very first time Dock 79 has ended the four straight quarters with an occupancy higher than 94%.
With The Maren’s stabilization at the end of March this year, we are now only 1% offin our second reporting period with The Maren consolidated on to our books. Because of the increased depreciation and amortization attributable to the Company as a result of consolidating The Maren’s results into our income statement, the impact on net income may in fact be negative for some time, but the positive impact on our NOI and cash flow will be significant. The Maren was 93.56% leased and 95.45% occupied at quarter end, and its retail space is 100% leased with occupancy expected in the fourth quarter of this year once build out is complete. It has been over a year since the District put in place the “emergency” measures which have prevented us from raising rents on renewals. This has obviously mitigated our ability to grow NOI at Dock 79. With The Maren now going through its first generation of renewals, it too is feeling the effect of these emergency measures. It is our understanding that these measures are set to expire but not prior to the end of the year. Because renewal negotiations take place several weeks in advance, if the emergency measures expire at year end, we will not see any practical effect to rent increases until February 2022.
We remain pleased with the current direction of our asset management segment, particularly the industrial assets. The speed with which we leased up and then sold our building at 1801 62nd Street last year’s record numbers throughyear strengthened our commitment to industrial development. We have a build-to-suit and two spec buildings under construction at Hollander and those three buildings will complete any development at Hollander for the foreseeable future. Because of that, we have bolstered our land bank with the $10.5 million purchase of 55 acres in Aberdeen, Maryland as well as this quarter’s purchase of 17 acres in Harford County, Maryland. Once entitled, this property will be capable of supporting over 625,000 square feet of industrial product and will be essential for future industrial development as we finish developing our remaining inventory at Hollander Business Park.
At the end of September, we held our very first Investor Day. We hope it was the first of many and the last one we hold virtually. The event afforded us an opportunity to take stock of where we are now and where we are headed. The first nine months. And like last year,months have seen the stabilization, consolidation, and permanent financing of The Maren; the refinancing of Dock 79; leasing begin at Bryant St and Riverside in Greenville; a build-to-suit opportunity at Hollander as well as the
royaltiesmining royalties’ highest nine-month revenue performance. That is a lot to take stock of in a short period of time, but we have collected throughare more excited about where we are headed. In the first nine months exceed the royaltiesnot-so-distant future, we collected in any entire year priorwill finish construction and start leasing Half Street and .408 Jackson; we will finish construction on three warehouses and begin work on allowing our landbank to 2017. Unrelated to any mining activity, Lee County exercised their option to buy 87 acres fromaccommodate our quarry in Ft. Myers for $2.2 million in order to extend Alico Roadnext generation of industrial development; and ease traffic in the area. This road extension will benefit any second life developments on our property once the reserves are depleted.
The lease up of the Maren continues to exceed our expectations. The building received its final certificate of occupancy at the end of September and is now officially “complete.” We signed 91 leases this past quarter and moved in 125 tenants. At quarter end, the building was 76% leased and 69% occupied, putting us within shouting distance of stabilization.
Unfortunately for Dock 79, the rent freeze on renewals was extended through the end of the year. Because our apartments come up for renewal two months prior to the end of the lease,hopefully, we will not haveonly see the abilitypassage but the practical effects of an infrastructure bill on our mining royalties income. We mentioned this at the Investor Day, but, assuming all goes according to increase rent on renewals for the rest of the year. In all likelihood the first quarter of 2021 will be affected as well. The current environment is less than ideal for our three retail tenants, but they are all currently open and serving customers. Occupancy remains above 90% and renewals are still in line with where they were in a pre-COVID world. We believe that the rapid lease-up of the Maren and the continued success of Dock 79 speak to the quality of these assets and the desirability of their location. Despite major construction and no baseball, waterfront real estate still demands a premium, and as working from home becomes more and more common,plan, it is possibleour belief that over the environment afforded by these assets has only servednext few years, we will put all of our cash to increase their appeal.
Industrial has responded well to the pandemic, as evidenced by the saleuse in July of 1801 62nd Street at Hollander Business Park for $12.3 million.new projects. We had no issues with tenants paying rent and do not expect to. We had some concerns regarding our office tenants, but every tenant is currently paying rent and the only issue we had with back rent is one tenant who owes $6,500 for the month of April.
We are half a year into this pandemic, and we have been very fortunate. Our assets have performed nearly as well and sometimes better than they did a year ago. But while the people of this country have gotten used to life during a pandemic, COVID-19 as an economic factor may just be ramping up. Government intervention has shielded people and businesses from some of the financial realities of this disease, and as that well of assistance starts to dry up, it is possible that the second wave of the disease may be the first wave of real economic distress. We have yet to see any reason why our assets will not continue to perform well during this unusual time, but we have the safety net of a conservative balance sheet and substantial cash reserves to tide us over if they do. Regardless of what is happening right now orbe opportunistic in the near future, we believe strongly in the long run viability of our business and its assets. The money we put back into it in the form of share buybacks is representative of that. To that end, during the first nine months of 2020,repurchasing stock. During 2021, the Company repurchased 379,8096,004 shares at an average cost of $41.30$43.95 per share.
Non-GAAP Financial Measure.
To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The non-GAAP financial measure included in this quarterly report is net operating income (NOI). FRP uses this non-GAAP financial measure 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.
Net Operating Income Reconciliation | |||||||||||||||||||||||
Nine months ended 09/30/21 (in thousands) | |||||||||||||||||||||||
Stabilized | |||||||||||||||||||||||
Asset | Joint | Mining | Unallocated | FRP | |||||||||||||||||||
Management | Development | Venture | Royalties | Corporate | Holdings | ||||||||||||||||||
Segment | Segment | Segment | Segment | Expenses | Totals | ||||||||||||||||||
Net Income (loss) | (130 | ) | (2,521 | ) | 37,874 | 5,159 | 661 | 41,043 | |||||||||||||||
Income Tax Allocation | (50 | ) | (933 | ) | 9,506 | 1,913 | 64 | 10,500 | |||||||||||||||
Income (loss) before income taxes | (180 | ) | (3,454 | ) | 47,380 | 7,072 | 725 | 51,543 | |||||||||||||||
Less: | |||||||||||||||||||||||
Gain on remeasurement of real estate investment | — | — | 51,139 | — | — | 51,139 | |||||||||||||||||
Gain on investment land sold | — | — | — | 831 | — | 831 | |||||||||||||||||
Unrealized rents | 49 | — | 149 | 166 | — | 364 | |||||||||||||||||
Interest income | — | 2,608 | — | — | 758 | 3,366 | |||||||||||||||||
Plus: | |||||||||||||||||||||||
Loss on sale of land | 26 | — | — | — | — | 26 | |||||||||||||||||
Equity in loss of Joint Venture | — | 3,594 | 371 | 32 | — | 3,997 | |||||||||||||||||
Interest Expense | — | — | 1,752 | — | 33 | 1,785 | |||||||||||||||||
Depreciation/Amortization | 408 | 159 | 8,899 | 161 | — | 9,627 | |||||||||||||||||
Management Co. Indirect | 577 | 996 | 291 | 273 | — | 2,137 | |||||||||||||||||
Allocated Corporate Expenses | 682 | 1,267 | 279 | 258 | — | 2,486 | |||||||||||||||||
Net Operating Income (loss) | 1,464 | (46 | ) | 7,684 | 6,799 | — | 15,901 |
Net Operating Income Reconciliation | |||||||||||||||||||||||
Nine months ended 09/30/20 (in thousands) | |||||||||||||||||||||||
Stabilized | |||||||||||||||||||||||
Asset | Joint | Mining | Unallocated | FRP | |||||||||||||||||||
Management | Development | Venture | Royalties | Corporate | Holdings | ||||||||||||||||||
Segment | Segment | Segment | Segment | Expenses | Totals | ||||||||||||||||||
Income (loss) from continuing operations | 2,745 | (2,055 | ) | 864 | 7,200 | 1,993 | 10,747 | ||||||||||||||||
Income Tax Allocation | 1,018 | (762 | ) | 496 | 2,670 | 739 | 4,161 | ||||||||||||||||
Income (loss) from continuing operations before income taxes | 3,763 | (2,817 | ) | 1,360 | 9,870 | 2,732 | 14,908 | ||||||||||||||||
Less: | |||||||||||||||||||||||
Equity in profit of Joint Ventures | — | — | 254 | — | — | 254 | |||||||||||||||||
Gains on sale of buildings | 3,801 | 1,877 | — | 3,651 | — | 9,329 | |||||||||||||||||
Unrealized rents | 147 | — | — | 178 | — | 325 | |||||||||||||||||
Interest income | — | 3,146 | — | — | 2,769 | 5,915 | |||||||||||||||||
Plus: | |||||||||||||||||||||||
Unrealized rents | — | — | 11 | — | — | 11 | |||||||||||||||||
Equity in loss of Joint Venture | — | 3,994 | — | 33 | — | 4,027 | |||||||||||||||||
Interest Expense | — | — | 105 | — | 37 | 142 | |||||||||||||||||
Depreciation/Amortization | 529 | 160 | 3,557 | 160 | — | 4,406 | |||||||||||||||||
Management Co. Indirect | 437 | 1,404 | 153 | 214 | — | 2,208 | |||||||||||||||||
Allocated Corporate Expenses | 738 | 1,710 | 168 | 234 | — | 2,850 | |||||||||||||||||
Net Operating Income (loss) | 1,519 | (572 | ) | 5,100 | 6,682 | — | 12,729 |
Net Operating Income Reconciliation | |||||||||||||||||||||||
Nine months ended 09/30/19 (in thousands) | |||||||||||||||||||||||
Stabilized | |||||||||||||||||||||||
Asset | Joint | Mining | Unallocated | FRP | |||||||||||||||||||
Management | Development | Venture | Royalties | Corporate | Holdings | ||||||||||||||||||
Segment | Segment | Segment | Segment | Expenses | Totals | ||||||||||||||||||
Income (loss) from continuing operations | 218 | (2,236 | ) | 304 | 4,796 | 3,413 | 6,495 | ||||||||||||||||
Income Tax Allocation | 81 | (829 | ) | 253 | 1,778 | 1,246 | 2,529 | ||||||||||||||||
Income (loss) from continuing operations before income taxes | 299 | (3,065 | ) | 557 | 6,574 | 4,659 | 9,024 | ||||||||||||||||
Less: | |||||||||||||||||||||||
Gains on sale of buildings | 536 | — | — | 126 | — | 662 | |||||||||||||||||
Unrealized rents | — | — | 25 | — | — | 25 | |||||||||||||||||
Interest income | — | 1,123 | — | — | 4,690 | 5,813 | |||||||||||||||||
Plus: | |||||||||||||||||||||||
Unrealized rents | 5 | — | — | 184 | — | 189 | |||||||||||||||||
Equity in loss of Joint Venture | — | 1,222 | 26 | 34 | — | 1,282 | |||||||||||||||||
Interest Expense | — | — | 958 | — | 31 | 989 | |||||||||||||||||
Depreciation/Amortization | 527 | 161 | 3,572 | 130 | — | 4,390 | |||||||||||||||||
Management Co. Indirect | 265 | 1,314 | 142 | 151 | — | 1,872 | |||||||||||||||||
Allocated Corporate Expenses | 470 | 1,219 | 116 | 123 | — | 1,928 | |||||||||||||||||
Net Operating Income (loss) | 1,030 | (272 | ) | 5,346 | 7,070 | — | 13,174 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Interest Rate Risk - We are exposed to the impact of interest rate changes through our variable-rate borrowings under our Credit Agreement with Wells Fargo.
Under the Wells Fargo Credit Agreement, the applicable margin for borrowings at September 30, 20202021 was Daily 1 Month1-Month LIBOR plus 1.0%. The applicable margin for such borrowings will be increased in the event that our debt to capitalization ratio as calculated under the Wells Fargo Credit Agreement Facility exceeds a target level.
The Company did not have any variable rate debt at September 30, 2020,2021, so a sensitivity analysis was not performed to determine the impact of hypothetical changes in interest rates on the Company’s results of operations and cash flows.
ITEM 4. CONTROLS AND PROCEDURES
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
The Company also maintains a system of internal accounting controls over financial reporting that are designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
All control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving the desired control objectives.
As of September 30, 2020,2021, the Company, under the supervision and with the participation of the Company's management, including the CEO, CFO and CAO, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Company’s CEO, CFO and CAO concluded that the Company's disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in periodic SEC filings.
There have been no changes in the Company’s internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that
35 |
we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
The following risk factor set forth below is in addition to the risk factors discussed under Part I, Item 1A (Risk Factors) of the Company’s most recent annual report on Form 10-K.
The current pandemic of the novel coronavirus COVID-19 could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.
Since being reported in December 2019, the novel coronavirus (COVID-19) pandemic has had repercussions across regional and global economies and financial markets. The outbreak of COVID-19 has significantly adversely impacted global economic activity, contributed to significant volatility and negative pressure in financial markets and increased economic uncertainty. In response to the pandemic, many states and cities in which we own properties have instituted quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. In response to these restrictions and to protect employee safety, many of our employees are working remotely.
As a result, the COVID-19 pandemic is negatively impacting many industries, especially the commercial real estate business which has mixed use tenants including apartment dwellers, small businesses and restaurants. The significance, extent and duration of the impacts of the COVID-19 pandemic remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the continued severity and spread of the virus, the period of time during which mandated social distancing or other mitigation measures remain in place, the timetable for developing effective treatments and a vaccine and the trajectory of the economic recovery.
At this time, the Company anticipates that the pandemic could have material and adverse effects on our ability to successfully operate and on our financial condition, results of operations and cash flows due to, among other factors:
The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic.
Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
(c) | |||||||||||||||||
Total | |||||||||||||||||
Number of | |||||||||||||||||
Shares | (d) | ||||||||||||||||
Purchased | Approximate | ||||||||||||||||
(a) | As Part of | Dollar Value of | |||||||||||||||
Total | (b) | Publicly | Shares that May | ||||||||||||||
Number of | Average | Announced | Yet Be Purchased | ||||||||||||||
Shares | Price Paid | Plans or | Under the Plans | ||||||||||||||
Period | Purchased | per Share | Programs | or Programs (1) | |||||||||||||
July 1 | |||||||||||||||||
Through | |||||||||||||||||
July 31 | 18,547 | $ | 39.71 | 18,547 | $ | 7,849,000 | |||||||||||
August 1 | |||||||||||||||||
Through | |||||||||||||||||
August 31 | 7,158 | $ | 40.59 | 7,158 | $ | 17,558,000 | |||||||||||
September 1 | |||||||||||||||||
Through | |||||||||||||||||
September 30 | 55,801 | $ | 41.32 | 55,801 | $ | 15,252,000 | |||||||||||
Total | 81,506 | $ | 40.89 | 81,506 |
(c) | ||||||||||||||||||
Total | ||||||||||||||||||
Number of | ||||||||||||||||||
Shares | (d) | |||||||||||||||||
Purchased | Approximate | |||||||||||||||||
(a) | As Part of | Dollar Value of | ||||||||||||||||
Total | (b) | Publicly | Shares that May | |||||||||||||||
Number of | Average | Announced | Yet Be Purchased | |||||||||||||||
Shares | Price Paid | Plans or | Under the Plans | |||||||||||||||
Period | Purchased | per Share | Programs | or Programs (1) | ||||||||||||||
July 1 through July 31 | — | $ | — | — | $ | 9,363,000 | ||||||||||||
August 1 through August 31 | — | $ | — | — | $ | 9,363,000 | ||||||||||||
September 1 through September 30 | — | $ | — | — | $ | 9,363,000 | ||||||||||||
Total | — | $ | — | — |
(1) | On February 4, 2015, the Board of Directors authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time to time as opportunities arise. On December 5, 2018, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On August 5, 2019, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On May 6, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On August 26, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. |
Item 6. EXHIBITS
(a) | Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", on page |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
FRP Holdings, Inc. | ||||
Date: November | By | JOHN D. BAKER II | ||
John D. Baker II | ||||
Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
By | JOHN D. BAKER III | |||
John D. Baker III. | ||||
Treasurer and Chief Financial Officer | ||||
(Principal Financial Officer) | ||||
By | JOHN D. KLOPFENSTEIN | |||
John D. Klopfenstein | ||||
Controller and Chief Accounting | ||||
Officer (Principal Accounting Officer) |
FRP HOLDINGS, INC.
FORM 10-Q FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 20202021
EXHIBIT INDEX
Certification of John D. Baker II. | |
(31)(b) | Certification of John D. Baker III. |
(31)(c) | Certification of John D. Klopfenstein. |
(32) | Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer under Section 906 of the Sarbanes-Oxley Act of 2002. |
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