FRP Holdings, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
FRP Holdings, Inc. is a real estate development, ownership and management company operating across industrial and commercial properties, mining royalty lands, development projects and multifamily properties. The filing covers the three months ended March 31, 2024. Results are unaudited and presented in thousands, except per-share data.
At March 31, 2024, FRP reported 19.0 million shares outstanding. A two-for-one stock split became effective April 12, 2024; historical share and per-share data were retroactively adjusted.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $10,133 | $10,114 | 0.2% |
| Lease revenue | $7,170 | $6,832 | 4.9% |
| Mining royalty and rent revenue | $2,963 | $3,282 | (9.7%) |
| Operating profit | $2,882 | $2,854 | 1.0% |
| Net investment income | $2,783 | $2,382 | 16.8% |
| Interest expense | $911 | $1,006 | (9.4%) |
| Equity in loss of joint ventures | $(3,019) | $(3,625) | Loss reduced by $606 |
| Net income | $1,335 | $406 | 228.8% |
| Net income attributable to FRP | $1,301 | $565 | 130.3% |
| Basic and diluted EPS | $0.07 | $0.03 | Up from prior period |
| Net cash provided by operating activities | $2,906 | $4,687 | Down $1,781 |
| Net cash used in investing activities | $(7,225) | $(8,755) | Lower use of $1,530 |
| Net decrease in cash | $(5,071) | $(4,198) | Greater decrease of $873 |
Operating margin was approximately 28.4% in Q1 2024 versus 28.2% in Q1 2023. Net income attributable to FRP represented approximately 12.8% of revenue versus 5.6% in the prior-year quarter.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $152,484 at March 31, 2024, down from $157,555 at December 31, 2023. The company also held $141,603 in U.S. Treasury notes maturing in 2024.
- Total assets were $705,673, including $545,974 of net real estate investments and $164,271 of investments in joint ventures.
- Total liabilities were $256,802 and total equity was $448,871.
- Secured notes payable were $178,742, consisting primarily of fixed-rate mortgage debt at 3.03% with principal due April 1, 2033.
- The $35 million Wells Fargo revolving credit facility had no borrowings, $898 of letters of credit outstanding and $34,102 available for borrowing at quarter-end. The facility bears interest at 2.25% over Daily Simple SOFR and has a 0.35% unused commitment fee.
- FRP was in compliance with its debt covenants. The credit agreement would have limited aggregate dividends to $96.9 million at March 31, 2024.
Segment performance and material changes
| Segment | Q1 2024 revenue | Q1 2024 operating profit | Key change |
|---|---|---|---|
| Multifamily | $5,414 | $1,212 | Operating profit up 51%; consolidated and pro-rata NOI benefited from stabilization and improved property performance. |
| Industrial and commercial | $1,453 | $562 | Revenue up 36% and operating profit up 91%, primarily from full occupancy at 1841 62nd Street and the addition of 1941 62nd Street. |
| Mining royalty lands | $2,963 | $2,446 | Revenue down 10% and operating profit down 12%; royalty tons declined 14%. |
| Development | $303 | $(1,338) | Operating loss increased by $303, mainly from lower lease revenue and higher general and administrative expenses. |
- Pro-rata NOI, a non-GAAP measure, increased 22% to $8,534 from $6,988. Multifamily pro-rata NOI increased 92% to $3,883, while industrial and commercial pro-rata NOI increased 47% to $1,159.
- Multifamily occupancy was 94.1% at quarter-end and average occupancy was 93.5% for the quarter.
- The Verge was 94.2% leased and 91.6% occupied at quarter-end, with retail 45.2% leased.
- Equity losses from joint ventures declined to $3,019 from $3,625, primarily due to lease-up at The Verge. FRP’s ownership in Bryant Street increased to 72.10% from 61.36% after an ownership adjustment and conversion of preferred equity to common equity.
- Q1 2024 included $320 of stock-based compensation and no gain on sale of real estate, compared with a $10 gain in Q1 2023.
- Net investment income increased by $401, reflecting higher interest earned on cash equivalents and lending ventures, partly offset by lower preferred interest.
- The former administrative services arrangement with Patriot Transportation ended after Patriot was acquired in December 2023. Q1 2023 included $225 of allocated Patriot costs; shared executives became FRP employees in 2024.
Cash flow, development activity and outlook
- Investing cash outflows included $6,205 for property investments and $7,771 of investments in joint ventures, partly offset by $6,546 of returned joint-venture capital.
- FRP expects to invest approximately $57 million in existing real estate holdings and joint ventures during the remainder of 2024 and $193 million beyond 2024 for projects currently in its pipeline.
- Management expects funding from cash and investments, operating cash flow, property sales, joint-venture distributions and credit facilities.
- A $30 million, 259,200-square-foot speculative warehouse under construction in Aberdeen, Maryland is expected to be completed in the third quarter of 2024. Management also expects two additional Maryland industrial projects to be ready for vertical construction within 18 months.
- FRP entered two Florida industrial joint ventures with BBX Logistics involving a 200,000-square-foot warehouse project in Lakeland and a 160,000-square-foot redevelopment project in Broward County.
- The company estimates its share of industrial projects currently in development represents approximately $191 million of capital expenditures, with $27 million spent to date, and targets a 6% to 7% NOI yield on cost.
- Management stated that industrial development is currently favored over most multifamily development because of expected returns, lower capital intensity and lower reliance on debt.
Risks, contingencies and unusual items
- Mining revenue is exposed to construction activity, production volumes, commodity pricing and tenant concentration. One mining lessee accounted for 21.9% of consolidated Q1 revenue. Royalties were also reduced by $289 in Q1 2024 to resolve a prior $842 overpayment; $335 remained outstanding at quarter-end.
- FRP and a partner guaranteed interest carry costs on a $110 million Bryant Street partnership loan. FRP’s guarantee is limited to its proportionate ownership; the recorded guarantee value was $1.5 million.
- The company had $898 of letters of credit supporting obligations to state agencies related to real estate development.
- Key risks include vacancies and lease renewals, tenant defaults, real estate and development conditions, entitlement and zoning delays, construction costs, interest rates, capital-market access, joint-venture performance, environmental liabilities, inflation and cybersecurity.
- Management does not expect currently known litigation, environmental matters or other contingencies to have a material adverse effect, but acknowledges that additional environmental liabilities may be identified.
- The company does not pay cash dividends and reported no present intention to do so. No shares were repurchased during the quarter; $7,363 remained available under the repurchase authorization.
Most important facts for investors to verify
- Whether multifamily lease-up and occupancy gains, particularly at The Verge, continue to reduce joint-venture losses and support pro-rata NOI.
- Progress, budget and completion timing for the Aberdeen warehouse and the planned Maryland and Florida industrial developments.
- Mining royalty volumes, the remaining $335 overpayment deduction and exposure to the concentrated mining tenant base.
- Liquidity usage as FRP deploys the projected $57 million during the remainder of 2024 and additional pipeline capital thereafter.
- Interest-rate exposure and refinancing conditions for the Bryant Street floating-rate loan and other joint-venture debt.
- Future capital contributions, distributions and potential losses from multifamily and development joint ventures.