FRP Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 5 speakers on the call.

Operator

everyone, and welcome to today's FRP Holdings Incorporated Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note this call is being recorded. I will be standing by if you should need any assistance.

Operator

It is now my pleasure to turn the conference over to CEO, John Baker III. Please go ahead.

Speaker 1

Thank you, Angela, and good afternoon. I'm John Baker III, Chief Executive Officer of FRP Holdings, Inc. And with me today are David de Villiers, Jr, our President John Baker, II, our Chairman David de Villiers III, our Chief Operating Officer Matt McNulty, our Chief Financial Officer and John Milton, our Executive Vice President and General Counsel. As a reminder, any statements on this call, which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward looking statements. These risks and uncertainties are listed in our SEC filings.

Speaker 1

We have no obligation to revise or update any forward looking statements except as imposed by law as a result of future events or new information. To supplement the financial results presented in accordance with generally accepted accounting principles, 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 referenced in this call is net operating income and pro rata net operating income. FRP uses this non GAAP financial measure to analyze its 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.

Speaker 1

To reconcile NOI to GAAP net income, please refer to the segment titled Non GAAP Financial Measures on Pages 9 and 10 of our most recent earnings release. Any reference to cap rates, asset values, per share values or the analysis of the estimated value of our assets, net of debt and liabilities, are for illustrative purposes only as a reflection of how management views its various assets for purposes of informing management decisions and do not necessarily reflect the price that would be obtained upon the sale of an asset or the associated costs or tax liability. Now for our financial highlights from the 2nd quarter. Despite revenues and operating profit remaining largely flat, net income for the 2nd quarter increased 2 42 percent to $2,000,000 or $0.11 per share versus $598,000 or $0.03 per share in the same period last year. For the 1st 6 months, net income saw a 188% increase to $3,300,000 or $0.18 per share versus $1,200,000 for the 1st 6 months of last year.

Speaker 1

This increase was driven partly by the improved performance during lease ups of our most recent multifamily development in DC, The Verge, which drove down our equity and loss in joint ventures by $891,000 compared to the Q2 last year and $1,600,000 compared to the 1st 6 months of last year. The primary driver for the improvement in net income was the performance of our most recent lending venture, Aberdeen Overlook. In the Q2, Aberdeen Overlook generated $1,500,000 in investment income compared to $560,000 in the Q2 last year from a previous lending venture project. Year to date, the project has generated $2,100,000 in investment income compared to $614,000 from a previous project through the 1st 6 months of last year. By providing a developer we know and trust with the money required to develop land for national homebuilders that are desperate for lots, these projects while not part of our core business strategy in the long term have generated returns for our cash, well in excess of treasuries without tapping into the time and energy of our management and employees.

Speaker 1

Over the last 3 years, we have grown pro rata NOI at a compound annual growth rate of 21.6%. We maintain that pace in the Q2 and the 1st 6 months of this year. Pro rad NOI for the 2nd quarter was $9,200,000 a 22% improvement over the Q2 of 2023. For the 1st 6 months, pro rata NOI was $17,800,000 a 22% increase over the same period last year. Primary drivers of this growth were the multifamily segment and the industrial and commercial segment as our mining royalty NOI is more or less flat compared to last year.

Speaker 1

Multifamily pro rata NOI increased by 84% this quarter compared to 2023 88% for the 1st 6 months compared to the same period last year. This growth is a result of the transfer to the multifamily segment of our 408 Jackson asset in Greenville and Bryant Street in DC from the development segment upon the stabilization of these assets when they reached 90% occupancy for 90 days. Same store NOI for Dock 79 and the Marin and Riverside was basically flat in the 1st 6 months compared to last year. NOI for Bryant Street and 408 Jackson compared to the Q2 last year when these projects, part of the development segment, increased by 37.6 percent and 292% respectively. For the 1st 6 months, these projects increased 27.9% 867% compared to the same period last year.

Speaker 1

These increases in NOI were the drivers from the multifamily segment for the improvement we saw in overall pro rata NOI. The transfer of the BIRDS to this segment upon stabilization in the Q3 of this year should only improve this segment's performance on an NOI basis. Industrial and commercial NOI increased by 41% in the 2nd quarter to $1,190,000 and by 44% in the 1st 6 months to $2,300,000 compared to the same periods last year. These increases are the result of having burned through the rent abatement concession periods at 2 buildings at our Hollinger Business Park. These assets are now generating real cash as opposed to the unrealized revenues that we recognize in the early phases of occupancy from straight lining rents for GAAP purposes.

Speaker 1

Yesterday, we posted to our website a brief slideshow of financial highlights for the Q2. For those who have not seen it, we are now publishing for illustrative purposes an estimated value of our real estate assets, net of debt and liabilities. Our analysis yielded a per share value in the range of 31 $0.90 to $37.87 We provide this information to reflect how management views its various assets for the purposes of informing management decisions and do not necessarily reflect price would be obtained upon sale of the asset or the associated costs or tax liability. I will now turn the call over to our Chief Operating Officer, David de Villia III for his report. David?

Speaker 2

Thank you, John, and good day to those on the call. Allow me to provide an operational perspective on the Q2 results of the company. Starting with our Commercial and Industrial segment, this segment consists of 9 buildings totaling nearly 550,000 square feet, which are mainly warehouses in the State of Maryland. At quarter end, 95.6 percent of the buildings were occupied. Total revenues and NOI for the quarter totaled 1,400,000 dollars $1,200,000 respectively, an increase of 2% 41% over the same period last year.

Speaker 2

The large variance between revenue growth and NOI growth is due to several tenants beginning their lease term with rent abatement periods. GAAP requires the entire lease term to be straight lined when calculating revenues. As a result, GAAP revenues are higher during the first half of the lease term than what is being received and the variance is more pronounced during a rent abatement period. As stated above, NOI is a non GAAP financial measure. NOI calculations back out the straight lining effects.

Speaker 2

As a result, 2023 NOI reflected the reduced rental payments and 2024 NOI reflected the full lease payments. This is why we saw a 41% NOI growth compared to a 2% revenue growth this quarter over the same period last year. Moving on to the results of our Mining and Royalty Business segment, this division consists of 16 minuteing locations, predominantly located in Florida and Georgia with 1 mine in Virginia. Total revenues and NOI for the quarter totaled $3,200,000 $3,000,000 respectively, a decrease of 1% and 3% over the same period last year. These decreases were primarily the result of a $277,000 reduction in royalties to resolve a 2023 overpayment by our tenant at our Manassas quarry, which overestimated our portion of production tons, which is shared with other property owners.

Speaker 2

The outstanding balance of this overpayment credit is $53,000 which we expect will be exhausted in the 1st month of Q3 of this year. As to our multifamily segment, this business segment consists of 1483 apartments and over 117 located in Washington D. C. And South Carolina. At quarter end, the apartments were 92.6% occupied and the retail space was 75.6 percent occupied.

Speaker 2

Total revenues and NOI for the quarter were $11,900,000 $7,000,000 respectively. FRP's share of revenues and NOI for the quarter totaled $6,900,000 $4,000,000 respectively. This is a significant increase over prior quarters due to our Bryant Street and 408 Jackson joint ventures being included in this segment as of January 1, 2024 and adding $3,500,000 of revenue and $1,900,000 of NOI this quarter. As a same store comparison, which only includes DOC, Marin and Riverside, FRP's share of revenues and NOI for the quarter totaled $3,400,000 $2,100,000 respectively, a decrease of 0.9% and 3.7% over the same period last year. This is primarily the result of the average vacancy and average expenses increasing by 1% and less rental overage payments from our retail tenants this quarter as compared to 2023.

Speaker 2

An abundance of supply in the DC market will continue to put pressure on vacancies and revenue growth in the foreseeable future. Rising real estate taxes and insurance premiums may also remain a headwind for NOI growth, which increased over 5.25% from a same store perspective this quarter compared to 2023. Management continues to be diligent in tenant retention and rental rates in the market. We are pleased to have renewal success rates over 60% with all renewal rental rates showing positive growth and a majority of our trade out rental rates being positive as well. Now on to the Development segment.

Speaker 2

This segment is where we acquire, entitle, develop and create new income producing assets that are transferred into our commercial industrial and multifamily business segments. Upon reaching certain completion and occupancy benchmarks, the segment uses capital to entitle and develop lands and fund our vertical construction endeavors with the goal of turning our non NOI producing assets into NOI producing assets. The segment also lends funds to prepare and develop lands for sale to national homebuilders in exchange for principal and interest payments and profit sharing. In terms of our commercial industrial development pipeline, our 258,000 Square Foot State of the Art Class A Warehouse Building in the Perryman Industrial Sector of Harford County, Maryland is nearing completion and is expected to be delivered on or before November 1 this year. Upon shell completion, this asset will be moved to the industrial commercial segment and will impact NOI negatively until it is occupied and stabilized with the operating expenses being passed through to the tenants.

Speaker 2

Our 200,000 Square Foot Class 8 Warehouse Building in Lakeland, Florida located along the I-four Corridor between Tampa and Orlando is where FRP intends to be a 90% partner with BBX Logistics and as well into the entitlement stage, permits for the development should be in hand on or before Q1 2025. FRP and BBX also closed on land that will support 2 Class A warehouse buildings in Broward County, Florida totaling over 182,000 square feet. The site is minutes from Port Everglades and the Fort Lauderdale Hollywood International Airport with frontage on I-five-ninety five accessing the Florida Turnpike and I-ninety five. The entitlement process is now underway and permits may be in hand by Q1 2025 as well. In Cecil County, Maryland along the I-ninety five corridor, we are in the middle of pre development activities on 170 acres of industrial land that will support a 900,000 square foot distribution center.

Speaker 2

We look to secure permits in Q2 of 2025. Finally, we are in the initial permitting stage for a 55 acre tract in Hartford County, Maryland. The intent is to obtain permit for 4 buildings totaling some 635,000 square feet of industrial product, existing land leases for the storage of trailers on-site helped to offset our carrying and entitlement costs until we are ready to build, which could be as early as 2025 pending favorable market conditions. Completion of these industrial commercial development projects will add over 2,100,000 square feet of additional industrial commercial product to our industrial platform, growing the business segment from 550,000 square feet to over 2,700,000 square feet. Over the next 3 to 5 years, we will focus on the permitting, construction and lease up of the Perryman, Lakeland, Fort Lauderdale and 212,000 Square Foot Building in Hartford County.

Speaker 2

These four buildings represent over 850,000 Square Feet of new industrial commercial product with a total project cost estimated at $142,000,000 With 6% to 7% return on cost expectations upon stabilization, these projects represent some $8,500,000 to $10,000,000 in potential NOI. As to our multifamily development pipeline, The Verge, our 344 residential unit project located in the district was 90.7 percent occupied at quarter end. Total revenues and NOI for the quarter were 2,000,000 dollars $1,160,000 respectively. FRP's share of revenues and NOI for the quarter totaled $1,300,000 $710,000 respectively. While our development focus is currently weighted toward our industrial assets, we continue to watch market conditions and their impact on 4 multifamily projects in our Development segment pipeline located in Washington DC, Greenville, South Carolina and Estero, Florida.

Speaker 2

These projects represent over 1200 apartments and 58,000 square feet of retail. Turning to our principal capital source strategy or lending ventures, I have the following updates to our 2 current projects. Amber Ridge in Prince George's County, Maryland, consisting of 187 lots is completely sold out. Filed development activities to get off bonds are ongoing and upon completion of this project, interest income and profits are expected to total $3,900,000 a 21% profit on funds drawn. Our second lending venture, Presbyterian Homes or Aberdeen Overlook, consists of 3 44 Lots located on 110 Acres in Aberdeen, Maryland.

Speaker 2

We have committed $31,100,000 in funding, $24,600,000 was drawn as of quarter end and over $12,700,000 in preferred interest and principal payments have been received to date. A national homebuilder is under contract to purchase all the finished building lots by Q4 2027. 78 of the 344 lots were closed upon and we expect to generate at least a 20% internal rate of return and funds drawn upon completion of the project. In closing, we are pleased with the entitlement progress being made on several industrial land assets, particularly on our Lakeland and Fort Lauderdale projects in Florida. The renewal and trade out rent growth within our multifamily assets is encouraging and a key indicator of where we are on the supply and demand curve.

Speaker 2

Interest rates and construction costs have appeared to stabilize, interest rate spreads have eased and although new supply of apartments in the DC Waterfront submarket remains a headwind for rent growth, absorption and demand for apartments and warehouse space remain a bright spot. As we look ahead, our focus remains on the margin between revenue and expense growth at our existing assets, having a fundamentally sound capital stack with sensible construction financing terms and hyper focused development, leasing and property management teams. With several permits expected in 2025, our efforts and entitlements to vertical due diligence. Through our cautious, patient and thorough vertical due diligence process, we will make informed and calculated decisions to wait or pull the trigger on vertical construction. Thank you.

Speaker 2

And I'll now turn the call back to John.

Speaker 1

Thank you, David. As we have said on several occasions and you just heard in David's report, we are maintaining our strategy of focusing on industrial development and expanding our footprint on a square footage and regional basis. In July, we closed on the purchase of the land for our industrial joint venture in Broward County, Florida, for a total purchase price of $24,500,000 We also closed on the land for our other industrial JV in Lakeland, Florida last quarter for a total purchase price of $2,800,000 We expect to start construction on both projects on or before March of 2025. We are nearly finished with shell construction of our 258,000 square foot industrial asset in Perryman, Maryland, with completion expected in the Q4. These three projects totaling 649,000 square feet of new Class A industrial space represent an estimated $118,000,000 in total CapEx and $72,000,000 of equity capital, of which we account for 66 $800,000 We've underwritten these assets at a 6% to 7% NOI yield on costs, but expect to

Operator

We'll take our first question from Steven Farrell with Oppenheimer Close. Please go ahead.

Speaker 3

Good afternoon.

Speaker 1

Hi, Steven.

Speaker 3

Just a quick question with the 2 Florida developments, the expected CapEx $57,000,000 28,000,000 dollars Does that include the purchase of land?

Speaker 1

Yes.

Speaker 3

Yes. Is there any particular reason why there's such a big discrepancy in the cost per square foot between the 2?

Speaker 2

Yes. In Lakeland, Florida, rental rates, let's say, range from $750,000,000 to $950,000,000 In the Broward County Fort Lauderdale site, rental rates range from $18.50 and are coming up against $20 a square foot triple net. And that well heeled Broward County, Florida market land is just more expensive and rental rates are a heck of a lot higher. So that's the driving difference.

Speaker 3

And even if I look at excluding the land though, it looks like the construction cost to develop is about $180 per square foot versus $125,000,000 Is there any construction related costs that are different?

Speaker 2

A couple. The Lakeland building is a single building. It's a single 200,000 square foot building. There's just efficiencies when you build a single building versus 2, which is the we're going to build 290,000 Square Foot Buildings in the Fort Lauderdale site. In Fort Lauderdale, there's some interesting site development costs.

Speaker 2

There are nuances to all these things. They may look the same, but there's always nuances that can move the cost around a little bit, particularly when it comes to the land development side of them.

Speaker 3

Okay. Thank you. And for the Chelsea project, is there a lease in place for when construction is finished?

Speaker 2

No, there is not.

Speaker 3

And do you anticipate having any issue filling that space?

Speaker 2

No, not at this time. I mean the market, there's still a good demand. We feel we have a good product. Typically, it's rare for us to get buildings pre leased before we really deliver them. This building really gets kind of put on the market Q4 of this year.

Speaker 2

And once we put it on the market and people can drive to it, paving is in and they can walk in it, that's typically when we start seeing a lot of activity. We've had some inquiries, but no paper traded at this time.

Speaker 3

Okay. That's good. And just a quick question on Dock 79 and Marin in the new chart on the 2nd page of your release, it looks like renewal rates at the dock were kind of outpacing Marin, which the percentage increase, which has not happened recently. Is there any color you can provide on that?

Speaker 2

I think that DOC for a while may have had some effects of Barron and now things are evening out and we're able to push rents at Dock more these days. Dock also has just lower rental rates to begin with More attractive. We'll have to see if it continues. I'd love it if DOC starts seeing effective rents the same as Marin's. I don't know if we'll get there, but that's kind of where we are right now.

Speaker 1

Yes, I think Steve, I think they've pretty consistently pushed high rental growth at Marin. And last year at DOC, we were trying to maintain occupancy and you didn't see the kind of rent growth on renewals that you had previously. And I think this is probably dock just like catch up.

Speaker 3

That's good. That's all I have. Thank you very much.

Operator

We'll go next to Bill Chin with Rhizome Partners. Please go ahead. Hello, Mr. Chen, your line is open. Please go ahead.

Speaker 1

Good afternoon, guys. Hi, Bill. Hey.

Speaker 4

Good to chat with you guys. I have a few questions and may jump around a little bit. Just a first quick question. On the pro rata NOI for DOC79, Marin, the effects of that JV transaction, that's beyond, right? There is no these are like for like numbers?

Speaker 2

Correct.

Speaker 4

Okay. Got you. I guess like the drop in the NOI is due to slightly lower occupancy and maybe expenses grown faster, is that the read?

Speaker 2

It is for Q2 alone. Bill, year to date, they're even. Q2 is really the Q1 where we saw erosion.

Speaker 4

Okay. When you say erosion, are you talking occupancy or are you talking NOI, like just one of those which you mentioned at all now?

Speaker 2

Both. So Q2 of 2024 compared to Q2 2023, we saw around a 3.5% decrease in NOI. And from an occupancy standpoint, the average occupancy in Q2 twenty twenty four was about a 1% lower compared to Q2023. Got you.

Speaker 4

Okay. The well, I mean, the good thing is the renewal rent growth is kind of better than what we're seeing in the Sunbelt. Generally, what we've been seeing is healthier rent trends in the DC Metro area. I see that that's just the renewal. Is it do you have do you know like what the new lease, I don't think you guys ever published that in the past, like what we see in some of the bigger REITs is the renewals are usually positive and then the new leases tend to be slightly negative.

Speaker 4

Like is that what you're seeing as well?

Speaker 2

So at DOC and Riverside, we had positive trade outs. Okay. And at Marin, it was the trade out was negative. It was just under 2%, about 1.8% in the negative.

Speaker 4

Got you. That's helpful. Jumping over to the warehouses, can we assume Chelsea's going to get about $9 a square foot. Is that a reasonable assumption?

Speaker 2

A couple of things. I would say that we are out in the market at $10 for Chelsea. Where we land is going to be it's going to be equation of how many improvements they want and plan the term and what type of annual escalations we get. So, hopefully that average rate across that term is even better. But we're kind of looking at that year 1 rate, we're out in the market right now at $10

Speaker 4

$10 Okay. That's helpful. And what's the market vacancy in that submarket right now?

Speaker 2

For our product type, I'd say it's don't hold me to this exact number, but I think we're probably in at 5%.

Speaker 4

5%. Okay. So I mean, it's not 2% like before, but still very healthy. I think in one of the earlier filings you have mentioned, I don't know if it's an earnings call or filings, you have mentioned that you learned a lot from the company learned a lot from the lending venture. And you're exploring ways to potentially apply that kind of to the 20 acres you have in Florida and Georgia, like if my memory serves me correctly, that's what you guys said or might have disclosed that?

Speaker 4

And any update on any potential sites or targets where we may we historically have thought of these parcels as multi decade assets when the land will be available to be monetized, right? Like any update on any near term monetization or just and by near term, I mean, like within 5 years, right, of turning them into potentially homebuilding lots, etcetera, like any commentary on that would be helpful?

Speaker 1

Yes. Go ahead, David.

Speaker 2

Bill, I was going to say at one of our quarries in Fort Myers, Lee County purchased land from us to put a major road through it called Aliko Road, to cause probably some of the mining operations to stop there, because you can't exactly bring large aggregate vehicles across a major highway. And when stuff like that comes up, we look at it to see if there's a second life, to see if we can do something with it. Near term, I don't think that's something near term. A lot has to happen for a major road to be built and water, sewer and zoning. But that's the type of stuff that we're just we're keeping an eye on.

Speaker 2

And if there's a way to squeeze some dollars at a property that otherwise is going to sit vacant, that's what we're going to do.

Speaker 1

Yes, Bill, just to piggyback on what David said, Vulcan is going to get every pit of limestone out of Fort Myers that there is to get prior to Aliko Road being built. It's just too valuable to them. And so they are hustling to get that to get it mine so that they can get to the other side of the road and continue mining in like the second phase of that. But those are I wouldn't say they're top of mind, but we certainly revisit them often and continue to talk internally about what development will look like there. But particularly that site, you're going to need to bring in some utilities with that road to make it happen.

Speaker 1

And until that road is built, it's not going to be possible to develop it. We are going to make sure that we're ready to develop that stuff as soon as it's capable of being developed.

Speaker 4

I remember there was a time when the bridge, the Frigiduckler bridge needed to be built in the 1 demo and I thought, man, that's going to take at least 15, 20 years, but that happened with like in a much shorter timeframe than I thought. But is Aliko Road, is that building Aliko Road, is a 3 year, is that a 5 year, is that a 10 year, like help me understand like what kind of timeframe we'll talk about?

Speaker 1

Yes, probably at 2027, 2028, something like that.

Speaker 4

Okay. All right. Because in New York, when we say we're going to do something, we've been like 30 years later. So I just want to make sure that we're on the same pace there. Okay, that's helpful.

Speaker 1

It's a priority for the county. The sub road is going to open up a lot for them. And it's I would say it's almost it's probably the county's top priority.

Speaker 4

Got you. That's helpful. Is am I thinking too fast here because I've driven past late Louisa years ago. This is like 8 years ago. And if I remember correctly, that's like right by Disney where all these subdivisions are going up.

Speaker 4

Like is there any potential of that being sold to some home developer in the near term meaning like 5, 10 years for those lots?

Speaker 1

No. I think first of all CEMEX is going to have to start mining, which hasn't happened yet. And I think they'd have to mine a pretty meaningful portion of the property just to get the kind of scale you'd want to develop it, which we're going to be making good money while they're doing that. And God, that place is going to be the proverbial hole in the donut even when we can go about developing the first phase of it. And it is within kind of this overall concept plan in Lake County called Wellness Way.

Speaker 1

Everybody knows development is coming there. It's just going to be a little bit before we do, but I think that you however long you have to wait, the demand for land down there is well exceeding inflation. So I don't think we're losing any money by sitting tight. We're going to be generating income as Senex finds it.

Speaker 4

Just be patient. Well, I mean, it's not a bad thing to let everything else appreciate and get built out, right? Like, they're all in the donuts. So that's is there a reason why that Cmax, I mean, it's unbelievable because it was 8 years ago when I drove across actually maybe 9 now, but SEAMEX still hasn't started. Like what's any timeline on when they may start mining that?

Speaker 1

I don't know. They know they own it or at least have a lease on it. And I think kind of the biggest hurdle to them getting in there and mining was they were required to extend some county roads at their expense. That was part of getting permits. And they do have other assets in that area.

Speaker 1

And so maybe the it's not as if they were immediately running out of reserves and they could supply their ready mix operations with what they already had. They will mine it eventually. I know that and we are happy to collect the minimum royalty payments in the meantime. That's another product that the price is exceeding the inflation. So again, I don't think we're losing any money by them not mining it.

Speaker 4

The site in Jacksonville, I know I'm jumping around a little bit, but I just have all these thoughts in my head. The site in Jacksonville, that's now a vacant site, could that potentially be a warehouse?

Speaker 1

I don't know about a warehouse, but I think it could be it could definitely be like equipment storage.

Speaker 4

Okay.

Speaker 1

Yes, it's nothing we have to worry about like immediately, but I think there's 2 or 3 years left on that lease as we kind of get to a year or 6 months out. I think that's where we'll start exploring kind of its next phase. But it will not sit there vacant.

Speaker 4

Okay, got you. And like how big of the how many square foot could be built on that site?

Speaker 1

I don't know about its viability as a future industrial asset. So it would I think equipment storage, at least for the time being, is its best use.

Speaker 4

Got you. And I don't think I have more questions, but I just kind of want to leave the management team with a thought. I've been tracking the company, I've been a shareholder for 9 years since 2015, 2014, 2015, so maybe 10 years now. And I track the cash flow, track the NOI. And I think that the management team and the Board should start thinking about initiating a dividend.

Speaker 4

I know there's a lot of projects in the pipeline. I know you guys do job putting that capital to work. But I think that I also know that because I've been a shareholder for 9, 10 years and I know your intentions, but that's not necessarily the case for the casual shareholder or prospective shareholder. And I think there I know you guys went out and hired really good IR team. I know that you guys are trying to increase visibility.

Speaker 4

So in today's environment, when you could get 4% in the 2 year treasury, 5% in the 6 month treasury and then the Mid America trade is paying almost a 4% yield. I think that there is competitively the company could be helped by initiating a 1% dividend because most of the capital could still be allocated and that would be maybe just $5,000,000 a year. I did some math before jumping on the call. I think we're going to be running at over $40,000,000 of NOI once Chelsea gets leased, once The Verge gets consolidated. And a lot of these assets don't have debt on there.

Speaker 4

Debt service is very minimal. And there's still a lot of cash on the balance sheet. So I think that initiating 1% dividend will be good. It will bring, I think more important than anything else is it signals to the casual shareholder and the prospective shareholder that there is an intention to return some of the capital to shareholders eventually. And I think if you start at 1%, you could have that dividend easily grow 10% a year or even 15% a year.

Speaker 4

And it will still be very, very affordable because the NOI has grown so quickly and you're starting off at a very low base at a very low amount. So that's something to think about sometimes on these earnings call. I'd like to use the call to kind of express some of the my thoughts and a lot of it comes from talking to other shareholders and other prospective shareholders who kind of have bought this up and I think it will also help with the trading liquidity, which is kind of a perpetual issue that the company deal with. So it's not a question, it's more of sharing some of the feedbacks that I have when I talk to other shareholders.

Speaker 1

No, Bill, that's really good feedback. And I'd be lying if I said that it's not something that we've an idea that we've at least bounced around. So I appreciate you sharing that.

Speaker 4

Well, thank you. And I'm glad that it's been thought about internally, and I have no further questions.

Operator

It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

Speaker 1

Thank you all and we of course appreciate your continued investment and interest in the company.

Speaker 2

Thanks. Bye.

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Key Takeaways

  • Net income rose 242% in Q2 to $2.0 million ($0.11/share) and 188% YTD to $3.3 million ($0.18/share), driven by improved lease-ups at The Verge and reduced joint venture losses.
  • Pro rata net operating income grew 22% year-over-year to $9.2 million in Q2 and $17.8 million YTD, led by an 84% boost in multifamily NOI and 41% growth in industrial & commercial NOI.
  • The lending venture Aberdeen Overlook generated $1.5 million of investment income in Q2 (versus $560 thousand prior year), delivering returns well above treasuries without tapping core management resources.
  • FRP’s industrial development pipeline exceeds 2.1 million sq ft (Perryman, Lakeland, Broward, Cecil County), aiming for 6–7% return on cost and $8.5–10 million of potential stabilized NOI.
  • Multifamily stabilization transfers (408 Jackson, Bryant Street) and 344-unit The Verge (90.7% occupied) bolster segment results, although DC market supply and rising taxes/insurance present ongoing headwinds.
A.I. generated. May contain errors.
Earnings Conference Call
FRP Q2 2024
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