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Jun 30, 2023
FRP Q2 2023 Earnings Report
Announced results for the second quarter ended June 30, 2023.
Key Takeaways
FRP Holdings reported net income of $598,000, or $0.06 per share, for the second quarter of 2023, compared to $657,000, or $0.07 per share, for the same period last year. The company experienced revenue growth in its Asset Management and Mining Royalty Lands segments, while the Stabilized Joint Venture segment saw a decrease in pro-rata net operating income due to the sale of a 20% TIC interest.
Net income for the second quarter of 2023 was $598,000 or $.06 per share.
Asset Management segment revenues increased by 55.7% due to full occupancy at 1841 and 1865 62nd Street and the addition of 1941 62nd Street.
Mining Royalty Lands segment revenues increased due to increases in revenue at nearly every active location.
Pro-rata net operating income in the Stabilized Joint Venture segment decreased by 10.3% due to the sale of a 20% TIC interest.
FRP
FRP
Forward Guidance
FRP Holdings faces challenges from inflation and rising interest rates, which impact development margins. The company benefits from increased rents and royalties but is cautious about multi-family development due to the need for construction loans. FRP plans to delay vertical construction in its partnership with SIC and MRP until lending markets improve.
Positive Outlook
- Can use cash on hand to finance warehouse construction on an all equity basis.
- Can develop in-demand industrial product while the interest rates on construction loans keep most development on the sidelines.
- Royalty revenue for this quarter was up 13% over the same period last year.
- Riverside in Greenville has maintained strong occupancy (95.42% this quarter) post stabilization.
- Occupancy and overall square-footage have increased since the second quarter of 2022, leading to a 39.2% increase in NOI for the first six months compared to the same period last year.
Challenges Ahead
- Inflation and the upward pressure on interest rates remain an obstacle for any developer.
- Compression of future margins from hard costs and financing is a real problem for development.
- In the instance of multi-family development, where a construction loan is an absolute necessity, we will in all likelihood sit tight for the time being.
- Pro-rata NOI is down for the segment for both the quarter and the first six months, which is to be expected after selling 20% of our share of Dock 79 and The Maren to SIC.
- The effort to get Dock 79 back to where it should be is largely responsible for the flattening in rental increases (3.20% in the second quarter vs 4.52% in the first quarter) as well as the 3% loss on trade-outs.