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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)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2022

 

or

 

[_]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

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)

904-396-5733

(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 every Interactive Data File required to be submitted 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 such files).    Yes  [x]    No  [_]

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

Large accelerated filer [_]   Accelerated  filer [_]
Non-accelerated filer [x]   Smaller reporting company [x]
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 May 10, 2022  
  Common Stock, $.10 par value per share       9,431,994 shares  
             
1 
 

 

 

 

 

FRP HOLDINGS, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2022

 

 

 

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     9
           
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations     20
           
Item 3.   Quantitative and Qualitative Disclosures about Market Risks     32
           
Item 4.   Controls and Procedures     32
           
    Part II.  Other Information      
           

 

Item 1A.

  Risk Factors     32
           
Item 2.   Purchase of Equity Securities by the Issuer     32
           
Item 6.   Exhibits     33
           
Signatures         34
           
Exhibit 31   Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002     36
           
Exhibit 32   Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     39

 

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,” “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-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 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)

 

    March 31, 2022   December 31, 2021
Assets:        
Real estate investments at cost:                
Land   $ 123,400       123,397  
Buildings and improvements     266,642       265,278  
Projects under construction     10,821       8,668  
     Total investments in properties     400,863       397,343  
Less accumulated depreciation and depletion     49,240       46,678  
     Net investments in properties     351,623       350,665  
                 
Real estate held for investment, at cost     9,829       9,722  
Investments in joint ventures     143,005       145,443  
     Net real estate investments     504,457       505,830  
                 
Cash and cash equivalents     164,523       161,521  
Cash held in escrow     548       752  
Accounts receivable, net     1,105       793  
Investments available for sale at fair value              4,317  
Federal and state income taxes receivable     767       1,103  
Unrealized rents     720       620  
Deferred costs     2,212       2,726  
Other assets     535       528  
Total assets   $ 674,867       678,190  
                 
Liabilities:                
Secured notes payable   $ 178,446       178,409  
Accounts payable and accrued liabilities     3,810       6,137  
Other liabilities     1,886       1,886  
Deferred revenue     324       369  
Deferred income taxes     64,047       64,047  
Deferred compensation     1,305       1,302  
Tenant security deposits     819       790  
    Total liabilities     250,637       252,940  
                 
Commitments and contingencies                 
                 
Equity:                

Common stock, $.10 par value

25,000,000 shares authorized,

9,431,994 and 9,411,028 shares issued

and outstanding, respectively

    943       941  
Capital in excess of par value     57,812       57,617  
Retained earnings     338,424       337,752  
Accumulated other comprehensive income (loss), net     (737 )     113  
     Total shareholders’ equity     396,442       396,423  
Noncontrolling interest MRP     27,788       28,827  
     Total equity     424,230       425,250  
Total liabilities and equity   $ 674,867       678,190  

 

 

See accompanying notes.

4 
 

 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share amounts)

(Unaudited)

 

                 
    THREE MONTHS ENDED
    MARCH 31,
    2022   2021
Revenues:        
     Lease revenue   $ 6,282       3,538  
     Mining lands lease revenue     2,425       2,315  
 Total revenues     8,707       5,853  
                 
Cost of operations:                
     Depreciation, depletion and amortization     2,898       1,443  
     Operating expenses     1,808       841  
     Property taxes     1,028       778  
     Management company indirect     774       570  
     Corporate expenses     835       779  
Total cost of operations     7,343       4,411  
                 
Total operating profit     1,364       1,442  
                 
Net investment income     898       1,375  
Interest expense     (738 )     (925 )
Equity in loss of joint ventures     (1,604 )     (1,635 )
Gain on remeasurement of investment in real estate partnership              51,139  
Gain on sale of real estate     733           
                 
Income before income taxes     653       51,396  
Provision for income taxes     249       10,521  
                 
Net income     404       40,875  
Gain (loss) attributable to noncontrolling interest     (268 )     12,502  
Net income attributable to the Company   $ 672       28,373  
                 
Earnings per common share:                
 Net income attributable to the Company-                
    Basic   $ 0.07       3.04  
    Diluted   $ 0.07       3.03  
                 
Number of shares (in thousands) used in computing:                
    -basic earnings per common share     9,366       9,341  
    -diluted earnings per common share     9,417       9,376  

 

 

 

See accompanying notes.

5 
 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands except per share amounts)

(Unaudited)

 

 

                 
    THREE MONTHS ENDED
    MARCH 31,
    2022   2021
Net income   $ 404       40,875  
Other comprehensive income net of tax:                
  Unrealized loss on investments available for sale, net of income tax     effect of $(315) and $(90)     (850     (242
Comprehensive income (loss)   $ (446     40,633  
                 
Less comp. income (loss) attributable to noncontrolling interest     (268 )     12,502  
                 
Comprehensive income (loss) attributable to the Company   $ (178     28,131  

 

 

 

 

 

 

See accompanying notes

 

 

6 
 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(In thousands) (Unaudited)

 

      2022   2021
Cash flows from operating activities:                  
 Net income     $ 404       40,875  
 Adjustments to reconcile net income to net cash provided by continuing operating      activities:                  
 Depreciation, depletion and amortization       2,961       1,502  
 Deferred income taxes                10,314  
 Equity in loss of joint ventures       1,604       1,635  
 Gain on remeasurement of invest in real estate partnership                (51,139 )
 Gain on sale of equipment and property       (733 )         
 Stock-based compensation       197       202  
 Net changes in operating assets and liabilities:                  
  Accounts receivable       (312 )     99  
  Deferred costs and other assets       (803 )     243  
  Accounts payable and accrued liabilities       (2,372 )     (613 )
  Income taxes payable and receivable       336       112  
  Other long-term liabilities       32       190  
 Net cash provided by operating activities       1,314       3,420  
                   
Cash flows from investing activities:                  
 Investments in properties       (3,636 )     (3,387 )
 Investments in joint ventures       (2,394 )     (1,918 )
 Return of capital from investments in joint ventures       3,227       16,426  
 Proceeds from sales of investments available for sale       4,317       23,701  
 Cash at consolidation of real estate partnership                3,704  
 Proceeds from the sale of assets       741           
 Cash held in escrow       204       (2 )
Net cash provided by investing activities       2,459       38,524  
                   
Cash flows from financing activities:                  
 Proceeds from long-term debt                92,070  
 Repayment of long-term debt                (90,000 )
 Debt issue costs                (679 )
 Distribution to noncontrolling interest       (771 )     (170 )
 Repurchase of company stock                (264 )
 Exercise of employee stock options                33  
Net cash (used in) provided by financing activities       (771     990  
                   
Net increase in cash and cash equivalents       3,002       42,934  
Cash and cash equivalents at beginning of year       161,521       73,909  
Cash and cash equivalents at end of the period     $ 164,523       116,843  
                   
Supplemental disclosure of cash flow information:                  

Cash paid (received) during the period for:

                 

  Interest

      736       925  
  Income taxes       (401 )     6  
                   
                   

 

 

 

See accompanying notes.

7 
 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(In thousands, except share amounts) (Unaudited)

 

                               
                  Accumulated            
                  Other Comp-   Total        
          Capital in       rehensive   Share   Non-    
  Common Stock   Excess of   Retained   Income   holders’   Controlling   Total
  Shares   Amount   Par Value   Earnings   (loss), net   Equity   Interest   Equity
Balance at January 1, 2022   9,411,028     $ 941     $ 57,617     $ 337,752     $ 113     $ 396,423     $ 28,827     $ 425,250  
                                                               
 Stock option grant compensation   —                  17                         17                17  
 Restricted stock compensation   —                  130                         130                130  
 Shares granted to Employees   865                50                         50                50  
 Restricted stock award   21,464       2       (2 )                                             
 Forfeiture of restricted stock award   (1,363 )                                                               
 Net income   —                           672                672       (268     404  
 Distributions to partners   —                                                      (771     (771
 Unrealized loss on investment, net   —                                    (850     (850              (850
Balance at March 31, 2022   9,431,994     $ 943     $ 57,812     $ 338,424     $ (737   $ 396,442     $ 27,788     $ 424,230  
                                                               
Balance at January 1, 2021   9,363,717     $ 936     $ 56,279     $ 309,764     $ 675     $ 367,654     $ 14,999     $ 382,653  
                                                               
 Stock option grant compensation   —                  17                         17                17  
 Restricted stock compensation   —                  135                         135                135  
 Shares granted to Employees   1,098                50                         50                50  
 Restricted stock award   27,778       3       (3 )                                             
 Exercise of stock options   1,234                33                         33                33  
 Shares purchased and cancelled   (6,004 )              (37 )     (227 )              (264 )              (264 )
 Contributions from partners   —                                                      4,548       4,548  
 Net income   —                           28,373                28,373       12,502       40,875  
 Distributions to partners   —                                                      (170     (170
 Unrealized loss on investment, net   —                                    (242     (242              (242
Balance at March 31, 2021   9,387,823     $ 939     $ 56,474     $ 337,910     $ 433     $ 395,756     $ 31,879     $ 427,635  
                                                               
                                                               
8 
 

 

 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

(1) Description of Business and Basis of Presentation.

 

FRP Holdings, Inc. is a holding company engaged in various real estate 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 residential apartment 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”), Riverfront Investment Partners I, 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 Investment Partners II, 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 Riverfront 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.

 

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 three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021.

 

(2) Recently Issued Accounting Standards.

 

None.

 

(3) Business Segments.

 

The Company is reporting its financial performance based on four 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 two commercial properties and one recent industrial acquisition, Cranberry Run Business Park, which we purchased in 2019. In July 2020 we sold our property located at 1801 62nd Street in Hollander Business Park, which had joined Asset Management April 1, 2019. During the fourth quarter of 2021 we completed construction on two buildings in our Hollander Business Park.

 

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.

 

9 
 

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. Two of our joint ventures in the segment, Riverfront Investment Partners I, LLC (“Dock 79”) and 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
      March 31,
      2022   2021
  Revenues:        
Revenues  Asset management   $ 839       712  
Revenues  Mining royalty lands     2,425       2,315  
Revenues  Development     383       317  
Revenues  Stabilized Joint Venture     5,060       2,509  
Revenues       8,707       5,853  
                   
  Operating profit (loss):                
   Before corporate expenses:                
Operating profit before corporate expenses    Asset management   $ 292       231  
Operating profit before corporate expenses    Mining royalty lands     2,183       2,094  
Operating profit before corporate expenses    Development     (718 )     (386 )
Operating profit before corporate expenses    Stabilized Joint Venture     442       282  
Operating profit before corporate expenses     Operating profit before corporate expenses     2,199       2,221  
   Corporate expenses:                
Corporate expenses   Allocated to asset management     (144 )     (214 )
Corporate expenses   Allocated to mining royalty lands     (94 )     (81 )
Corporate expenses   Allocated to development     (521 )     (419 )
Corporate expenses   Allocated to Stabilized Joint Venture     (76 )     (65 )
Corporate expenses     Total corporate expenses     (835 )     (779 )
Operating profit      $ 1,364       1,442  
                   
 Interest expense Interest expense   $ 738       925  
                   
  Depreciation, depletion and amortization:                
Depreciation, depletion and amortization  Asset management   $ 234       137  
Depreciation, depletion and amortization  Mining royalty lands     55       65  
Depreciation, depletion and amortization  Development     45       53  
Depreciation, depletion and amortization  Stabilized Joint Venture     2,564       1,188  
10 
 

 

Depreciation, depletion and amortization     $ 2,898       1,443  
  Capital expenditures:                
Capital expenditures  Asset management   $ 450       79  
Capital expenditures  Mining royalty lands     91           
Capital expenditures  Development     2,953       3,299  
Capital expenditures  Stabilized Joint Venture     142       9  
Capital expenditures     $ 3,636       3,387  

 

 

        March 31,       December 31,    
  Identifiable net assets   2022       2021    
                   

Assets

Asset management $ 24,339       23,897    

Assets

Mining royalty lands   37,840       37,627    

Assets

Development   176,887       176,386    

Assets

Stabilized Joint Venture   263,586       266,429    
Investments available for sale Investments available for sale at fair value            4,317    
Cash Cash items   165,071       162,273    

Assets

Unallocated corporate assets   7,144       7,261    
Assets   $ 674,867       678,190    

 

(4) Related Party Transactions.

 

The Company is a party to an Administrative Services Agreement which resulted from our January 30, 2015 spin-off of Patriot Transportation Holding, Inc. (Patriot). The Administrative 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, 2022.

 

The consolidated statements of income reflect charges and/or allocation from Patriot for these services of $223,000 and $256,000 for the three months ended March 31, 2022 and 2021, respectively. These charges are reflected as part of corporate expenses.

 

To determine these allocations between FRP and Patriot as set forth in the Administrative 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.

 

The Company’s Outstanding debt, net of unamortized debt issuance costs, consisted of the following (in thousands):

 

    March 31,   December 31,
    2022   2021
Fixed rate mortgage loans, 3.03% interest only, matures 4/1/2033   $ 180,070       180,070  
Unamortized debt issuance costs     (1,624 )     (1,661 )
Credit agreement                  
 Long term debt   $ 178,446       178,409  

 

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 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-Month LIBOR, which may be reduced quarterly to

11 
 

1.25% or 1.0% over Daily 1-Month LIBOR if the Company meets a specified ratio of consolidated debt to consolidated total capital, as defined which excludes FRP Riverfront. A commitment fee of 0.25% per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.20% or 0.15% if the Company meets a specified ratio of consolidated total debt to consolidated total capital. The Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants. As of March 31, 2022, there was no debt outstanding on this revolver, $506,000 outstanding under letters of credit and $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% and applicable interest rate would have been 1.45514% on March 31, 2022. The credit agreement contains certain conditions and financial covenants, including a minimum tangible net worth and dividend restriction. As of March 31, 2022, these covenants would have limited our ability to pay dividends to a maximum of $246 million combined.

 

On November 17, 2017, Dock 79 borrowed a principal sum of $90,000,000 pursuant to a Loan Agreement and Deed of Trust Note entered into with EagleBank. The loan was secured by the Dock 79 real property and improvements, bore a fixed interest rate of 4.125% per annum and had a term of 120 months. The loan was paid in full on March 19, 2021. A prepayment penalty of $900,000 was recorded into interest expense in the quarter 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 was recorded in the consolidated 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 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 a 0.75% transfer fee.

 

Debt cost amortization of $37,000 and $38,000 was recorded during the three months ended March 31, 2022 and March 31, 2021, respectively. During the three months ended March 31, 2022 and March 31, 2021 the Company capitalized interest costs of $674,000 and $928,000, respectively.

 

The Company was in compliance with all debt covenants as of March 31, 2022.

 

(6) Earnings per Share.

 

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

               
  Three Months ended
  March 31,
  2022   2021
       

Weighted average common shares outstanding

during the period – shares used for basic 

earnings per common share

  9,366       9,341  
               

Common shares issuable under share based

 payment plans which are potentially dilutive

  51       35  
               

Common shares used for diluted

 earnings per common share

  9,417       9,376  
12 
 

 

               
Net income attributable to the Company $ 672       28,373  
               
Earnings per common share:              
   -basic $ .07       3.04  
   -diluted $ .07       3.03  

 

 

For the three months ended March 31, 2022, 51,083 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 months ended March 31, 2021, 19,950 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 three months of 2021 the Company repurchased 6,004 shares at an average cost of $43.95.

 

(7) Stock-Based Compensation Plans.

 

The Company has two 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 ten years from the date of grant. Stock based compensation awarded to directors, officers and employees are exercisable immediately or become exercisable in cumulative installments of 20% or 25% 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 3.0 to 7.0 years.

 

The dividend yield of zero 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 January 2022, 7,448 shares of restricted stock were granted to employees that will vest over the next four years. In January 2022, 14,016 shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next five years. In January 2021, 8,896 shares of restricted stock were granted to employees that will vest over the next four years. In January 2021, 18,882 shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next five years. In March 2020, 20,520 shares of restricted stock were granted to employees as part of a long-term incentive plan that will vest over the next five years. The number of common shares available for future issuance was 377,650 at March 31, 2022. In March 2022 and March 2021, 865 and 1,098 shares of stock, respectively, were granted to employees rather than stock options as in prior years.

 

The Company recorded the following Stock compensation expense in its consolidated statements of income (in thousands):

                 
    Three Months ended
    March 31,
    2022   2021
Stock option grants   $ 17       17  
Restricted stock awards     130       135  
Employee stock grant     50       50  
Annual director stock award                  
Stock compensation   $ 197       202  

 

13 
 

 

A Summary of changes in outstanding options is presented below (in thousands, except share and per share amounts):

 

        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, 2022     104,755     $ 37.93     4.8   $ 1,416  
                             
Outstanding at March 31, 2022     104,755     $ 37.93     4.6   $ 1,416  
                             
Exercisable at March 31, 2022     96,586     $ 37.26     4.4   $ 1,281  
                             

Vested during three months ended

March 31, 2022

                       $     

 

 

The aggregate intrinsic value of exercisable in-the-money options was $1,984,000 and the aggregate intrinsic value of outstanding in-the-money options was $2,081,000 based on the market closing price of $57.80 on March 31, 2022 less exercise prices.

 

The unrecognized compensation cost of options granted to FRP employees but not yet vested as of March 31, 2022 was $111,000, which is expected to be recognized over a weighted-average period of 1.6 years.

 

A Summary of changes in restricted stock awards is presented below (in thousands, except share and per share amounts):

        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 January 1, 2022     46,074     $ 45.88     3.1   $ 2,114  
    Time-based awards granted     7,448       57.80           431  
    Performance-based awards granted     14,016       57.80           810  
    Vested     (7,813 )     46.30           (362 )
    Forfeited     (1,363 )     46.30           (63 )
Non-vested at March 31, 2022     58,362     $ 50.20     3.6   $ 2,930  
                             

 

Total unrecognized compensation cost of restricted stock granted but not yet vested as of March 31, 2022 was $2,307,000 which is expected to be recognized over a weighted-average period of 3.8 years.

 

 

(8) Contingent Liabilities.

 

The Company may be involved in litigation on a number of matters and is 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. 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 is subject to numerous environmental laws and regulations. The Company believes that the ultimate

14 
 

disposition of currently known environmental matters will not have a material effect on its financial position, liquidity, or operations. The Company can give no assurance that previous environmental studies with respect to its 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 properties will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; and that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to the Company.

 

As of March 31, 2022, there was $506,000 outstanding under letters of credit. The letters of credit were issued to guarantee certain obligations to state agencies related to real estate development.

 

The Company and MRP guaranteed $26 million of the construction loan on the Bryant Street Partnerships 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.

 

(9) Concentrations.

 

The mining royalty lands segment has a total of five tenants currently leasing mining locations and one lessee that accounted for 21.3% of the Company’s consolidated revenues during the three months ended March 31, 2022, and $366,000 of accounts receivable at March 31, 2022. 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.

 

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 March 31, 2022, the Company was invested in U.S. Treasury notes valued at $91,559,000 maturing in late 2022 through 2024. The unrealized loss on these investments of $1,207,000 was recorded as part of comprehensive income and based on the market value (Level 1).

 

At March 31, 2022 and 2021, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents including U.S. Treasury notes was adjusted to fair value as described above.

 

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 March 31, 2022, the carrying amount and fair value of such other long-term debt was $180,070,000 and $162,274,000, respectively. At March 31, 2021, the carrying amount and fair value of such other long-term debt was $178,321,000 and $169,355,000, respectively.

 

(11) Investments in Joint Ventures.

 

The Company has investments in joint ventures, primarily with other 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 joint ventures” on the income statement. The assets of these joint ventures are restricted to use by the joint ventures and their obligations can only be settled by their assets or additional contributions by the partners.

 

15 
 

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 March 31, 2022                              
Brooksville Quarry, LLC   50.00 %  $ 7,475     14,319     (23 )   (12 )
BC FRP Realty, LLC   50.00 %   5,494     22,239     (72 )   (36 )
Bryant Street Partnerships   61.36 %   59,420     203,870     (2,251 )   (1,509 )
Aberdeen Station Loan         638     638              
DST Hickory Creek   26.65 %   6,000     45,679     (127 )   85  
Amber Ridge Loan         8,912     8,912              
1800 Half St. Owner, LLC   61.37 %   38,935     107,219              
Greenville/Woodfield Partnerships   40.00 %   16,131     90,759     (330 )   (132 )
   Total        $ 143,005     493,635       (2,803 )     (1,604 )

 

 

                          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, 2021                              
Brooksville Quarry, LLC   50.00 %  $ 7,488     14,301     (82 )   (41 )
BC FRP Realty, LLC   50.00 %   5,530     22,470     (230 )   (115 )
Riverfront Holdings II, LLC (1)                 (760 )   (628 )
Bryant Street Partnerships   61.36 %   59,558     204,082     (6,084 )   (4,954 )
Aberdeen Station Loan         514     514              
DST Hickory Creek   26.65 %   6,000     46,048     (481 )   343  
Amber Ridge Loan         11,466     11,466              
1800 Half St. Owner, LLC   61.37 %   38,693     93,932     12     20  
Greenville/Woodfield Partnerships   40.00 %   16,194     87,731     (948 )   (379 )
   Total        $ 145,443     480,544       (8,573 )     (5,754 )
                               
(1):Riverfront Holdings II, LLC was consolidated on March 31, 2021. Bryant Street Partnerships included $234,000 in 2021 for the Company’s share of preferred interest and $118,000 in 2022 and $118,000 in the first quarter of 2021 for amortization of guarantee liability related to the Bryant Street loan.

 

The major classes of assets, liabilities and equity of the Company’s Investments in Joint Ventures as of March 31, 2022 are summarized in the following two tables (in thousands):

 

                                             

 

 

  As of March 31, 2022   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       197,423       43,567       106,789       90,234      $ 438,013  
Cash and cash equivalents   0       1,268       673       430       346       2,717  
Unrealized rents & receivables   0       4,923       1,119       0       7       6,049  
Deferred costs   0       256       320       0       172       748  
   Total Assets 0       203,870       45,679       107,219       90,759     $ 447,527  
                                             

 

 

Secured notes payable 0       123,850       29,348       37,058       48,957     $ 239,213  
Other liabilities   0       5,241       180       9,102       3,172       17,695  
Capital - FRP   0       56,874       4,304       37,479       15,452       114,109  
Capital – Third Parties   0       17,905       11,847       23,580       23,178       76,510  
   Total Liabilities and Capital 0       203,870       45,679       107,219       90,759     $ 447,527  

 

16 
 

 

                                               
  As of March 31, 2022    
  Brooksville   BC FRP   Aberdeen   Amber Ridge   Apartment/   Grand
  Quarry, LLC   Realty, LLC   Loan   Loan   Mixed Use   Total
                       
Investments in real estate, net  $ 14,280       21,436       638       8,912       438,013      $ 483,279  
Cash and cash equivalents   33       164       0       0       2,717       2,914  
Unrealized rents & receivables   0       447       0       0       6,049       6,496  
Deferred costs   6       192       0       0       748       946  
   Total Assets  $ 14,319       22,239       638       8,912       447,527     $ 493,635  
                                               
Secured notes payable  $ 0       11,191       0       0       239,213     $ 250,404  
Other liabilities   42       162       0       0       17,695       17,899  
Capital - FRP   7,475       5,443       638       8,912       114,109       136,577  
Capital - Third Parties   6,802       5,443       0       0       76,510       88,755  
   Total Liabilities and Capital  $ 14,319       22,239       638       8,912       447,527     $ 493,635  
                                               

 

The Company’s capital recorded by the unconsolidated Joint Ventures is $6,429,000 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 equity of the Company’s Investments in Joint Ventures as of December 31, 2021 are summarized in the following two tables (in thousands):

 

 

                                             

 

 

  As of December 31, 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       199,730       43,840       93,504       87,421      $ 424,495  
Cash and cash equivalents   0       1,123       827       428       279       2,657  
Unrealized rents & receivables   0       2,925       1,044       0       5       3,974  
Deferred costs   0       304       337       0       26       667  
   Total Assets 0       204,082       46,048       93,932       87,731     $ 431,793  
                                             

 

 

Secured notes payable 0       119,201       29,337       18,404       44,309     $ 211,251  
Other liabilities   0       9,066       115       14,470       4,462       28,113  
Capital - FRP   0       57,555       4,423       37,478       15,584       115,040  
Capital – Third Parties   0       18,260       12,173       23,580       23,376       77,389  
   Total Liabilities and Capital 0       204,082       46,048       93,932       87,731     $ 431,793  

 

                                               
  As of December 31, 2021    
  Brooksville   BC FRP   Aberdeen   Amber Ridge   Apartment/   Grand
  Quarry, LLC   Realty, LLC   Loan   Loan   Mixed Use   Total
                       
Investments in real estate, net  $ 14,281       21,561       514       11,466       424,495      $ 472,317  
Cash and cash equivalents   18       312       0       0       2,657       2,987  
Unrealized rents & receivables   0       368       0       0       3,974       4,342  
Deferred costs   2       229       0       0       667       898  
   Total Assets  $ 14,301       22,470       514       11,466       431,793     $ 480,544  
                                               
Secured notes payable  $ 0       11,384       0       0       211,251     $ 222,635  
Other liabilities   0       140       0       0       28,113       28,253  
Capital - FRP   7,488       5,473       514       11,466       115,040       139,981  
Capital - Third Parties   6,813       5,473       0       0       77,389       89,675  
   Total Liabilities and Capital  $ 14,301       22,470       514       11,466       431,793     $ 480,544  
                                               

 

17 
 

 

The amount of consolidated retained earnings (accumulated deficit) for these joint ventures was $(10,112,000) and $(8,942,000) as of March 31, 2022 and December 31, 2021, respectively.

 

 

The income statements of the Bryant Street Partnerships are as follows (in thousands):

 

                                 
    Bryant Street   Bryant Street   Bryant Street   Bryant Street  
    Partnerships   Partnerships   Partnerships   Partnerships  
    Total JV   Total JV   Company Share   Company Share  
    Three Months ended   Three Months ended   Three Months ended   Three Months ended  
    March 31,   March 31,   March 31,   March 31,  
    2022   2021   2022   2021  
Revenues:                                
    Rental Revenue   $ 1,820     $ 17     $ 1,116     $ 10  
    Revenue – other     348       19       214       12  
Total Revenues     2,168       36       1,330       22  
                                 
Cost of operations:                                
     Depreciation and amortization     1,497       366       919       225  
     Operating expenses     1,330       507       815       311  
     Property taxes     127       0       78       0  
Total cost of operations     2,954       873       1,812       536