On this page of StockholderLetter.com we present the 3/24/2023 shareholder letter from FRP HOLDINGS, INC. — ticker symbol FRPH. Reading current and past FRPH letters to shareholders can bring important insights into the investment thesis.

 •  3/24/2023 Letter Continued (Full PDF)
 •  4/16/2024 FRPH Stockholder Letter
 •  4/1/2025 FRPH Stockholder Letter
 •  More "Real Estate" Category Stockholder Letters
 •  FRPH Benford's Law Stock Score = 97

FRPH 3/24/2023 Shareholder/Stockholder Letter Transcript:

FRP HOLDINGS, INC.
2022 ANNUAL REPORT


FRP Holdings, Inc.
Annual Report 2022
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended December 31
(Amounts in thousands except per share amounts)
2022
2021

Change
Revenues ........................................................................................................... $
Operating pro   t ................................................................................................ $
Net investment income .................................................................................... $
Interest Expense ............................................................................................... $
Equity in loss of joint ventures ...................................................................... $
Gain on remeasurement of investment in real estate partnership ......... $
Gain on sale of real estate ............................................................................. $
Gain (loss) attributable to noncontrolling interest ...................................... $
Net income attributable to the Company .................................................... $
37,481
7,996
5,473
(3,045)
(5,721)
874
(518)
4,565
31,220
2,274
4,215
(2,304)
(5,754)
51,139
805
11,879
28,215
20.1
251.6
29.8
32.2
(0.6)
(100.0)
8.6
(104.4)
(83.8)
Per common share:
Net income attributable to the Company:
Basic ............................................................................................................ $
Diluted ......................................................................................................... $
0.49
0.48
3.02
3.00
(83.8)
(83.7)
Total Assets ....................................................................................................... $ 701,084
Total Debt ........................................................................................................... $ 178,557
Shareholders    Equity ....................................................................................... $ 407,145
Common Shares Outstanding .......................................................................
9,460
Book Value Per Common Share ................................................................... $
43.04
678,190
178,409
396,423
9,411
42.12
3.4
2.7
.5
0.8
BUSINESS. FRP Holdings, Inc. is a holding company
engaged in the real estate business, namely (i) leasing
and management of commercial properties owned by the
Company, (ii) leasing and management of mining royalty
land owned by the Company, (iii) real property acquisition,
entitlement, development and construction primarily for
apartment, retail, warehouse, and o   ce buildings either
alone or through joint ventures, (iv) ownership, leasing
and management of buildings through joint ventures. The
Company   s operating subsidiaries are FRP Development
Corp. and Florida Rock Properties, Inc.
STRATEGY. Our strategy consists of the re-deployment of
cash from asset sales, real estate operations, and mining
royalties, into new assets that allow management to exploit
its knowledge and expertise. The asset classes of choice
are mixed-use, industrial, raw land, existing buildings,
and repeatable strategic partnerships located in core
markets with growth potential. Emphasis will be placed on
generating returns through opportunistic disposition, as
well as cash-   ow and long-term appreciation.
OBJECTIVE. We strive to improve shareholder value
through (1) active engagement with properties and
partners to grow asset value, (2) contributing our
operating expertise and connections to maximize value
and NOI growth, and (3) manage our capital structure
in an e   cient and responsible manner, with a watchful
eye on projected future market conditions and trends to
facilitate timely disposition of selected assets, (4) diligent,
sustainable growth.
1

To Our Shareholders
Time is a funny thing. The same summer day that seems to
last forever to the boy, is more or less the blink of an eye
to his father. A school year is an eternity to a student, and
yet the same year for the teacher or the parent running
carpool passes so quickly as to have almost ended
moments after it began. The way time seemingly speeds
up as one gets older is the basis of a theory that in terms
of the way we perceive time, our lives are halfway over
by the time we turn 18. Youth, maybe even more than we
realized, is wasted on the young. That   s a pretty depressing
thought. And yet it gives one heart that even though time
appears to move faster and faster, a lot can still happen
in a year. This Company had so much going on in 2022,
that it is hard to fathom (what with time moving so fast)
that we got it all done in just 365 days. In 2022, we made
our    rst mining royalty acquisition in a decade with our
purchase of the Bland Property in Astatula, Florida, which
helped propel us to our largest revenue year ever for
that segment. 2022 saw the stabilization and permanent
   nancing of Riverside in Greenville, South Carolina, as
well as the completion of construction on and lease-up
of both .408 Jackson (also in Greenville) and The Verge
in DC. In 2022, we added to our industrial development
pipeline with the purchase of a new site in Cecil County,
Maryland capable of supporting 900,000 square feet
of industrial development, and we passed a major predevelopment milestone with the unappealable annexation
into Aberdeen, Maryland of our 54 acres adjacent to
Cranberry Run Business Park on which we plan to build
690,000 square feet of industrial. This past year saw
meaningful increases in revenue, operating pro   t, and
pro-rata NOI across all segments with the highest prorata NOI total ever for Stabilized Joint Ventures (17.05%
increase to $9.47 million vs $8.09 million in 2021), the
highest NOI total for Mining Royalties (13.62% increase to
$10.15 million vs $8.94 million in 2021), and the highest
NOI total (39.22% increase to $2.67 million vs $1.92 million
in 2021) for our Asset Management segment since the
sale of our warehouse portfolio in 2018. Far and away the
biggest news of 2022, however, was our announcement
in the beginning of the fourth quarter of our agreement
to partner with Steuart Investment Company (SIC) and
MidAtlantic Realty Partners (MRP) in developing our
collective properties in the Capitol Riverfront and Buzzard
Point submarkets of Washington, DC. We   ve mentioned
the details of this agreement a number of times, but it
bears repeating   this partnership plans to build over three
million square feet of mixed-use development comprising
3,000 residential units and 150,000 square feet of retail
spread amongst 10 distinct multi-family projects (including
2
FRP Holdings, Inc.
Dock 79, The Maren, and The Verge) on or near the water.
This deal took over two years of overtures, meetings,
and negotiations to put in place, but the end result, in
the words of Hamlet,    is a consummation devoutly to be
wished.    It will take over a decade to realize, but when all
is said and done, your Company will have a meaningful
share of nearly every asset visible from the south entrance
of the nation   s capital.
ASSET MANAGEMENT
The Asset Management segment, our industrial assets
in particular, produced strong results in 2022. Increased
occupancy and rent increases at our Cranberry Run
Business Park as well as full occupancy at one of the
two new spec buildings at Hollander accounted for a 43%
increase in revenue over calendar year 2021 as well as a
39.22% increase in NOI. All seven of our industrial assets
are 100% leased, and six of the seven industrial buildings
in-service are 100% occupied with occupancy expected
on the seventh in the    rst half of 2023. Looking forward,
we have completed construction on a 101,750 square
foot build-to-suit warehouse project and are awaiting the
   nal certi   cate of occupancy and expect the tenant to
move in some time in the    rst half of 2023. We have three
other properties in our industrial development pipeline
in various stages of predevelopment: 170 acres in Cecil
County, Maryland, purchased in September 2022 and
capable of supporting 900,000 square feet of industrial
for which we are currently pursuing entitlements; 17
acres in Aberdeen, Maryland where we have submitted
grading and building permit applications for 259,000
square-foot warehouse; and a 54 acre site adjacent to our
Cranberry Run Business Park capable of 690,000 square
feet of industrial which was just annexed into the town of
Aberdeen, Maryland. Given the current state and recent
performance of our industrial portfolio, management
is excited to move forward with these projects in what
has been, along with mining royalties, this Company   s
   bread and butter.    With nearly 1,850,000 square feet of
potential industrial in our development pipeline, when the
dust settles on these projects, we will have expanded our
existing industrial footprint by 358% to roughly 2.4 million
square feet.
STABILIZED JOINT VENTURES
Stabilized Joint Ventures experienced a shot in the arm
to begin the year as the District of Columbia    nally lifted
its emergency protocols and allowed for rent increases
on renewals. Both properties bene   tted from this return
to free market economics. This year, 61.45% of expiring

To Our Shareholders
continued
leases at The Maren renewed with an average increase
in rent of 8.17%, and 61.40% of expiring leases renewed
at Dock 79 with an average increase in rent of 5.91%.
Increases seemed to pick up steam over the course of the
year, culminating in fourth quarter renewals of 42.31% of
expiring leases at Dock 79 and 61.90% at The Maren, with
an average rent increase on renewals of 8.89% and 11.14%
respectively. This year we began to track    trade outs      the
increase in rent on a new lease when we were not able
to renew an expiring one. In 2022, we saw an increase in
rent on these trade outs of 7.4% at The Maren and 12.6%
at Dock. In   ation certainly has something to do with the
numbers you   re seeing here, but it also demonstrates the
extent to which rents were held back by DC   s emergency
protocols and just how far we had to push rents to get
them back in line with what they should have been barring
restrictions. Of course, the desirability of the assets in
question had something to do with why we were able to
attempt this in the    rst place. As mentioned previously,
as part of the deal we reached in the fourth quarter with
Steuart Investment Company, SIC is now a 20% partner in
both Dock 79 and The Maren. SIC paid $65.3 million for
their 20% stake, which places a $326.5 million combined
valuation on Dock 79 and The Maren. Point being, we are
excited about this new partnership and what it will build,
but SIC   s investment in our Riverfront projects shows
how excited it is about what we have already built. In
the third quarter of 2022, we added Riverside, our joint
venture with Wood   eld Development in Greenville, South
Carolina, to the Stabilized Joint Ventures Segment after
it achieved stabilization (90% occupancy for 90 days).
As mentioned previously, we were concurrently able to
permanently    nance this joint venture with a $32 million
loan with a term of eight years at a    xed rate of 4.92%.
This loan is interest-only for the    rst    ve years and has
no prepayment penalty after the    rst three. Riverside
achieved stabilization in what management believed was a
remarkably short period of time (even accounting for how
fast time passes for adults). Lease-up began in the third
quarter of 2021 and we achieved stabilization in the third
quarter of 2022. That and the fact that the building   s 200
units were 98% leased with 92.5% occupancy at year end
speaks to the strength of the Greenville market and gives
us con   dence as we begin lease-up of .408 Jackson, our
second joint venture with Wood   eld in Greenville.
MINING ROYALTIES
2022 was a huge year for mining royalties. In the fourth
quarter, the segment had its highest revenue quarter ever
($2.9 million), closing the books on its best year ever. Prior
FRP Holdings, Inc.
to 2022, mining royalties had never achieved $10 million in
revenue in any    scal year. In 2022, this segment had over
$10 million in NOI. Surpassing the $10 million mark with
$10.7 million in revenue, a 12.9% improvement over 2021,
was primarily due to the acquisition of the Bland Property
(adjacent to, and part of the same Vulcan sand plant as our
existing land in Astatula, Florida). As you may recall, we
purchased this property in April of 2022 for $11.6 million.
This was the    rst property added to this segment since
2012 and only the second property we   ve purchased
for mining royalties since 1986. It contains roughly 21.8
million tons in sand reserves on 1,500 acres and right
now is our biggest royalty producing property by revenue.
Looking into 2023, we are still con   dent in the underlying
fundamentals of this business. Increased demand in 2022
made for meaningful price increases (Martin Marietta:
10.5% increase on average selling price over 2021,
Vulcan Materials: 12.4% increase on average selling price
in Q3 2022), and demand should remain strong in 2023
and beyond. Total federal highway spending is expected
to be in the ballpark of $72 billion this year, and over
$102 billion in highway, bridge, and tunnel projects were
awarded in 2022, a 24% increase over the previous year.
The Cornyn-Padilla amendment to the 2023 Congressional
Appropriations Bill, now allows states to divert unused
Covid relief funds for infrastructure projects. To that end,
in June 2022, Florida released the largest budget in the
history of the Florida Department of Transportation with
over $12 billion in planned infrastructure investment over
the course of    ve years. The boost in demand from the
increase in infrastructure investments described above
should translate into price increases and help continue to
drive the bottom line in this segment.
It has been management   s goal for the last    ve years to
put the proceeds of the asset sale to work in new projects.
While we have continued to put money to work in the form
of new investments, the goal of having a home for all our
excess cash has eluded us. Naturally it follows that since
our last major round of share buybacks in 2021, we have
received a number of inquiries regarding our plans for
returning at least part of the cash on our balance sheet to
investors in the form of additional buybacks or dividends.
If it was ever a consideration, the agreement with SIC and
MRP has eliminated it. With the industrial and multifamily
projects we have in front of us, it will take all of our current
cash as well as future cash    ow to be able to make the equity
investments that we have laid out over the next decade plus
while maintaining a reasonable capital cushion. It is true
that we are not building everything at once, and in every
3



 3/24/2023 Letter Continued (Full PDF)