On this page of StockholderLetter.com we present the 4/16/2024 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.

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

FRPH 4/16/2024 Shareholder/Stockholder Letter Transcript:

FRP HOLDINGS, INC.
2023 ANNUAL REPORT


Annual Report 2023
FRP Holdings, Inc.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended December 31
(Amounts in thousands except per share amounts)

2023
2022

Change
Revenues ............................................................................................................ $
Operating profit ................................................................................................. $
Net investment income ..................................................................................... $
Interest Expense ................................................................................................ $
Equity in loss of joint ventures ....................................................................... $
Gain on sale of real estate and other income ............................................. $
Loss attributable to noncontrolling interest.................................................. $
Net income attributable to the Company ..................................................... $
41,506
11,700
10,897
(4,315)
(11,937)
53
(420)
5,302
37,481
7,996
5,473
(3,045)
(5,721)
874
(518)
4,565
10.7
46.3
99.1
41.7
108.7
(93.9)
(18.9)
16.1
Per common share:
   Net income attributable to the Company:
  Basic ............................................................................................................. $
  Diluted .......................................................................................................... $
0.56
0.56
0.49
0.48
14.3
16.7
Total Assets ........................................................................................................ $ 709,166
Total Debt ............................................................................................................ $ 178,705
Shareholders    Equity ........................................................................................ $ 414,520
Common Shares Outstanding ........................................................................
9,484
Book Value Per Common Share .................................................................... $
43.71
701,084
178,557
407,145
9,460
43.04
1.2
1.8
.3
1.6
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 office 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-flow 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 efficient 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
FRP Holdings, Inc.
It is a truth universally acknowledged, at least in the
investment world, that diversification on the company
level is unnecessary if not out-and-out a bad thing. The
heyday of the conglomerates like Gulf & Western or GE at
its Jack Welch peak, with their hands in multiple assets
and industries and global markets, is over. Investor bias
towards asset concentration makes sense on a number
of levels: it prevents empire building; it is hard enough
to    get smart    on one industry, let alone a multitude of
unrelated industries; investors don   t need companies to
diversify for them when they can do it themselves as they
see fit. The biggest argument against diversification on the
company level is that it complicates things. Valuing one
type of asset is easier than valuing multiple asset types.
shrinking of margins in the multifamily space because of
the cost of debt and materials, as well as the softening of
the DC market as a glut of post-covid projects came on line
in the last two years, has led us to believe we are better
off delaying any multifamily projects in that market. We
have long-term faith in the DC market, and our partnership
with MRP and the Steuart Investment Company to develop
the Steaurt Family parcels is an amazing opportunity, but
right now the timing is wrong. At the same time, despite
the cost of materials, the industrial market is still excellent,
and we can finance most of the development in our
industrial pipeline on an all-equity basis. This is a perfect
example of the benefit of having multiple asset types in
our development strategy.
This Company is not simple. Though far from a
conglomerate, we have several business segments in
different and unrelated facets of the real estate industry.
We have our in-house projects and a multitude of joint
ventures. The investor who knows the apartment business
might not want to take the time to get to know the industrial
space and almost certainly has limited exposure to the
aggregates business. That surface level complexity and
lack of concentration in one particular asset type is
probably off-putting to some investors, especially for a
company our size. We are arguably the corporate version
of what Scott Fitzgerald referred to as    that most limited
of all specialists   the well-rounded man.   
Our complexity is also part of the heritage of this Company,
and we believe we have made it into an asset. Our mining
royalties are the sole reason for this Company   s existence
and have been an instrumental component of the cashflow
engine that has fueled our debt-free industrial development.
We could have sold our land on the Anacostia River in DC,
and deemed multifamily development outside of our focus,
and we would have closed the door on owning some of
the best assets in one of the greatest cities in the world.
When we sold our industrial portfolio in 2018, we could
have solely concentrated on multi-family projects, and in
doing so, we would have written off decades of industrial
real estate experience, not to mention the recent boom in
industrial real estate values.
Having a multifaceted development strategy has served
the Company well, but, as mentioned previously, it has
also tended to muddy the waters for our investors. We are
a small company, but in less than a decade we have shifted
from an industrial asset manager with some development,
to a developer with some asset management. Furthermore,
we are a JV partner in a multitude of projects, a capital
partner, a lender    it   s a lot, and it has tended to make our
quarterly filings a trip to proverbial firehose for a drink of
water. While we have tried to play to our strengths and
put our cash to work, we have done a poor job of making
our Company easier to understand. In our effort to grow
shareholder value, we have made it harder for investors to
wrap their arms around everything we do. This complexity
in a company our size is one reason why we believe our
stock price has never reflected our true net asset value.
In theory, we could just keep our heads down and do our
jobs and wait for an efficient market to recognize the fruits
of our labor. In reality, we have to be more proactive about
explaining what we do, how we do it, and where we are
headed. It is our belief that our development strategy is a
strength, maybe our biggest strength. But it also makes us
complex, and unless we want to turn our back on that very
strategy, then we have to make it easier for the investing
public to understand us. Our Investor Day in October
was a good start. Publishing a quarterly analysis of the
estimated value of our assets is another step in the right
direction. We are far from done.
We are a full-service real estate developer with expertise
and experience in several asset classes at every stage of
the development and ownership level. The ability to shift
our capital, focus, and level of exposure between different
asset classes is a good thing, and we believe it has served
and will continue to serve this Company and its investors
well. To that end, as we announced at our Investor Day in
October, we are shifting our development focus away from
multifamily towards industrial. The combination of both the
INDUSTRIAL AND COMMERCIAL
In an attempt to further clarify what we do, we have
renamed our    Asset Management    and    Stabilized Joint
Venture    segments. Going forward, these will be our
   Industrial and Commercial    and    Multifamily    segments.
This change is purely cosmetic and does not shift assets
between segments and requires no restatement of financial
results. However, going forward, it does allow us to pursue
industrial joint ventures while still keeping like with like.
2

To Our Shareholders
continued
The Industrial and Commercial segment performed well
this year, growing revenues by 45.4% and NOI by 46.2%
compared to 2022. These increases are partly the result
of rent growth at our Cranberry Run Business Park, but
mostly due to a full year of 100% occupancy of two of
our buildings at Hollander Business Park as well as the
addition to this segment in March 2023 of a fully occupied
101,750 square-foot, build-to-suit warehouse at Hollander.
The strong performance of this segment as well as the high
demand for industrial product and its resilience to inflation
is why we have shifted our development focus towards
industrial for the time being. Industrial is our    bread and
butter    and expanding our footprint will be the main focus
of our development strategy for some time.
MULTIFAMILY
Our Multifamily business segment had a mixed year. Dock
79 and the Maren experienced nominal revenue growth of
1.8% with average annual occupancy (94.36%, 95.60%),
renewal rates (68.29%, 53.23%), and increases on renewals
(2.80%, 4.21%) in line with historic expectations. There was
an expected drop in pro rata NOI compared to last year,
due to the sale of our 20% TIC interest in both buildings
to SIC, but total NOI for the buildings is down compared
to last year. Rent growth did not keep pace with rising
expenses and as mentioned previously, the DC market is
soft right now due to a significant number of buildings
coming online after a Covid bottleneck, as evidenced by
trade-outs at the Maren and Dock 79 of 1.90% and -4.00%
respectively. These are still excellent assets in a beautiful
area as anyone who came to the Investor Day we held
at Dock 79 can attest to. They are financed interest-only
through March 2033 at a rate (3.03%) that now feels like
a historical anomaly. But the market, like the Nationals,
isn   t where it was before Covid, which is the reason why
we   re hitting pause on multifamily development in DC for
the time being. And like the market (but maybe not the
Nationals), we believe strongly in the long-term future of
Dock 79 and the Maren, but we just need to wait out this
ebb in the market and focus on expenses.
Conversely, we remain excited about Riverside, our JV
with Woodfield Development in Greenville, SC. Riverside
was added to this segment in the third quarter of last year
after an exceptionally brief lease-up and had an average
annual occupancy of 94.51% with 55.41% of expiring
leases renewing with an average increase of 8.46%. Most
importantly, Riverside added $800,000 of pro-rata NOI
to this segment in its first full calendar year. We remain
bullish about the Greenville market and look forward to
adding .408 Jackson to this segment when it stabilizes in
early 2024.
FRP Holdings, Inc.
MINING ROYALTY LANDS
Mining royalties had a very strong 2023. Once again,
we had our highest revenue year ever in this segment,
growing revenues to $12,527,000, a 17.3% improvement
over what had previously been our best revenue year
ever in 2022. Part of the reason for this increase was
the additional royalties from the acquisition in Astatula,
FL that we completed in the second quarter of 2022, but
the bulk of the increase came from increases in revenue
at nearly every active location. We are very fortunate to
have the best operators in the aggregates industry for our
tenants. Vulcan Materials, our primary tenant, has been
aggressive with their pricing, growing their average sales
price at all locations by 15% over 2022, as reported in
their third quarter investor presentation. Martin Marrietta
saw a 20% increase in average sales price according to
their third quarter call. State and federal infrastructure
spending are expected to continue their upward trend with
a 14% increase in total state highway and bridge capital
spending anticipated in 2024 (on top of a 13% increase
in 2023). Combined with increases in non-residential
construction, demand in this sector should continue to be
strong in 2024, even if interest rates dampen the pace of
single-family home construction.
DEVELOPMENT
We have a three-part development strategy which we
use to grow our business: 1) In-House Development and
Acquisition; 2) Joint Venture Development and Acquisition;
and 3) Principal Capital Source Lending. Since the sale
of our legacy industrial assets in 2018, this three-pronged
strategy is how we have gone about putting our cash
to work. Our In-House strategy includes our industrial,
commercial, and land development platform. These
properties are acquired, developed, and managed 100%
by FRP and transferred from Development to the Industrial
and Commercial segment when construction is completed
and the building has its certificate of occupancy. As
stated previously, industrial development through inhouse projects as well as JV   s is the current focus of our
development strategy. We have three in-house projects in
our industrial pipeline in various stages of development
which will eventually join and drive NOI growth in the
Industrial and Commercial segment. During the second
quarter of 2023, we broke ground on a 259,000 squarefoot building on our 17-acre parcel in Harford County,
MD. We expect shell completion on this building in the
third quarter of 2024. In North East, MD, along the I-95
corridor, we are in the middle of pre-development activities
on 170 acres of industrial land that will ultimately support
a 900,000 square-foot distribution center. We would be
reluctant to build something this size as a spec building,
but we will be in a position to break ground as early as
3



 4/16/2024 Letter Continued (Full PDF)