This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: The following is a recording for John Milton with Florida Rock Properties, Inc., on Thursday, November 5, 2020, at 8 a.m. Central. Excuse me, everyone. We now have all of our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will then open the floor for questions. At that time, instructions will be given. Ask for the procedure to follow if you would like to ask a question. It's now my pleasure to turn today's conference over to John Baker III, Chief Financial Officer of FRP Holdings, Inc. Please go ahead, sir.
spk03: Good morning. I'm John Baker III, CFO and Treasurer of FRP Holdings, Inc. With me today, either in person or by phone, are John Baker II, our Chairman and CEO, David DeVilliers, Jr., our President, John Klassenstein, our Chief Accounting Officer, John Milton, our Secretary, and David DeVilliers III, our Executive Vice President. Before we begin, let me remind you that any statements made on this call which relate to the future are by their nature subject to risks and uncertainties that could cause the actual results and events to differ materially from those indicated in such forward-looking statements. These risks are detailed in our SEC filings including 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. Thank you for joining us this morning. We appreciate your interest in FRP. Net income for the third quarter of 2020 was $5,455,000 or $0.57 per share versus $2,001,000 or $0.20 per share in the same period last year. The third quarter results were impacted by the following items. Interest expense decreased $83,000 as we capitalized more interest on our joint venture construction projects. Loss on joint venture increased $1,042,000 because of a $1,129,000 operating loss at the Marin due to leasing efforts and a gain of $5,732,000. From the sale of our building at the Hollander Business Park and the sale of 87 acres of our Fort Myers property as a result of the county exercising their option for a right-of-way, which will start to enhance our future development there. We continue to buy stock during this quarter and repurchases totaled 81,506 shares during the quarter. at an average price of $40.89 per share, bringing our total shares repurchased in the first nine months to 379, 809 shares at an average price of $41.30. We remain very liquid with approximately $136 million of cash and equivalents, including investments. Now let me turn the call over to David DeVilliers, Jr., who will give you a deeper dive into our operation.
spk01: Thank you, John, and good morning to those on the call this morning. Let me now provide you with our third quarter highlights and add a bit of detail to those provided by John in his opening remarks. As of the close of the third quarter, our asset management segment consisted of but three commercial properties, the Cranberry Business Center in Harford County, Maryland, the land at 21st Street in Jacksonville, Florida, and lastly, our home office, a multi-tenanted office building in Hunt Valley, Maryland. In July, we finalized the sale of 1801 62nd Street in Baltimore, Maryland, our latest spec building that was completed in April of 2019. The sale generated $12.3 million in cash and a profit of $3.8 million. which we are seeking 1031 exchange opportunities. As you may remember, the vast majority of asset management was reclassified to discontinued operations in 2018 and early 2019 as a result of the warehouse platform sale. This quarter, we continued to grow occupancy of Cranberry Run from 71.9% as of June 30 to 78.6% at quarter's ends. The significant $2 million renovation project is now complete, and the upgrades to the buildings have been well received by the market. Total revenues for this business segment were $721,000, up $291,000 over the same period last year. Operating profit was a positive $35,000, up $195,000 from an operating loss of $160,000 in the same period last year. primarily due to our new spec building at 1801 62nd Street reaching 100% occupancy and continued increased occupancy at Cranberry Row. In the mining and royalty segment, total revenues were $2,507,000 versus $2,302,000 in the same period last year. Total operating profit was 2.4%. $2 million, an increase of $179,000 versus $2,059,000 in the same period last year. As of quarter's end, aggregate royalties were within 1% of last year's record numbers through the first nine months. And like last year, the royalties we have collected so far are greater than those collected any entire year prior to 2017. Finally, Unrelated to any mining activity, local government exercised its right of eminent domain on some of our Fort Myers quarry to extend a roadway intended to ease traffic congestion in the area. We received $2.2 million in cash, incurring a $1.9 million profit. Under IRS Code 1033, we have up to three years to invest the profits in a like-kind asset in order to defer this federal tax liability. This resulting roadway extension will greatly benefit any Second Life developments on the remaining FRP-owned acreage once mining reserves are depleted. With respect to ongoing and new projects in the development segment, we have several highlights. This quarter, we received final permits and began construction on two speculative warehouse buildings at Hollander Business Park in Baltimore, Maryland, adjacent to the previously mentioned 1801 62nd Street, which we sold last quarter. Totaling 147,000 square feet, the two industrial buildings are planned for delivery in the third quarter of 2021. Two. Phase 1 of our joint venture with St. John's Properties, consisting of four buildings totaling 72,080 square feet of single-story office and 27,950 square feet of small bay retail space in Baltimore County, Maryland, saw some activity this quarter as our percentage increased to 47% with the addition of the project's first retail tenant. Entitlements continue for our project in Hampstead, Maryland, known as Hampstead Overlook, which received concept plan approval this spring for the 255 single-family and townhouse building lots proposed. We are currently seeking preliminary plan approval from the town and the county. This is a critical step in moving the development forward and a prerequisite for final plan approval, which secures the entitlements necessary to develop the project. Relative to our lending ventures platform, the first phase of settlement at the Hyde Park subdivision in Baltimore County, Maryland, closed in May of this year on the 122 townhouse and four single-family recorded loss. The settlement produced $2.67 million in principal and accrued interest. This quarter, we received the remaining $1.67 million in principal and $322,600 of accrued interest. additional profits from the repayment of an $800,000 note, which accrues interest as expected over the next 12 to 8 months prior to its maturity in March of 2022. Our other lending venture project, the residential development called Amber Ridge, located in Prince George's County, Maryland, is currently in the initial stages of horizontal development. Two national homebuilders are under contract to purchase all 187 lots following the completion of certain infrastructure improvements. The first sections of these lots are scheduled to be turned over in the second quarter of 2021. These lending ventures appear to have nice returns as we look to benefit from the surge in homebuilding and the shortage of lots in the areas we are concentrated. Moving on to phase two of our riverfront on the Anacostia project in Washington, D.C., known as Marin, it welcomed its first tenant in late March of this year. This 14-story mixed-use development consists of 264 apartments and 6,937 square feet of first-floor retail. During the third quarter, Marin received 100% of its use and occupancy certificates and has seen robust leasing activity increasing from 45% leased and 23% occupied at the end of June to 76.14% leased and 68.94% occupied at the end of the third quarter. The retail component is 74% leased with the large retail suite totaling 5,111 square feet signing a tenant at the end of the second quarter. As with Dock 79, this is a joint venture with Mid-Atlantic Realty Partners, or MRP. FRP maintains the majority interest in this project. The first phase of our mixed-use residential and retail development in northeast Washington, D.C., known as Bryan Street, was 78% complete overall at the end of the third quarter, with the first of four buildings scheduled for delivery in the fourth quarter of this year, and the remaining three buildings expected to be complete by the fourth quarter of 2021. This phase consists of 488 apartments and 85,681 square feet of first floor and freestanding retail. Approximately 44,000 square feet of this retail is pre-linked. The project is running on time and within budget. This property is located in a designated opportunity zone, which allows us to defer a $14.9 million tax liability associated with the warehouse platform sale in 2018. This project is also a joint venture with MRP, and FRP holds a major interest. In December of 2019, the company contributed $37.3 million of equity into a new joint venture agreement with MRP, for the development of a mixed-use project known as 1800 Half Street. Development is located in the Buzzard Point area of Washington, D.C., less than half a mile downriver from Dock 79 in Marist. It lies directly between our two-acre site on the Anacostia, currently under lease by Vulcan Materials, and Aldi Field, the home stadium of the D.C. United Professional Soccer Team. The 10-story structure will house 344 apartments and 11,246 square feet of ground floor retail. The project is a qualified Opportunity Zone investment and will defer a bit over $10 million in taxes associated with 2018's warehouse platform sale. In June, we closed on a $74 million construction loan and subsequently began construction at the end of August of this year. We expect to deliver this project in the fourth quarter of 2022. In addition to 1800 Half Street, and also in December of 2019, we ventured outside of Washington, D.C., and entered into two joint venture agreements with Woodfield Development, a strategic new partner, to invest in two separate and distinct residential development projects in Greenville, South Carolina. Woodfield has vast experience developing residential and mixed-use projects throughout the Southeast and Washington, D.C. The first project, called Riverside, is a 200-unit apartment project, and the CFRP contributed $6.2 million in exchange for a 40% ownership interest. Construction began during the first quarter this year and is expected to be complete in the third quarter of 2021. This is a qualified Opportunity Zone investment. Our second project with Woodfield is a 227-unit mixed-use development entitled Point 408 Jackson, a nod to Shoeless Joe Jackson, who actually lived on this site, and which is adjacent to Greenville's Minor League Baseball Stadium, which houses an affiliate of the Boston Red Sox. This project will also include 4,700 square feet of retail space. FRP received a 40% ownership position in this project in exchange for $9.7 million. Closing on the property occurred at the end of April of this year. Construction is also underway and the project should be ready to receive its first tenant in the second quarter of 2022. This project is also a qualified Opportunity Zone investment, along with Riverside, allows us to defer a total of $4.3 million in taxes. Moving on to our Stabilized Joint Ventures business segment, relative to DOT 79, net operating income for the quarter was $1,634,000, down 11.6% over the same period last year. Average occupancy during this quarter for the apartments was 93.29%. This past quarter, the retention rate was 52.3%, but with no rate increases due to a statutory prohibition by the District of Columbia due to COVID. The rent freeze is currently expected to last in the first quarter of 2021. We will continue to renew and sign tenants at their existing rates preferring terms of occupancy over chasing rent growth. The retail component of Dock 79, which totals approximately 14,600 square feet, remains at 76% occupied and 76% leased as of the end of the quarter. Unfortunately, our retail tenants were shut down from March 16th through the end of June as a result of the COVID-19 pandemic. with exception of one of the restaurants being partially open for carrying out. All three retail tenants are now open, albeit nowhere near the normal occupancy. Rent payments have resumed for the most part. Our key guiding principle in this situation is maintaining open communication while preserving our rights as landlord while we wait to see what the future holds for these businesses. The goal is to be a good partner in our existing tenant base and to assist them through this unusual time. We partnered with these existing tenants because we believed in their concepts and business plans, and we continue to do so. The remaining retail space had an executed letter of intent to lease prior to the COVID-19 breakout and is now back on the market. Dock79 is a joint venture between MRP, in which MRP FRP holds a 66 ownership percent interest. So to summarize FRP's movement in the mixed-use development, prior to December of 2019, we had ownership in 305 completed units of Dock 79 and were committed to another 752 units for a total of 1,057 units. As of December 2020, we will have completed 723 apartment units with the inclusion of Marist and the first of four buildings at Bryant Street. We now have 1,105 units under construction with future delivery dates ranging from the beginning of the third quarter of 2021 through the fourth quarter of 2022. As of December 2022, The total completed apartment inventory within our portfolio is projected to be 1,828 units, in which we currently hold an average ownership of 62%. And finally, relative to the new asset introduced to this business segment in July of last year, the 294-unit Hickory Creek apartment complex in Richmond, Virginia, Things remained status quo in the third quarter with average occupancy running above 94%. The distribution was on time and for the anticipated amount of $86,000. Our $6 million investment in this project is a part of a 1031 like-kind exchange. The complex was constructed in 1984 and substantially renovated in 2016. The business plan calls for further refurbishment to the interiors of the apartments and the increasing of rents prior to selling the project at a greater value after an appropriate hold period. FRP is fortunate to have a focused and talented team that has recently been quite active in leasing, development, and sales across multiple business segments. However, it's important to note that like the rest of the world, we've changed due to COVID. Our operations, communications, workflow, and access have all been altered. but we are committed to our mission and remain mindful of the unprecedented impact COVID is having on us all. We are considered an essential business and continue to operate at full capacity while heeding the guidance of the federal government and orders issued by the state and local authorities. Our offices in Baltimore, Maryland are open for limited activities on site, and all employees are set up to operate fully from their homes. When required, our employees are physically distancing and employing other measures to ensure the protection of the folks with whom we interact as we go about our business. At the end of the first quarter, requests for forbearance were limited to four tenants. Three retail restaurants at Dock 79 and one small office tenant whose business focus was related to hotel services. At the end of the second quarter, all but one of the aforementioned tenants had made significant progress towards clearing late rents and expenses. By the end of the third quarter, laudable progress in working through appropriate payment schedules has continued. To be sure, FRP is not unscathed by COVID-19. However, the retail tenants at Dock 79 currently represent a total of 6% of the company's net operating income. and for the time being, appear to be faring better than most in their category. Our tenants continue to operate, though perhaps on revised schedules and conditions, and with few exceptions, continue to pay rent as usual. We are mindful of the challenges that are facing our tenants, partners, and employees every day, and we strive to be good stewards of our stockholders' faith, as well as the trust and support of our business partners. COVID-19 marks a new beginning and will change the way we have to behave personally and professionally. But with all challenges comes opportunity. Lastly, I would encourage everyone to visit our newly minted website at www.frpdev.com, which now better reflects the company we have become, the investments we make, and the future we seek. Thank you, and I'll now turn the call back to John.
spk03: Thank you, David. As you can see, we've been very busy in redeploying the funds from the warehouse sale. Still, we remain very liquid because of asset sales and strong cash generation. We've not been badly hurt by COVID, but we are mindful that we are by no means out of the woods. Our strong balance sheet gives us confidence that we can grow at a measured rate while knowing that we have the drive power to face an uncertain future. We appreciate your confidence and will now open the floor up to any questions.
spk06: Thank you. At this time, we'd like to open the floor for questions. If you would like to ask a question, please press the star key followed by the one key on your touchtone phone now. Questions will be taken in which the order they are received. If at any time you need to remove yourself from the questioning queue, please press star two. Again, that is star one to ask an audio question. Our first question will be from Bill Chin from Live On Partners.
spk02: Hi, guys. Hey, Bill. Hey, Bill. How are you? Good, good. Good to connect with you guys. I got a few questions. The first one is on Doc79. I looked at the Q2 leasing and occupancy, which is 92% fees and 90% occupied. In Q3, the leasing went down by 1.6%. Occupancy is up by 4.3%. Could you just help me interpret what that means when leasing percent is down 1.6% and occupancy is up 4.3%? It's not obvious. The
spk03: The reason for that kind of quirky disparity is that I think when we are two months out from a lease being renewed, if the lease has not yet been renewed, then we do not count that unit as a lease, but it remains occupied. OK.
spk02: So from an economic perspective, is DOC-79 trending lower or higher? I guess it's a question I'm trying to ask based on these Q2 and Q3 numbers.
spk01: I think it's still, say, DeVilliers. It has been a little slightly off. and predominantly because of the retail businesses not operating at 100% occupancy. And so we're losing a little bit. We did not get the overages in rent payments that we did last year because of the baseball and just the success of the retail tenants. and also the parking that we get from people driving to the baseball games and to the soccer games and also to the retail components. We're not getting that right now either. So we'd like to think that all that will wrap itself back up in, you know, the spring. But the good thing is that the occupancy seems to be holding. For example, I think at the end of October – We were 94% occupied, and we were a little over 93% leased. So we think that we're faring the pandemic pretty well down there. But the rent freeze obviously is an issue, and that looks like it's going to, for our renewals, that looks like that could probably creep over into the first quarter of 2021 and possibly a little bit longer. We just don't know. Absolutely.
spk02: And if I could have a follow-up on the retail, you know, I was down there in August and obviously a very lovely area in the summer by the waterfront. But as we go into the winter season and there's no baseball, any thoughts on kind of the retail tenants, their ability to weather the Q1 and Q4 and Q1?
spk01: Generally, Bill, they're lesser profitable months for them from November through March. One of the things that everybody is doing, and far more so, is they're trying to make the exterior spaces usable, which is not something that they really spent a lot of time on before. We have an extensive amount of outside area, as you probably know, And so all of the tenants are using as much of the space as we can offer them to create areas where people can come eat and drink outside. I think we're trying to get a hold on the market for propane heaters, but that's one of the things that they're all really working towards because that seems to be a much more safer and much more usable way to keep these restaurants performing as best they can. Thank you.
spk02: Can I ask other questions, or do you want me to go back to the queue? Keep going if you want. Sure. Okay. On the aggregate business, I mean, phenomenal performance, but how do I think about – How much of that is driven by commercial construction versus single-family construction versus any sort of infrastructure? As I think about commercial construction, my understanding is that if the projects were in place already, you keep going, but I don't think anyone is starting any commercial construction right now. You know, we got to see some sort of, you know, drop-off effects on the commercial side. You know, the single-family side seems to be strong, and that seems to be the case for quite some time. So any thoughts on how do we think about the aggregate business going forward?
spk03: There's sort of a... I'm happy to answer the question. There's a... The kind of traditional breakdown of what kind of jobs drive aggregate sales is single-family homes, commercial construction, and then infrastructure. And one of the reasons that Florida is such a great aggregates market is that you know, compared to other states, single family homes, home construction are a much stronger component of that mix than, you know, than your other states. So, obviously, we have no idea what the future holds, but the... I think as people want to get out of, you know, bigger cities and into kind of the Sunbelt areas like Florida, you know, because of COVID, Florida, which is a huge part of our, you know, aggregate assets is going to benefit tremendously from that and Georgia as well.
spk02: Thank you. Thank you. That's very helpful. Thank you very much. My final question would be, and then we've got one final question, then I can follow up offline, is that on Bryan Street and 1800 Half Street, One of the thoughts, I mean, the docks have been done well relative to the D.C. market, but Bryan Street and 1800 Half Street doesn't necessarily have the luxury of those locations. Are you guys revising downward, or how are you thinking about what's the rent achievable versus what you guys have previously underwrote those projects to, given the, you know, I think New York City is suffering rent. You know, I've seen rent down 15%, but D.C., I think I've seen somewhere in the high single digits. and obviously occupancy is lower as well. But any kind of thoughts on what's in line for Bryan Street and making that a half street as we bring that to market?
spk01: I guess, Bill, this is David DeVilliers. Obviously, when we got into these projects, we weren't anticipating something like COVID. But I think the underlying, you know, possibilities are still there. They might just be pushed out a little bit. I mean, these projects, you know, are opportunity zone assets. And so just by their very nature, we were pretty conservative in our estimating lease up and also of the initial rent structures because they are in pioneering areas, right? And And so, for example, Bryant Street's not really going to be open for leasing other than the small building of 150 units, just because that's how the construction process is going, you know, until next summer. And the thing that drives, you know, that area, obviously, is public transportation. I mean, we literally, the red line literally dumps right out at the second station north of Union Station, and And there's just not that many people, you know, riding the public transportation right now. So it's going to be slow as you go. But, you know, we're still, you know, very optimistic about the long-term aspects of that and also for Half Street. You know, the area is still there. And Half Street is a little different because we would put Half Street a little bit more along the lines of what we hope to be successful as the marines and docks, but You know, down there, you've got the water, you've got sports, and probably even gambling down in that area. So you've got a lot of different things that want to keep that area kind of moving forward. And, again, Bryan Street's a little different, but it's a transit-oriented program, and like everyone knows, the transit-oriented programs are, you know, under a little bit of scrutiny right now in the short term because of COVID. But we... We were cautiously optimistic going in. We still remain cautiously optimistic, and we have had – we're looking at some – at least in our underwriting, we were planning on a fairly substantial lease on time. Okay.
spk02: One follow-up on 1800 Half Street. I've been down there and looked at that site. Okay. Is there any way that we could work with Vulcan on getting an easement on the waterfront so that people could kind of walk towards the Navy Yard from there rather than, like, going around? Is that a possibility? Well, probably not. Everything's a possibility, but probably not. Probably not.
spk03: Unless you have a PBL and you can drive a ready-mix truck. What's that? Unless you have a commercial driver's license and you can drive a ready mixed truck, they're probably not going to let you on the site.
spk02: Yeah. I mean, there's no way where you could kind of offer some financial incentive because I'm assuming that if we wait until 2026 for them to vacate that space so that you can kind of like walk along the water. It may make financial sense to get that built sooner, you know, rather than five, six years.
spk01: I think it also has to do with what's going on around us too. We're looking at the other properties and the other property owners. you know, that are kind of surround the, you know, our site on the river. And there will be different ways to access riverfront. It just won't be across Vulcan's property. Yeah, that's true. Yeah, that's true.
spk02: Okay. Well, those are all the questions that I have, and I'll follow up offline with you guys. I'll let others ask questions. Okay, thanks, Bill.
spk06: Thank you. Our next question will be from Stephen Farrell from Oppenheimer.
spk04: Hi, guys. Can you hear me?
spk02: Hi, Stephen. Yes, sir.
spk04: How are you? It was a relatively quiet quarter in respect to new projects besides the construction beginning on the Hollander Business Park. Was this more related to confidence in existing projects?
spk01: We have a lot of projects under development. now, as you know, from the apartment side, and I thought it was relative to development. We are massively under development, as I mentioned in my remarks in the apartment side, and it took a while to get the building permits from Baltimore City in order to be able to start the new two buildings in from Hollander Business Park, and we have a couple of pieces of ground under contract right now that we're looking at the possibility of increasing the warehouse platform once again from an opportunistic standpoint. So even though I guess the operating incomes were a little flat, the development side is going about as fast as it can go.
spk04: And You mentioned the residential projects and inventory remains tight. Do you feel sort of a sense of urgency to get those to market while the market is supportive?
spk01: Well, yes. We have actually three of them, two of them which are lending ventures. Both of those, we sold one of them. We're under contract with National Home Builders on the other one. and we have substantial deposits from them for that one. The third one, which is the Hampstead overlook, which has been tough because we had to change the zoning on that from industrial to residential, and we have to meet the criteria of both the town and the county, which is always an interesting dynamic. But that area of the country, being Carroll County, is considered one of the finest places to raise a family. I didn't make that up. I just read it. We're pretty excited about that, but we're very concerned about doing it the right way and seeing how people receive the different ideas that we come up with. We think we're in a good place, we're in a good location, and we keep pushing forward, to your point, as quickly as we can so that we try to hit the market.
spk04: Great. With regards to the Lee County right-of-way option exercise, does this impact mining in any way?
spk02: Potentially.
spk03: So the area where the right-of-way is going is between phases of mining that Vulcan has going on. I think if the county moved as fast as they possibly could, it would be an issue for Vulcan just in terms of getting material from the phase one part of the quarry to their land. It doesn't take away any reserves or anything like that. potentially be a headache if the county moves before Vulcan is done mining with phase one, but that doesn't appear to be an issue yet. And the benefit of that is that it incentivizes Vulcan to mine as fast as possible on that phase one land. So it could be a logistical headache, but in terms of reserves, it doesn't impact it.
spk04: Great. And there's often talks about an infrastructure plan and the mining revenues have been at an all-time high. At your properties, is there additional capacity if there were to be an infrastructure deal?
spk03: Yes. Do you know if it's going to happen?
spk04: No, that's the hard part. But just kind of wanted to know about volumes and price escalations.
spk03: Prices can always go up, which is the beauty of prices. But no, there's definitely room for growth on our assets. And we would obviously... regardless of who the president is. Hopefully they recognize the urgency of an infrastructure bill, which is not only necessary, but would be great for business.
spk04: Great. That's the only question I have.
spk06: Thank you. Our next question will be from Kevin from BMI Capital.
spk02: Hi, how are you guys? Can you hear me? Yes, sir. Yes, sir. Okay, great. I just wanted to comment. The website looks great. When did that happen? That happened pretty recently? Yeah.
spk01: Yeah. It was a... This is Dave DeVilliers. Thanks for bringing it up. It took us about 16 months, and we launched it literally about a week or so ago. Awesome.
spk02: Awesome. Well... I just wanted to ask you guys a follow-up question. The high-level narrative of the apartment business, is this where you guys kind of see the best place to allocate the 1031 money in this development and credit cycle, or is FRP basically going full steam and becoming really an apartment and residential multifamily company going into the future? Is it kind of marching down that direction?
spk01: I'll take the first shot, John, and then you can correct me if you think I'm missing something. We've expanded our development platform from just slowly being warehouse and, of course, being an aggregate company. And we moved into the apartments through the development of our properties that were experienced. And so we kind of let the land tell us what it wants to be. The warehouses kind of got us to where we are. And we're still very much interested in maintaining that warehouse development program, albeit different that we want to rather than hold them for a long term, we look to opportunistically exploit their value and dispose of them sooner. which is certainly an example of what we did with our latest building down at the Hollander Business Park. As soon as we got that up and it got leased, someone wanted it from an e-commerce standpoint, and we were happy to sell it. So I would say we are heavily involved in development and development. in apartments, and we'll probably continue to do so, but not without looking over our shoulder, obviously. But more importantly, location is critical to us. We want to find places where population is growing. But we certainly are not forgetting where our roots are, which is obviously the aggregates and also the warehouse platform.
spk03: Yeah, Kevin, to follow up on what David was saying, As far as where the future of the company is going, we've got a pretty healthy pipeline of future multifamily projects that are already in the works, so to speak, whether it's phase 3, phase 4, 664E, where Vulcan is right now. definitely our future has multifamily in it, but I think as far as deploying capital, we're somewhat agnostic when it comes to our asset base. We love industrial right now, and we'll continue to deploy capital into industry. you know, developing land to start building more warehouses. If we could get, you know, if we had an opportunity to expand our aggregates business, we would do that yesterday. We, of course, love that business. And then multifamily we're obviously a big fan of. So, you know, I don't think there's any one asset base that we – you know, want to dominate a future capital employer.
spk02: Awesome. Yeah, and those buildings look great. And it kind of sounds like you guys are staying opportunistic within the real assets class. And the board has been really rational in its recent decisions. So best of luck. Thanks, guys. Thank you, Kevin. Thank you.
spk06: Thank you. Our next question will be from Herbert Klotz from DM Windsor Capital.
spk02: Hey, guys. Good morning, Herbert. Good morning. I echo everything Kevin just said. I'm super excited about the new website. It looks great. As you all think about this expansion and allocating you know, some of the remaining proceeds from your industrial sale. Can you all just talk about sort of markets of conviction? I mean, John, you just outlined a pretty exciting pathway with sort of looking at, you know, obviously the agri-business, but also maybe, you know, maybe a deeper dive back into the old roots on the industrial development side. I mean, where are your markets where you guys are excited about right now?
spk01: Well, I can take a crack at that. Herbert, we're We still remain pretty excited about the Northeast, where we kind of started up here in the mid-Atlantic. It's still a major population area. And from a warehouse perspective, you can reach almost 2 thirds of the population in an eight hour drive with a truck. So it's a pretty major market. Baltimore, Maryland, Washington, D.C., Northern Virginia is still an awfully strong market for warehousing. And that's kind of where we grew up and we keep our focus on that. We like the, like I said before, we like the populated areas, areas where people continue to move. We have moved out of D.C., as I said earlier, into Greenville, South Carolina, with our new strategic partner, Woodfield Development. They have done a tremendous amount of apartments down throughout the southeast. We went to Greenville. We kind of fell in love with that because of the area. It's business climate. It's warm. There's a lot of young people there, and there just seems to be a lot of vibrancy down there in that area. So I guess to answer your question, we're looking for two things. One, areas where we believe that there's growth, and then two, partners that we can join forces with that we can do repeatable development. And that's kind of hard because we've We're not passive by any stretch of the imagination. We're pretty active developers, and so you want to make sure that the groups that you join forces with are compatible. So between location and seeking out third-party platforms, it's an interesting dynamic.
spk02: Thank you. Yes, that's very helpful. And I guess just real quick, you know, particularly with the DC portfolio and the multi-sides, are you starting to see any sort of headwinds as far as collections are concerned, or do you feel pretty good about sort of the creditworthiness? You spoke to the retail, and actually that sounded relatively positive, but just more on the multi-front, are you folks seeing any sort of headwinds with collections, or do you feel pretty solid about the residents in place and sort of their ability to continue to pay rent, you know, as this pandemic kind of continues to last longer than anyone wants?
spk01: Well, I think... Go ahead, John.
spk03: You can obviously fill in the details. Of course, we had no expectation of COVID and a corresponding economic slowdown when we signed the tenants that we have right now, but I think it speaks to our property manager, just kind of the good work they did on the on the front end that I believe other than maybe one tenant, we have not had any rent collection issues. And that's just because of the quality of the tenant base that we had in place prior to the pandemic hitting.
spk02: Well, I'm sorry. I just took that on the call. I thought that was just in regard to the resale. I didn't realize that was in regard to all the multi. That's fantastic.
spk03: Yeah, I know. We have one retail tenant and one residential tenant.
spk02: Oh, wow. Excuse me, guys. Well, that's incredible. That almost sounded too good to believe. Well, that's great. Well, fingers crossed that it keeps going in that direction. Awesome. Well, thank you so much. Very exciting. Thank you.
spk06: Thank you. Our next question will be from Curtis Jensen from Lobati & Company.
spk05: Good morning, folks. Curtis, how are you? Can you hear me? Curtis, how are you? Yep. I'm doing great. I'm on 1800 Half Street. I guess you got the construction loan in Q2, and I'm curious about how banks are kind of lending on those projects, given what's going on with COVID. I mean, would the banks be looking at, you know, lending against your expected cost of construction, or are they kind of trying to look at it on a stabilized value basis? And, you know, given uncertainty about maybe real estate markets, there's more squishiness than what a stabilized value might be. I mean, how are they thinking about their LTV? And, I mean, is it still sort of like 65% of an expected value, or can you just give me a sense of that?
spk01: It's a little lower than 65%. I'm sorry. It's a little lower than 65%, probably closer to 55% and 60%. And they do look very heavily at our costs. And, of course, like anything, they look at the people that are seeking it. They're looking at the borrowers and do they have the experience to get these things to happen. So they have become far more conservative than before. But then we weren't looking, we have never really looked to maximize the loan to value as we've been going into these things. We've usually stayed around 60 or 60, as much as 65%, but that was with an EB-5. But this one, we are probably a little less than 60% loan to cost on this one.
spk05: Are you seeing or getting a sense around the DC market that you implied, I guess, that the lending is getting a little tighter? Is that impacting any other developers? I mean, are people having to, you know, shelve some development plans? And kind of is there any impact to supply based on, you know, this environment?
spk01: I think people are slow-walking developments in certain areas, Curtis, for sure. It takes a lot of equity to get into these things, and that's the beauty of FRP. As you know, we're very liquid. I think we had about $165 million in the bank at the end of September. And again, the banks are very cautious about who – They lend to, number one, and number two, the percentages of loan to cost. And both of those have become a lot more critical.
spk05: At Half Street, is that going to be sort of, are you targeting sort of the same demographic as the Marin and Dock 79? I mean, is it kind of the same demographic that eventually you think will be occupying the buildings?
spk01: Well, that whole area down there seems to be more millennial-oriented, but the units that we've designed, our underwriting is conservative. Again, I think, like I mentioned earlier, Half Street, like Bryant Street, are Opportunity Zone investments. And as you know, we're required to keep these assets for 10 years. And it's very beneficial if we do that because of the capital gains deferral. And so our underwriting of these projects is certainly different than the ones that are not Opportunity Zone. And so we've looked a little bit more with a conservative eye of Lisa. You know, someone mentioned, why are you building a building behind a concrete plant? Well, you know, the answer to that is in the short term. One of the great things about Half Street is when that building gets up and ready for lease, it just so happens that the timing is that there won't be another building coming online when that one does, but Half Street.
spk05: Yep. 1801 62nd Street, the sale proceeds, I guess, are in the balance sheet as of the end of the third quarter, right? Yes. Was it $12 million or something like that? They were not on the balance sheet at Q2, but they're in cash as of September? That is correct. All right. Let me give you a pitch here. If I showed up with a duffel bag full of $10 million, would you sell me the two acres at Buzzard Point?
spk02: No. It would take me more than that. Where Vulcan is?
spk03: Yeah. No. No, we would not.
spk02: No.
spk05: Yeah. What kind of number would it take to get you guys out of there and turn the... I'm asking you a bit against yourself here.
spk03: Yeah. To give up control of that property. More than $10 million, but less than $1 billion. Something like that. Yeah. Yeah. I know that we have a, you know, hard and fast number in our head. I think, you know, what is, David, do you remember what land right now in Buzzer Point is going for? Is it kind of the $70 to $80 per, you know, FAR, something like that? Yeah.
spk01: Property service is going for about 80, actually, and on the waterfronts even more. There's a premium to waterfront. But relative to Buzzard's point in the area that we're talking about, that ground has been going for $80 plus per FAR foot. And we're thinking that the land that Vulcan sits on is somewhere between 300,000 and 350,000 square feet of land.
spk03: of building so you could do the math but that you know and that but that would be just for uh you know kind of your your vacant land i think we have a tenant in place that pays good rent so you know that that yes yeah we're not in you got four million in the bulkhead too i guess right a few years ago yeah
spk05: Are there opportunities to, you know, do more kind of like the lending on single-family types of projects where, you know, home builders are looking for land, maybe they don't want to put up capital to, you know, buy their land, they're short of land, and looking for land. I mean, are there things to do there? Yes.
spk01: Yes. Curtis, we do that. We have a couple of people that have a tremendous amount of residential experience. And the reason why we wanted to get into that, I guess, into that business or that platform is that we have a pretty good eye. We believe that we have a pretty good eye for choosing land and have a lot of knowledge in land development. and the home builders have gotten away from buying raw land and entitling it and going through the infrastructure development, either because they don't want to or because they aren't allowed to. And so we look for areas where there's, let's call it, filling the hole of the donut. The ones that we're doing right now, It's hard to believe that those properties are under development when everything around them has got houses on them. So we spend a lot of time just kind of looking for land in areas that we feel have the need for additional supply. And certainly, we have a couple of areas up towards Delaware that we're looking at. We're also down in PG County. So we're pretty selective. And more importantly, we really don't look to get into these things unless we kind of have a builder that's interested and willing to put up a little bit of a deposit up front and maybe a lot of the deposits as we go through. So it's got a lot of things have to kind of line up for us to actually, you know, get involved in a certain piece of ground.
spk05: And the last question, thank you, the last question is that the sale of the 87 acres at Fort Myers, is that part of the 1,900 or so acres you had at Fort Myers? Did it involve any of the entitled lots there?
spk03: It does not involve the entitled lots. This was an option that the county had that went back a ways and It was actually pretty critical to the future success of those lots. So they did not take anything that's going to impact our ability to develop that land, but it was part of the 1,900 acres there.
spk05: So if anything, it was a modest positive for future developments.
spk03: you know, modest, essential to future development, and the money is good, too. Okay, yeah.
spk05: All right, thanks very much. Keep up the good work. Thank you, Curtis. Thank you, Curtis.
spk06: Thank you. I'm showing no further questions at this time.
spk03: All right. Well, thank you again for your support, and we obviously appreciate your interest in the company, and that's that.
spk05: Talk to you next quarter.
spk02: Talk to you next quarter.
spk06: Thank you, ladies and gentlemen.
spk02: Thanks, everyone.
spk06: Thank you, ladies and gentlemen. That concludes today's teleconference. You may now disconnect.
Disclaimer