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spk02: The following is a recording for John Milton with Florida Rock Properties on Thursday, March 4th, 2021 at 8 a.m. Central Time. 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 open the floor for questions. Instructions for asking questions will be given at that time. I would now like to turn the conference over to John Baker II. Mr. Baker, you may begin.
spk07: Good morning. My name is John Baker, and I'm Executive Chairman and CEO of FRP Holdings, Inc. With me today on the line are David DeVilliers, Jr., our President, John Baker III, our CFO, David DeVilliers III, our Executive Vice President, John Klopfenstein, our Chief Accounting Officer, and John Milton, our Secretary. Before we begin discussion of the quarter's results, let me remind you that any statements on this call which relate to the future or by their nature subject to risk and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These risks and uncertainties are 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 except as imposed by law as a result of future events or new information. Now, let me turn to the results. Net income for the fourth quarter of 2020 was $393,000, or four cents per share, bringing our net income for the year to $11 million, $615,000 or $1.21 per share versus $16,177,000 or $1.63 per share. The lower results for 2020 were driven by lower investment income as interest rates fell dramatically during the year and by greater losses on our joint ventures, especially the Marin and Bryant Street, which had high interest and depreciation expense and operating losses as we built our rent rolls from zero at both locations. These losses were partially offset by gains on property sales, including our three remaining lots in the Lakeside Business Park, our depleted mining site at Gulf Hammock, Florida, a right of way through our Fort Myers property, and our newly completed and fully occupied warehouse in our Hotlander Business Park in Baltimore. During the year, we made good progress on our new developments at Bryant Street and Half Street in Washington, our two mixed-use projects in Greenville, South Carolina, and at the Marin, where we completed the construction of the second phase of our Anacostia property and expect to achieve 90% occupancy this month. Additionally, our mining royalties business had record results, and we negotiated new 12-year interest-only loans on DOC 79 and the Marin at a fixed rate of 3.03%, with total principal on the two loans of $180 million. The loan on the... Doc 79 replaces a 4.15% loan, and on that property alone, we will save over $1 million a year in interest. Finally, during the year, we repurchased 510,145 shares of our stock at an average cost of $41.78. while still leaving ourselves with $150 million of cash and equivalents at year-end. Let me turn over the call to our President, David Duvalier, who will walk you through our various projects. David?
spk08: David Duvalier Thank you, John, and good day to those on the call this morning. Let me now add a bit of detail to the highlights John provided in his opening remarks. As to our asset management segment, With the disposition of our final two heritage properties in 2019, we completed the liquidation of a little over 4 million square feet of assets that made up this business segment, leaving just the company's 33,000-square-foot multi-tenanted home office building in Sparks, Maryland, and the now vacant lot in Jacksonville, Florida, that at one time housed Florida Rock Industries' home office that remains under lease to Vulcan Materials. Earlier this year, we transferred from the development segment, 1801 62nd Street, our completed 94,350 square foot speculative warehouse building in Baltimore City. The building became 100% leased and occupied in the first quarter of 2020, and we subsequently completed the sale of the asset in July of 2020, realizing a gain of some $3.8 million. In early 2019, we added an asset to this business segment through the purchase of the Cranberry Run Business Park in Aberdeen, Maryland, a 268,000 square foot multi-building warehouse park that was in dire need of rehabilitation. We spent the remaining months of 2019 and part of 2020 completing an extensive renovation of the park and associated buildings. During 2020, we received significant leasing success, bringing the park from 26.1% at the beginning of the year to 87.6% occupancy at year's end. Total revenues for the asset management segment for the quarter were up 44% to $658,000 over the same period last year with an operating profit of $36,000 versus a loss of $213,000 in the same quarter last year. Increased revenues and profit this quarter were mainly attributable to approved leasing at Cranberry Run. In the mining and royalty segment, total revenues for the quarter were $2,383,000 versus $2,274,000 in the same period last year. Total operating profit was $2,089,000, an increase of 2.5%. over the same period last year. And of particular note, as John said earlier in his opening remarks, this business segment experienced the highest revenue numbers for the year in our company's history. With respect to ongoing and new projects in the development section, highlights would include, one, at year's end, phase one of our joint venture with St. John's Properties consisted of four buildings totaling 72,080 square feet of single-story office buildings and 27,950 square feet of small bay retail space in Baltimore County, Maryland. Leasing efforts procured one retail tenant despite the pandemic who took possession in the fourth quarter of 2020 with lease commencement in January of 2021. As a result, the project is now 46.7% occupied overall, a 2.7% increase over 2019. At completion, this project will consist of 329,000 square feet of office and retail space. Secondly, we continue with the PUD entitlement process at Hampstead Overlook, our 118-acre development tract in Hampstead, Maryland. The concept plan approved in the first quarter of this year calls for 164 single-family and 91 townhome units. We are currently seeking preliminary plan approval from local agencies as the next step in the development process. We are optimistic that 2021 will be the year of substantial progress towards this goal. Third, as an update to our lending ventures, All of the entitlements were completed this year at Hyde Park in Baltimore County, Maryland, and a home builder purchased all 126 residential lots prior to the commencement of any land development activities. All principal and accrued interest has been repaid and part of the profits have been received. Additional profits are expected to be received in 2021 and early 2022, resulting in an overall return of our $3.5 million investment of over 27% or a little over $1 million. Four, relative to our other lending venture, it is also a residential development project called Amber Ridge and located in Prince George's County, Maryland. Our total commitment for this project is $18.5 million. As with Hyde Park, The investment includes a charged 10% interest rate and a preferred return of 20%, above which a profit-induced waterfall determines the final split of proceeds, similar to Hyde Park. Entitlements are complete, land development has commenced, and two national homebuilders are under contract to purchase all 187 lots after completion of the horizontal development. Phase 2 of our riverfront on the Anacostia Project in Washington, D.C., known as Marin, as John alluded to earlier, began leasing in March and received a final certificate of occupancy for the building in September of 2020. By year's end, 87.5% of the apartments were leased and 84.1% were occupied. far out exceeding expectations despite the pandemic environment. Of note, the apartments are expected to reach occupancy by the end of this month. Relative to the 6,900 square feet of first floor retail, 76% of the space is leased with occupancy currently scheduled for the third quarter of this year. As with Dock 79, This is a joint venture project with Mid-Atlantic Realty Partners, or MRP, in which FRP is the major partner. Six, at the end of 2018, we entered into a third joint venture with MRP to develop the first phase of a mixed-use residential and retail development adjacent to the Red Line Metro Station in northeast Washington, D.C., known as Bryan Street. As a transit-oriented development, immediate access to public transportation options is a critical feature to the design and marketing of this project. FRP contributes $32 million in common equity and another $23 million in preferred equity to the joint venture, all of which were capital gains dollars. Construction began in February of 2019, and the project at year end is 82% complete. The first building delivery, entitled CODA, consisting of 154 apartments, was completed at the end of December, and our leasing team has produced 34 leases as of the end of February, making this building 25% leased. On time and within budget, we expect to deliver the remaining three phases of Phase 1 and Q3 of this year. Not unexpectedly, we are keeping a watchful eye on the completion of construction and the delivering of such a large project during the pandemic. We believe leasing activity should increase as the critical mass of vaccinations are completed and we approach herd immunity, thereby allowing a certain return to normalcy that hinges on people moving about freely, a linchpin to the attractiveness of this project. This property is located in a designated opportunity zone, which allows us to defer a significant tax liability. In total, phase one at Bryan Street will consist of 487 apartments and 86,100 square feet of first floor and freestanding retail. Approximately 44,000 square feet of the retail is pre-leased. Seven, in December 2019, The company entered into its fourth joint venture with MRP for the development of a mixed-use project known as 1800 Half Street. And in August of this year, we began construction. The development is located in the Buzzard Point area of Washington, D.C., less than a half mile downriver from Dock 79 and Marion. It lies directly between our two-acre site on the Anacostia River, currently under lease to Vulcan Materials, and Alley Field, the home stadium of the D.C. United professional soccer team. The 10-story structure will have 344 apartments and 11,246 square feet of ground floor retail and is scheduled for completion in the third quarter of 2022. This project is also located in an opportunity zone, and FRP contribute $37.3 million of capital gains as common equity. At the end of 2019, we entered into two joint venture agreements with Woodfield Development, a new strategic partner, to invest in the two distinct projects in Greenville, South Carolina. Woodville has vast experience developing residential and mixed-use projects throughout the Southeast and Washington, DC. Our first JV, called Riverside, It's a 200-unit multifamily project in which FRP contributed $6.2 million in capital gains in exchange for a 40% ownership interest. Construction began in Q1 of 20 and is on schedule to be complete in the third quarter of 2021. This is a qualified Opportunity Zone investment. Our second joint venture with Woodfield is a 227-unit multifamily development entitled .408 Jackson, which is a nod to Shoeless Joe Jackson and is adjacent to Greenville's minor league baseball stadium. This project will also include 4,700 square feet of retail space. FRP has received a 40% ownership position in this project in exchange for $9.7 million in capital gains funds. Construction began in May of this year and should be complete in the third quarter of 2022. This is also a qualified opportunity investment, and along with Riverside, will allow us to defer a little over $4.3 million in federal taxes. Closeout 2020. In November, we completed the purchase of a 55-acre tract of land in Aberdeen, Maryland. adjacent to the cranberry run business park we paid 10.5 million dollars for this property this project will be known as cranberry run phase two and could support up to 675 000 square feet of warehouse product in a robust distribution market this purchase will expand our industrial land holdings to allow us to continue the industrial development program beyond the remaining undeveloped building lot in Hollander Business Park in Baltimore City. We are currently petitioning for annexation to bring all parcels of this property into the same municipal boundaries. This process will take a year, and we will begin the design process in the interim. Existing land leases for the storage of trailers on site will help to off-site our carrying and entitlement costs. We are hopeful we can begin construction here in late 2022 or early 2023. Moving on to our stabilized joint venture business segment, in July of 2019, we completed a partial 1031 like-kind exchange by investing $6 million for a 26.65% beneficial interest in a Delaware statutory trust, or DST, that owns a 294-unit garden-style apartment community known as Hickory Creek, located in Henrico County, Virginia. The complex was constructed in 1984 and substantially renovated in 2016. The business plan calls for further rehabilitation of the apartments, generating value-added rents prior to selling the project after an appropriate hold period. We continue to receive monthly distributions from operations in Hickory Creek. Fourth quarter distributions were $85,000 and $339,000 for the year. Occupancy averaged above 95% for the year, with a collection rate and 12 COVID-related payment plans representing less than 3% of revenues. Relative to DOC 79, the average occupancy for the year was 93.1%, down from 95.1% last year. This past quarter, retention rate was 60.4%, similar to the same period last year. Rental rates, however, were flat due to government-imposed restrictions on rent increases due to COVID. Net operating income for the quarter was $1.55 million, down $270,000, or 14.77%, over the same period last year. All in all, DOCS 79 fared quite well during the year, despite the significant interruptions we all experienced throughout 2020, generating a net operating income of $6,652,000, down 7.1% over 2019. Keeping our eyes on resident retention, finding creative solutions to help our tenants weather a difficult new reality, and optimizing expense savings continues to be our primary focus as we navigate this property through the pandemic. Those seriously impacted by COVID with shutdowns, reduced capacity, canceled stadium events, and general uncertainty, our three retail tenants at Dock 79, which total approximately 10,500 square feet of the total 14,000 of retail space, seem to be holding their own and looking forward to warmer weather and better utilization of their outdoor spaces. The remaining retail suite is being actively marketed, but we are being quite selective as to vendor and use. Full occupancy is expected in late 21 for the retail program. DOC 79 was our first joint venture between MRP and FRP, in which FRP is the major partner with a 66% ownership position. We have touched a few times on the impact COVID has had on FRP. Make no mistake, we are not immune to the effects of this terrible global disease that has monopolized the world's attention throughout 2020. FRP has significantly adjusted its operations, withstood infected employees and contractors, held the hands of tenants paralyzed by new government regulations preventing their opening for business, and witnessed the carnage of life and enterprise at many turns. All the while, we are immensely grateful that as a business, and a collection of professionals, we stand atop a solid financial foundation that uniquely enables us to progress as an organization with a steadfast mission that followed closely should insulate us from much of the troubles others face. Thank you, and I'll now turn the call back to John.
spk07: Thank you, David. Now we are at this point happy to open up the call for any questions that any of you might have.
spk02: And at this time, we will open the floor for questions. If you would like to ask a question, please press star followed by a one on your telephone keypad. Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, press star two. Again, to ask a question, press star one now. And our first question comes from Bill Chen. Please go ahead. Hey, guys. Hey, Bill.
spk05: Hey, Bill. A couple questions. I'm probably going to jump around a little bit. I think there's an Alamo draft house in the Bryant Street project, if my memory serves me correctly, and they just filed for bankruptcy yesterday. Is there any updates on whether we're going through with the Alamo draft house as a tenant on the Bryant Street project?
spk08: Bill, this is David Duvillier. We know about the parent filing bankruptcy about the same time you did. The lease that we have is with the franchisee.
spk04: Okay.
spk08: And they have three different, this will be the third, and they have two other operations that are open. Okay. but certainly not to the extent that they would like them to be. So we don't know fully yet. We speak with them probably on a biweekly basis. So, again, we're aware. We're just going to have to see what that fallout does. The building is under construction. We're going to get to a white box, you know, program, and then we'll try to figure it out from there. They were expected to come and start working on the interior of the project sometime this summer. So the time could be better if we can get to herd immunity, but that's kind of about where we are now.
spk05: Got you. And just in case for some reason, you know, that Can we repurpose that space if needed? I mean, you know, a movie theater has kind of got a certain layout, which may be different than a typical layout. So any color in that would be helpful.
spk08: Again, if the building is designed for, you know, for them, as you may or may not know, 65% of their revenues is derived from food and beverage. So, you know, it can be – I won't say it can be repurposed easily or quickly, but it can certainly be repositioned, you know, for other retail uses.
spk05: Got you. Okay. And I'm just going to jump around a little bit. I hope you guys don't mind. On Cranberry and Broad, you know, great job getting that repurposed and leased up. Can you guys share what kind of rent we're getting on that building?
spk08: Well, when you say what kind of rent, a lot of these spaces there, Bill, are temporary spaces. We call temporary leases plus or minus a year. And so our original underwriting was for something a lot less than what we're getting now. When you do storage for temporary spaces, again, we paid about $30-some dollars a foot for that building and then put a bunch of money into it. So we've got a pretty low basis. But then the leases we're generating are well beyond what we had originally underwriting.
spk05: That's you. And the intention there is, is it, you know, refresh my memory, I guess the intention there is to sell that?
spk08: Well, you know, everything's for sale, as you certainly know from our past activities. I mean, the paint was hardly dry on the Hollander building before we sold that one in June. So we just, you know, again... we don't know, we don't make any plans to sell something right away. We just look at the market and we try to be as opportunistic as possible in the sale of our assets.
spk05: Got you. Thank you. And I think the new acquisition, the $10 million acquisition, the Aberdeen, that's right next to Cranberry. Is that right? Yes, sir. And was there, like, what did you guys see that made that attractive?
spk08: Well, it's surrounded by the large box institutional warehouses. It's a great location. It's a great location. It's close to 95. And as you know, where we're located there in the northeast, you can get to a major part of America's population in less than an eight-hour drive. So we... And more importantly, it helps to put a little bit of inventory back into our program. I mean, for years, we probably had too much inventory. And before we bought that, we had one lot left at Hollander Business Park that could take as much as 100,000 feet. Now, we were out. But primarily, we love the location.
spk04: Got you. Got you.
spk05: And on local rent dynamic, I think the headline is generally that in Richmond, Virginia, I think I saw something in the mid single digits rent increase for 2020. Just want to get a confirmation on that. I don't know if that happened in the DSP property. So if you could comment on that. And also, If you could comment on rent trends in Greenville, South Carolina, you know, if that is a market that experienced rent growth in 2020.
spk08: It has, excuse me, as you can imagine, 2020 has been a very unusual year for everybody in every asset class. I think I'd rather be in the mixed use and warehouse class than the office and retail, but So it's really kind of hard to tell. It's somewhat of an anomaly. We've seen positive signs in both Richmond by virtue of some of the increases they got at Hickory Creek. But, again, when you're dealing with a pandemic, it's awful hard to put any real credibility on rent increases or whatever. So, for example, in D.C., as you know, the government wouldn't allow us to increase rents. We see a favorable trend. We see the trend continuing. I think it kind of bumped along in 2020, but we're very, very excited about, you know, these vaccinations and the return to, you know, to people moving about freely. And I think that will show a tremendous chance to increase rents all around, especially in places that had success before this came. Mm-hmm.
spk05: And just one last question before I dropped off. So, you know, I'm looking at the apartment rents in COTA for the Bryant Street project. It seems like the asking rent is about 280 a square foot for the COTA building. Can we extrapolate that to the rest of the Bryant Street project? Well,
spk08: The CODA building is a little bit – is probably the lower end. I won't say the low end, but a lower end than the Chase, which are the two buildings that are a little closer to the railroad and on the other end of the park. So CODA's units are just a – I would say just a touch below. So we're going to see greater rent at the Chase, which are the two buildings that are under construction now. So we have given a little bit more of a discount than we had underwritten in the beginning, you know, 5% to 7% maybe. But we've only been open for two months, and we've leased 34 units as of February 28th. So, you know, the game's afoot. We feel really good about, you know, the project. We'll be excited when, you know, when the spring comes and we finish the project because, you The great thing about this project is there are a lot of open space, and that's important, you know, a very important factor for the retail component and also for the people that live there.
spk05: Got you. Thank you very much. I think that's all the questions that I have.
spk02: Okay. Thank you. And our next question comes from Curtis Jensen. Please go ahead.
spk06: Hey, good morning, fellas. Can you hear me okay? Yes, sir, Curtis. Well, congratulations on getting through the year. Your business held up amazingly well, and you got a heck of a lot accomplished. You were very busy, and it was pretty remarkable. But two or three questions, if I could. Just thinking about the – some of the sub-markets in D.C., like Southwest and Capitol Hill and Capitol Riverfront, there was, I think in the last year, something like 3,900 units delivered into those markets and across a dozen buildings or so. You've got big commitments at Half Street and Bryant Street. How do you feel about, and there's probably been positive absorption and sounds like you guys are doing a great job getting leased up and stuff like that, but it, you know, given your significant footprint already and, and given what you've learned about this public health experience, are you inclined to keep putting, you know, big checks into the DC area or, you know, if you had a, you know, are you, Obviously, you're thinking about other things. You spent $10 million for property and light industrial in Aberdeen and stuff like that. Just give me a sense of where you think you might be allocating. Are you kind of done for the moment in D.C.? Obviously, there's stuff at Buzzard Point coming down in the years ahead, but I mean, how are you feeling about this market right now and the multifamily market given all these cross-currents?
spk08: I can offer a couple of comments, and then, John, I guess you could appreciate your insight to this as well. We've talked about this, Curtis. I mean, look. The southeast of Washington, D.C., where we're located is literally the southern entrance to the nation's capital. And the new Frederick Douglass Memorial Bridge, the infrastructure improvements with the Oval, and all of that that's under construction, which has created somewhat of a nightmare for all the people that live there and walk around there. we see a very strong, you know, a strong increase in the people. They continue to move into the area down there, the younger people. And you can argue that with the change of the way people work, where they don't go to offices, they like to live in, you know, in nicer places. And there's a tremendous amount of live-work-play type of activities in and around, you know, the southeast. I mean, you've got sports and baseball and soccer, you have the water, you have sports betting, you have a lot of different positive influences on that area. So we're still pretty, we're still pretty bullish on the area. I mean, obviously, it's not without a little trepidation. But we, we continue to take a look at what what's in front of us. And as this quote, we reach herd immunity, and we see where things kind of play out, I think at that point we'll take a look at where we are and decide and kind of look at the tea leaves and squeeze the old crystal ball and see where we think things are at that time.
spk06: Fair enough.
spk08: Go ahead. Sorry.
spk07: Curtis, this is John Baker. I would say we are very bullish on the area in buzzard point and phases three and four of our Anacostia property. So, you know, we were very surprised, pleasantly surprised at how quickly the Marin leased up. I think we were figuring that we would get 15 units a month and we got a lot of months two or three times that. So... We've got every reason, both because of what happened before COVID and during COVID, to have a lot of faith in that part of the market. We're going to watch Bryant Street, as David mentioned in his thing. That's a multi-phase thing. building and we're starting off with a big hunk of apartments and retail. So we'll watch that one to see if it leases up. We're off to a decent start, but it really won't be fair to analyze that market until people start using the metro again, and we get some resolution on what happens with the Alamo Drafthouse Theater. So, less optimistic about that, but, you know, we would be prepared to go forward if we could get at least up in a reasonable amount of time on phase one. So, to answer your question, we're anything but done in D.C.
spk06: On phase three and four, do you have to wait until the bridge is done before you can get going there? Or I know there was some, you had some situation with the city, I guess, around an easement or something like that. But do you have to kind of wait until the bridge is done before you get going there? Well,
spk07: to the answer to the question would be um probably would want to wait till it's done but more importantly with us building the building at half street we wouldn't think about starting a new project until we get that up and rent it out so um either way it's going to be the bridge is going to be done and i don't know if you've seen it the bridge and that uh roundabout that they're going to have there is really looking beautiful. I never thought that bridge would be an amenity, but it is gorgeous, and so I think it has added something to the whole area.
spk06: I guess they're going to take down the old bridge, right? The old one will be taken down in time? Yeah. Right. On Doc 79, you said the NOI was $6.6 million, I think. Were there added expenses? I mean, I'm sure there were probably added expenses, you know, related to COVID precautions and things like that, expenses that you think will go away that you can take out, you know, once the public health issues abate a bit. Absolutely. Or do you think you're going to keep running the building the way it is?
spk08: If we – excuse me, COVID, this is David DeVilliers. Absolutely. I mean, we had a lot of expenses because of keeping it sanitized and that sort of thing that we would not have under normal conditions, for sure.
spk06: Would that be like a few hundred thousand dollars annually, or is that –
spk08: It could be. It could be.
spk07: That's probably high. That's probably high, Curtis. But the real play on that is that in our retail, we had been getting excess rents, especially during the World Series year and, you know, as opposed to being shut down and hoping to get rents. So I think that's where you'll see an improvement as we come back. And also, you know, our rent was 93, our occupancy was 93% at Dock 79 as opposed to 95 the year before. That's an impact. Average occupancy. Average occupancy. And the rent freeze. Yeah, and and we were unable to raise the rents where it's interesting at Marin our rents are what David about 10% higher than they are at the dock. So there's there's room to rent to raise rents when that freeze comes back or ends, I should say. So I think you'll see. Doc 79. get improvements in a lot of ways, not the least of which was as we were building the Marin, I'm not exaggerating, we had heavy construction going on 20 or 30 feet from Dock 79, and that could not have helped the leasing activity. And that's, of course, done now. So it'll be a lot more mature place and I think a very, very desirable place.
spk06: Great. You know, when I think about Hyde Park and Amber Ridge, it seems like you guys, it seems like an opportunistic kind of mezzanine lending opportunity. maybe that's not the right phrase, but that's how I think about it. Knowing what's going on, home builders are dying for land. Do you see other opportunities like those coming down the pike?
spk08: Yes, Curtis, we do. As a matter of fact, we have one that's fairly close to the uh, to us making a charge. Uh, but you're absolutely right. I mean, it's been, it's been an interesting dynamic, obviously trying to navigate, have our, you know, our partner navigate through, uh, 2020 dealing with entitlements, you know, from government agencies that are closed down, that sort of thing. And to be able to get, to get one of the projects sold, uh, And then to get all the entitlements on the other one during this year has really been pretty remarkable. But we look at really good areas where we can find the hole in the donut, and that's what these two are. And we have other ones that we look at, but they have to meet – we have some pretty rigid criteria before we're going to become part of a lending venture. But we have a really good partner who has been in the residential sector development business and the past president of actually a couple of the national home building companies who's our partner, and we've known for over 25 years. So we're pretty excited about the Lending Ventures program, and it also we don't want to take our eyes off what our real business is, you know, and that is industrial development and then certainly now mixed use.
spk06: And then I'll shut up in a second. My last question is, you know, can you just remind me of the kind of obligations you have in an Opportunity Zone? Are they, you know, is there sort of an 80-20 low-income type of obligation, or what sort of other obligations do you have when you go into an Opportunity Zone?
spk08: Well, the big thing is, obviously, in a lot of these, you have a certain percentage in different locations of what we'll call affordable housing, and those dynamics change depending on the location. But more importantly, it's the whole period. You know, you have to It defers, we have to, the current program with Opportunity Zones is that you have to settle, you know, you have to settle on the property by the end of 2021, and then that, you have to then keep the property at least through, I believe it's 2027, and then you pay You owe the taxes on those capital gains monies that you invested in 2021. You owe taxes on 85% of that. And then, more importantly, if you go past 2021, the monies that you invest in these projects, you have to keep them up and operating for 10 years. And if that happens, then... the basis is frozen and you don't have to pay taxes on the increased basis if and when you ever sell the property. That's the big program is the deferral of taxes in the short term, but the freezing of the basis. So whatever happens, you don't have to pay taxes on the increased basis when you ultimately do sell it after that 10-year hold period.
spk06: Okay. Thanks a lot. Keep up the good work. Thank you.
spk02: Thanks for your support. Thank you. And our next question comes from Steven Farrell. Please go ahead.
spk01: Hi, guys. Can you hear me? Yeah.
spk02: Yes.
spk01: A quick question about Bryan Street. I know you mentioned with the Marin that your internal metrics were about 15 leases a month. What are your similar lease-up metrics for the COTA? And what kind of contingency plans are in place in case there's a slow lease up?
spk08: Well, COTA has actually been leasing at the rate of about 17 units a month for January and February. I mean, we're just kind of just getting started. And that's not a bad start, considering the fact that construction is going on all the way all around you. So we're pretty happy with what has happened at Dakota. We are, as John said, we're looking at that project closely. And as I said in my remarks, we're watching the construction completion. We have a lot going on as it relates to construction. generating the retail activity that we think will help to keep the leasing activity up and maybe even increase it. We are very conservative in our underwriting of these leases going in, so we're not that far off of what our underwriting criteria was at least to start at Bryan Street. We are giving out some, you know, and we change the pricing on these properties just about every day through the software programs that our property manager has, which is the Bizzuto companies. And they're very good and very experienced in running and operating these programs. So we're kind of following along with them. As it relates to the retail program, we have As John and I said earlier, we're watching to see what happens with the Alamo Draft House. That's 44,000 feet, but we have another, you know, 42,000 or 43,000 feet of first floor retail. And we've had some really good velocity from retail tenants, which is amazing. We've created a food hall concept that will occupy about 10,000 square feet of that. And we have an incredible amount of velocity. We've actually got a couple of letters of intent that we're going to lease on. So, so far, so good.
spk07: And, Stephen, to answer your question on a less optimistic point of view, we've got $150 million in cash, and that's what our backup is if things don't go well.
spk01: Great.
spk07: Thank you. That would enable us to keep paying the loan. Stephen, you're breaking up. We can't hear you. Stephen, I'm sorry we can't hear you. I think it's frozen.
spk02: Yeah, we lost him. All right, and as a quick reminder to our audience, if you'd like to ask a question, please press star 1 now. We do have a question here from John Kohler. Please go ahead.
spk03: Good morning, gentlemen. I'm Just a couple of follow-up questions from what Stephen was asking, if I may. Can you bracket your CapEx budget for this year? And then as a follow-up to that, if you can also sort of ballpark where you see funds coming in from either asset sales or refinancing and how you expect that to offset any cap spend you have.
spk07: John Kay, can you... Talk about the CapEx.
spk02: I don't have that figure right in front of me. David, do you recall the figure?
spk08: Yeah, what was the question? I'm sorry.
spk03: Yeah, what your cash outflow was looking like for all the projects you have and then how you might offset some of that from asset sales or the refinancing of of Marin or any cash that you might pull out. I'm just curious about how the cash flow looks for the year as a corollary to the $150 million that you already have in the bank. Okay. When you say for the year, do you mean 2020 or 2021? 2021, please. Sorry. Okay.
spk08: Well, we, again, John spoke earlier. We're going through some refinancing of both Marin and Dock That's going to generate $180 billion of new financing. One of the programs that that will do is the Marin, we are refinancing basically the construction loan into a long-term permanent financing. And when we go to settlement on that financing, which John talked about, we get $13,750,000 of preferred equity back plus accrued interest of about $2.3 million. So that's close to, what, $16 million there. Our CapEx right now for 2021 is scheduled to be around $36 million. So... That's kind of from 3,000 feet, but that's kind of where we are right now. We don't have anything under contract to sell right now, so I don't know that that will add cash. So if you take just the 16 that we know we're going to get back and you put that against the 36, it's probably a net capex of around $20 million that we would have to go into the bank. of our $150 million to take it out.
spk03: Okay, perfect. And I'm guessing, given the amount of money that's available pretty much everywhere, that potential deals of any material size are probably not within your price range. Is that a reasonable assessment, that you're seeing opportunity but they're not priced right?
spk08: We have a pretty strict underwriting criteria and we're always looking, but there's a lot of crazy money out there in the world today. But we look at a lot of projects. Last year we looked, I'm embarrassed to say, probably over 800 projects and we wound up purchasing 55 acres in Aberdeen, Maryland.
spk03: Yeah, that's That's great. That's the right filter in my opinion.
spk07: John, I think your point is a very good one. There are not many projects that are built and for sale that would whet our appetite because they're just expensive as can be. And that's exactly why we think developing these projects is a better business model than buying them right now.
spk03: Okay, great. And then lastly, your execution on the Sherry purchase was quite good, and I'm not asking for an opinion on where you view the stock price or anything like that, but given the lack of potential deals and depending on how your CapEx budget goes, would you still look to allocate some cash for additional repurchases where you thought the stock was inexpensive?
spk07: I think we've got about $10 million approved at this point by the board, and I'm glad you're not going to ask us what our pricing strategy is, but needless to say, we would rather pay less than more.
spk02: Okay. All right. Thank you very much.
spk04: Great.
spk02: Thank you. And next we'll go to Bill Chen. Please go ahead.
spk05: Hi, guys. On the refinancing of the Marin and Dock 79, we've seen the 10-year Treasury have some wild moves lately. Are those two transactions kind of like a foregone conclusion, or is there – Is there some way that those two financing could be derailed?
spk08: Bill, the rates that we quoted said today are fixed. We look to probably work deep into the documents now. We could probably get the settlement in over the next two or three weeks. So we're well within the confines of the time allocated to get the settlement here. And those loans actually were originally, they were on a 12-year average as opposed to the 10 and 180 basis points. So there was a floor on those loans when we first went into it that we couldn't lock in until we send in the application. But the floor was like 2.8%. We got, I won't say we got caught, and we wound up at 3.03%. No, this is, hopefully, we'll get to the end. There's no reason to believe that we won't, but crazier things have happened.
spk05: Thank you for the color. On the construction loan on the Marin, do we have an estimate on what that final number will be? The final number of what? For the Marin construction loan. I mean, I think it was roughly 63 or 65 million. I know the construction loan was approved for 71 million. Is 71 the final figure? It's 69 and a half.
spk04: 69 and a half. Okay.
spk05: Got you. Thank you. That's helpful. And I think I just want to leave off with my final opinion as a shareholder, that we believe that share buybacks are a great use of capital. And I would just encourage that as you continue to create a lot of value for shareholders, that the share buyback price is a moving target. You know, my suggestion would be don't get fixated on what you paid in the past. I think that number could rise over time. as these projects get developed and value gets created, you know, just be flexible on that end. And we can have, you know, I will reach out, you know, offline to discuss. But, you know, I just want to, you know, I think previous share buybacks have been done at very attractive prices. And I think future share prices should account for the increase in prices through, you know, all the good jobs that you guys have done.
spk07: Thank you. Thank you.
spk02: Thank you. And it appears that we have no additional questions at this time.
spk07: Well, I appreciate everybody joining the call. They were really good questions. Enjoy being with you all and appreciate your interest in FRP, and we'll talk to you next quarter.
spk02: Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
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