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.
spk01: Good day, everyone, and welcome to today's FRP Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your telephone keypad. Please note this call is being recorded and that I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to John Baker. Sir, please go ahead.
spk02: Good morning. I'm John Baker III, Chief Financial Officer and Treasurer of FRP Holdings. And with me today are David DeVilliers, Jr., our President, John Baker II, our Chairman and CEO, John Milton, our Executive Vice President and General Counsel, John Koffenstein, our Chief Accounting Officer, and David DeVilliers III, our Executive Vice President. As a reminder, any statements on this call which relate to the future are, by their nature, subject to risks 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 in our SEC filings. 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. To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures with the meaning of Regulation G promulgated by the Securities and Exchange Commission. The non-GAAP financial measure referenced in this call is Net Operating Income, or NOI. FRP uses this non-GAAP financial measure to analyze its operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. This measure is not and should not be viewed as a substitute for GAAP financial measures. To reconcile gap to net income, please refer to the segment titled Non-Gap Financial Measures on page 12 and 13 of our most recent earnings release. Now for our financial highlights from the second quarter. Net income for the second quarter was $598,000, or six cents per share, versus $657,000, or seven cents per share, in the same period last year. Second quarter of 2023, and when compared to the previous year, was impacted primarily by an increase of $2,281,000 in equity and loss of joint ventures from two projects in lease-up, an increase in management company expense of $235,000 due to new hires and recruiting costs, as well as an increase in interest expense of $390,000, offset by an increase in interest income by $2,005,000. First quarter pro rata NOI for all segments was $7,610,000 versus $6,550,000 in the same period last year for an increase of 16.3%. Net income for the first six months of 2023 was $1,160,000 or 12 cents per share versus $1,329,000 or 14 cents per share in the same period last year. The first six months of 2023 compared to the same period in 2022 were impacted by an increase in equity and loss of joint ventures of $4.3 million as we lease up The Verge and 408 Jackson, an increase in management company indirect expense of $300,000, an increase in interest expense of $658,000, offset by an increase in interest income of $3,489,000. The first six months of 2022 were also positively impacted by a $733,000 gain from property sales, which we did not repeat in the first six months of 2023. Revenue, operating profit, and NOI are all experiencing strong growth this quarter and for the year to date. Compared to the second quarter of 2022, we grew revenue by 11.1%. operating profit by 33.9% and pro rata NOI by 16.3%. For the first six months compared to last year, these metrics grew by 13.5%, 63.9%, and 24.5% respectively. And yet, net income has been more or less flat. The situation is not new to the company, but the product of development and lease up when equity and loss in joint ventures are at their highest and have a negative impact financially on our net income. This was the situation during previous lease-ups, and it is quite literally the cost of doing business. We count ourselves very fortunate that we have a shareholder base that understands the situation and is patient while we transition these products into stabilization and income production. I'll now turn the call over to David for his report. David?
spk03: Thank you, John, and good morning to those on the call. As I have done for the last few quarters, I'd like to provide you with a perspective on the results of the company from an operational standpoint. We report our business segments in designated silos, which are important in analyzing the company. However, operationally, we have overlap and synergies that are difficult to follow using the business segments as reported. So employing a day-to-day look at FRP, which we call our real estate operations, let me offer the following. Our real estate operations consist of a four-pronged approach that has been the core of our business programming since mid-2018 when we liquidated our legacy warehouse portfolio. One, in-house, which happens to be the same as our reported asset management business segment, includes our industrial, commercial, and land development platforms. These properties are developed, managed, and owned 100% by FRP. Two, mining and royalties. Three, third-party joint ventures, which as the name implies, are projects developed in conjunction with third parties, where FRP is the major owner but relies on seasoned and respected third-party operating partners to perform the lion's share of entitlements, construction, and day-to-day operations. And four, lending ventures, which we are the principal capital source for residential land development activities. Relative to our in-house or asset management platform, occupancy at our three buildings at Hollander Business Park since the beginning of the year, as well as rent growth on renewals at Cranberry, have produced a healthy lift to our NOI. As of last month, our buildings in Hollander, totaling 247,000 square feet, are fully occupied, helping to lift second quarter NOI for our in-house properties to $834,000 versus $681,000 in the same period last year. This represents a 23.8% increase. Our industrial pipeline is strong with three projects in the queue. The 17-acre parcel in the Perryman industrial section of Harford County, Maryland, not too distant from our other assets in Aberdeen, received its building permit this week for our planned 259,000 square foot warehouse building, which based upon current market conditions, we plan to commence construction this month. Pre-development activities on our 170-acre tract in Northeast Maryland are ongoing and pending favorable market conditions. We could break ground as early as mid-2024 on a 900,000-square-foot distribution facility at this location. Finally, our 55-acre tract of land in Aberdeen, Maryland, adjacent to the Cranberry Run Business Park, is being designed with multiple options to deliver several buildings or a single large distribution center. Options include 600,000 to 700,000 square feet under roof, depending on final design and market dynamics. Existing land leases for the storage of trailers onsite help to offset our carrying entitlement costs on this property. Depending on market demand, we could very well begin construction here in 2025 or 2026. Completion of these three aforementioned development projects will add over 1.9 million square feet of additional warehouse product to our industrial properties. That, when added to the assets already in operation, will create over 2.35 million square feet. Relative to mining and royalty, as John Third stated in his opening remarks, our mining and royalty division saw revenues for the quarter of $3,264,000 versus $2,883,000 in the same period last year. This is record revenue for any quarter in the mining and royalty segment for the second quarter in a row. NOI was $3,125,000, an increase of 14% over the same period last year. Moving on to our third-party joint ventures, currently we operate both underdevelopment and stabilized projects with four distinct partners, MRP, Stewart Investment Company, Woodfield, and St. John properties. The difference between under development and stabilized being a sustained occupancy level of 90% for a minimum of 90 days. As of 6-30, our JV platform includes six, or excuse me, seven mixed-use projects. Six mixed-use residential projects totaling 1,827 apartments and 198,000 square feet retail and one mixed-use office project, totaling 72,000 square feet of single-story office and 27,950 square feet of retail. Four mixed-use residential projects are located in Washington, D.C., where MRP is our joint venture partner. Our neighboring projects, Dock 79 and Marin, along the Anacostia River, where our partners include MRP Realty and most recently, Stewart Investment Company, remained healthy with occupancies of 95.4% and 94.3% respectfully at quarter's end, with all retail fully leased. Quarterly renewal success rates consist of DOC 79 at 65.31% and Marin at 39.6%, with rental rate increases of 3.74% and 6.6% respectively. Bryan Street, a multi-building, transit-oriented, mixed-use project located on the wetland in Northeast, contains three residential buildings as well as a movie theater, anchored retail building, and a flexible outdoor platform fully leased to a unique entertainment concept called Metro Bar. At the end of the second quarter, Bryan Street's three residential towers, totaling 478 residential units, were 93% 93.2% occupied and its retail components were 95.9% leased and 79% occupied. 67.25% of expiring residential tenants renewed their lease with a combined average rental rate renewal increase of 2.86% for the quarter. Our food hall, Bryan Street Market, opened in March and has seen early success with eight of nine stalls leased, and the first four tenants have opened for business. A grand opening for the Bryan Street Market is planned for the fourth quarter this year. The Alamo Drafthouse Theater and Entertainment Venue continues to see greater revenues that have been enhanced by blockbuster films such as Mission Impossible, Oppenheimer, and Barbie. Our fourth and newest mixed-use residential project in the district, Verge, received its final certificate of occupancy in the first quarter and is showing strong performance at 68.6% leased and 43.3% occupied. A significant boost in leasing over the first quarter with nearly half or 45% of retail spoken for as of the end of June. In terms of velocity, we gained occupancy of 22 units per month on average during the second quarter at Burge. Moving on, our two projects in Greenville, South Carolina with Woodfield Development as our development partner are seeing great success. Riverside and its 200 apartments was 95.5% occupied and renewed 61.76% of expiring leases with rental rate increases of 11.96% for the second quarter. 408 Jackson was placed in service during the fourth quarter of 22, and at quarter's end, its 227 apartments were 85.9% leased and 76.2% occupied. Another strong performer in lease up, 408 demonstrated a significant boost in occupancy over the second quarter. averaging 29 units per month. Its retail component is fully leased and targeting an opening date in the fourth quarter of this year. Relative to the six aforementioned mixed-use residential joint venture projects, FRP's share of NOI was $3,290,250 versus $3,049,948 in the same quarter last year. 7.9% increase. The last, or seventh, mixed-use project that makes up our third-party JV division is undertaken with St. John's Properties, a pioneer in flex and office development and former National Developer of the Year. With St. John, we are developing windlass run in Baltimore County, Maryland that includes 72,080 square feet of single-story office and 27,950 square feet of retail. This project is now 62.79% leased and 48% occupied overall due to an increase in lease space over the second quarter as a result of a new 12,000 square foot office lease. NOI for this past quarter for this asset was $109,213 versus $102,400 over the same period last year, or a 6.7% increase. Lending Ventures, the last leg of our operating stool. This is a program where we provide working capital toward the entitlement and horizontal development of single-family residential projects and ultimately a sale to national home builders. The first of our two current projects is Amber Ridge in PG County, Maryland, with a total commitment to this project of $18.5 million. The investment includes a charged 10% interest rate and a minimum preferred return of 20% above which a profit-induced waterfall determines the final split of proceeds. All but 23 of the 187 lots have been taken down as of June 30, and $19.6 million of principal interest and profits has been returned as of the end of the quarter. The final 23 units providing additional profits are on track to be taken down by year-end. Our other current lending venture is called Presbyterian Homes, which is a 344-lot, 110-acre residential development project in Aberdeen, Maryland. We've committed $31.1 million in funding under similar terms as Amber Ridge. The National Home Builder is under contract to purchase all of the lots, which include 222 townhomes and 122 single-family dwellings. Horizontal construction has begun, and we expect the first lots to be taken down in Q4 this year. In closing, we are pleased with the company's performance this quarter. I would be remiss not to mention the headwinds facing us. In Washington, D.C., the volume of new apartment units being delivered is significant. We'll present a challenge for our leasing terms and could impact our rental rate expectations. Additionally, a rising interest rate Environment presents challenges for construction material pricing and availability as well as affordable financing terms. On a positive note, competitive developers who may not be buttressed by a balance sheet like ours might not be able to obtain or have the available capital to construct projects like our upcoming 259,000 square foot warehouse facility at Chelsea Road. We have flourished in a constantly changing environment due in no small part to the strength of our financial foundation and the consistent efforts of our talented teams. We look forward to building upon our successes and finding new ways to exploit our skills in the marketplace. Thank you, and I'll now turn the call back to John.
spk02: Thank you, David. At this point, we're happy to open the call up to any questions you might have.
spk01: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you would like to remove yourself from the queue at any time, you may press star 2. Once again, that is star 1 to ask a question. And our first question will come from Curtis Jensen with Rabadi. Your line is open. All right, we'll move next to Stephen Farrell with Oppenheimer. Your line is open.
spk05: Good morning. How are you? Good morning, Stephen. First question, regarding your comments about the construction loans, what is the sensitivity of rental rates in relation to construction loans?
spk03: I don't quite understand your question.
spk05: In other words, with development on the sidelines, how do you see the restriction of new supply affecting rental rates?
spk03: Well, obviously, all of the construction loans out there are restricted. floating, right? So, for example, year over year, these interest rates have gone up for us between 3.5% and 4%. The market's going to dictate what the rental rates, we've talked about our rental rates have actually done pretty well and favored pretty well over the last 12 months, whether they're already there through trade-outs and lease-ups. I think where the big pull is going to come from, Stephen, is Our buildings are done, and so we don't have to worry about what's happened with the increased construction costs and material pricing because that's behind us. So I think that's probably the big issue. And, you know, trying to get out and start a new building with these kind of interest rates is going to be very, very difficult, I think.
spk05: And at what level do you think it does make sense either – from a rent level and increase in rental rates or cost perspective?
spk03: Well, again, these rental rates are really not subject to anything other than the market. There is a lot of competition in D.C., especially with a lot of the new units coming on. So that drives your rental rates. We look at the rental rate market for all of the competition every day And so we raise and lower prices depending on the type of unit, the location of units. So that kind of does its own thing. Interest rates we can't control. The only thing we can do is decide not to start something. But if the interest rates continue to go up, obviously they do have an impact on our operating cash flow.
spk02: David, what would you say the interest rate on a typical construction loan would be today? Okay.
spk03: Well, for example, the three that we have at Bryan Street, that's 7.4% as of June, the end of June. That's probably the biggest. We have another one at 7.2% and another one at 7.4%. So they've literally gone from the threes up to the sevens. And they usually run on a sofa, an average 30-day sofa. and anywhere from 2.25 to 2.50 basis points. But anything coming out today, the new loans or the basis points are in the mid to high threes. So it's another interest rate point with the new stuff rather than the existing.
spk02: Yeah, I think you'd have to see sustained growth really high increases in rental rates in order to justify taking on that kind of construction loan to build.
spk03: You do.
spk02: Yeah.
spk03: For example, our Riverside property in South Carolina, we got almost a 12% increase in our rental rates for all the tenants coming due in the second quarter. That's a dramatic increase. But you're going to need, as John says, some sustained, not to be that high, but you do need to have some pretty strong rent growth to be able to support these kind of interest rates.
spk05: And longer term, maybe two to three years down the road, I would think that restricting the supply and development being on the sidelines would be beneficial to properties like Bryan Street and just rental rates in general. Do you think you have a similar view? Yeah, I think that'll definitely help.
spk02: David, you can answer that.
spk03: Well, it's interesting, Stephen. You're absolutely right. We do. There's going to be a slowdown in deliveries in 25 and 26 because of that. It takes, you know, basically two years to build these things. And the fascinating thing that's happened throughout the country is that, you know, during COVID, there wasn't a whole lot of construction. So it got ramped up late in the year and early in 2021, which has led to a lot of units coming online over the last six to nine months, you know, causing a record number of units available in the market now. So as the project leads up, you know, then there's going to be the whole thing is going to change. And we think 25 and 26 could be great years for rental rate increases.
spk05: And maybe I missed this in the call. Do you have an updated timeline for development of phase one of the Stewart deal? I know you just said now you'll need either big rent increases or. reduction in the rates on the construction loan but do you foresee pushing it back farther maybe 2024 end of 2024 25 what are your thoughts on that well we're still what the plan right now Steven is we're going through the entitlement process which takes a while we want to get it ready
spk03: which should probably be sometime here in this quarter, the beginning of the fourth quarter. And then we'll take a look at all of the metrics, right? Part of our deal, and we usually don't go into these things without guaranteed maximum prices from our contractors, and we have everything lined up, not to mention the fact it's a good construction loan. So I would doubt unless something changes dramatically, that we would consider starting that in 23, not to mention the fact starting something in the winter in Washington is not very favorable from an efficiency standpoint. So probability says that we wouldn't get into that probably until sometime in 24, again, if the market conditions dictate such a thing.
spk05: And turning to industrial, I think, We have starts are down and we're starting to see some pressure on rents around the country. Is it as similar as supply and demand dynamics around Baltimore?
spk03: Not so much. The development is somewhat restricted. For example, where our Chelsea property is, which is the one that I mentioned earlier, which is getting literally ready to start this week, there's a moratorium on all new construction in the area. So we're like, not only is it tough for certain people to spend that kind of money to build a building, they're not accepting any permit applications. So we're like the only game in town starting literally now, and it'll come on a year from now. And we're excited about that market because the vacancies are very low and the rental rates have done very, very well. I mean, the vacancies are still well below the pre-pandemic norms. It's a very tight market.
spk05: And with the timing of the phase one of Stewart being pushed back, do you envision using cash to opportunistically invest in additional industrial properties or just developing the pipeline?
spk03: We're always looking for value add opportunities. Stephen, for example, our Cranberry-run business park was that, which we've enjoyed some really strong results in that property over the last several quarters. We're always in the market for value-add stuff, for sure. And if something comes along and it works and it doesn't require so much rehabilitation or refurbishment and the numbers work, we'd absolutely consider it.
spk05: And have you seen any opportunities in non-development properties or maybe the seller might need liquidity or anything of that nature?
spk03: We haven't yet. We're very particular in who we do business with. We've got a pretty strong team of folks in MRP and Woodfield, St. John, And so we're very careful as to being out in the market and looking for other platforms that would be in a joint venture type of business. That would be a tough one. We're always looking. We look at properties every day in certain areas. Obviously, throughout the Northeast, North Carolina, South Carolina, we've got our eye on, obviously, because we've got projects in. in South Carolina. But so, yeah, we're always, we're looking in the banks that we've been dealing with and the lenders, you know, know who we are and the fact that, you know, that we're fairly strong from a balance sheet standpoint and we're good boots on the ground operators. You know, so many of these people would develop properties before, There's a lot of fee developers out there that would build them and sell them and move on to the next one. We've historically been pretty strong in managing these assets. We think we bring a lot to the table with our joint venture partners for sure.
spk05: That's good. Thank you for taking my questions. Once again, that is
spk01: Star 1 to ask a question. And next we have Curtis Jensen with Rabadi. Your line is open.
spk06: Hey, good morning. I got cut off earlier, so it was my fault, but I apologize if I'm redundant here. I have a couple of questions, and the first one is sort of about presentation, specifically when I go from the text your text disclosure in the press release, kind of like the tables, and it seems to me even get a little cloudier when I think about the GAAP accounting for all this. But like to take an example, Bryant Street. Is Bryant Street considered stabilized at this point? It's been 90 days, about 90%? No, sir.
spk03: It has not reached it yet. It's going to probably make it next quarter. We still got, you know, just because it's leased, it's got to be occupied. And the residential is not quite there for 90 days, which is what kind of the mark that we put on it. And the retail is still having people move in. But it was close.
spk06: So when I go to the tables and I see the development segment and I see like the three months results of it, The lease revenue is $467,000. Is that Bryant Street's lease revenue, your portion of Bryant Street, or is there something else, or is Bryant Street lease revenue disclosed somewhere else?
spk04: Good morning, Curtis. This is John Klopfenstein. Our unconsolidated joint ventures, which includes Bryant Street, the Verge, Riverside, all the Greenville, you know, 4A Jackson, They're all unconsolidated, so from a GAAP perspective on our income statements, they don't run through revenue or expense. They all run through that one line on the income statement that you find on the main page called equity and loss of joint ventures. But we are going to be filing our 10-Q today, and in the footnote about our joint ventures, you'll find a breakdown of each of those joint ventures' income statements showing the revenue and expense.
spk06: Okay, so when I go into the tables in your press release and I see development segment, that's not going to include Riverside or Bryan Street or anything like that, anything that's somewhere between development and stabilized.
spk04: It does not. And it won't be included in stabilized joint ventures in revenue and expense either in the future once it stabilizes because those aren't our revenues. They're our joint venture partners' revenues. You'll have to refer to the table I'm talking about in the footnotes. Okay.
spk06: And then I guess for GAAP purposes, it'll continue to be showing equity and loss or equity in joint ventures.
spk04: That's exactly right. It will always be there.
spk06: All right. So the only two things in your table that are considered stabilized joint ventures are the MARIN and DOC. So that's been consistent over time.
spk04: That's correct. Yes, Riverside is not reflected in that table in the revenues and expenses because of the gap treatment that's required.
spk06: All right. I just hope you, I mean, it is, I understand how you disclose it as a, like Bryant Street's a mixed-use joint venture between, you know, FRP and MRP, but it's not disclosed the same way. If I were a first-time reader, I'd say, okay, I'm going to look under joint ventures. And then I go to the table and I'd say, oh, that's stabilized joint venture. But that's, you know, I've been around the company. Anyway, it's a little bit confusing to me and I've been around the company for seven years. I guess the last bit.
spk04: Let's get feedback. We'll see if we can improve that disclosure in the future to highlight.
spk06: I only say it because the NOI from your you know, multifamily and mixed use is going to be coming bigger and bigger and bigger over the next couple of years. And then, of course, you've got a whole other stream of income coming on in asset management. So as, you know, from a place of trying to analyze the company, I'm going to have to go from kind of book value, asset values, development kind of assets to income-earning, income-producing properties. And it's going to be harder to dissect all of this if there isn't some more disclosure about that, I think. Anyway, I don't want to hold us up on that. But on the verge, and again, I apologize. I'm being redundant here. you know, consistent with your heads in beds philosophy, are you having to offer a lot of incentives to get people over there or unusual incentives or is it just kind of, you know, are you pretty happy with it?
spk03: We're actually pretty happy with it right now. As I said, we've been moving a lot of people in and we actually did a temporary a temporary program with a group called placemaker, which takes on, which actually takes it on 27 units as of June one. And then they lease them. They master lease effectively that way. So we're really, and so that's 27 units that we would not have been able to get occupied that quick because they, interestingly enough, that they rent these spaces to professionals and that kind of thing for, You know, a minimum of 30 days. And, in fact, when they moved in in June 1, they took all 27 units. We have them for a year, and we're wondering, and that's a – we kind of do a 60-40 split. We get 60% of the revenues, and then get 40. And the price is leasing up so quick, we're wondering if that was a great idea or not. But, no, things are going very well at the Burrs. But, look, we are giving one to one-and-a-half months. which is not overly penal, but just like we did with CODA and that kind of thing, when you open these things up in December, the early months of the year and the late months of the year are not the best months to be opening up for lease. Now that we've come into the summer and to the fall, the rents are getting a little stronger, as you can see. So far, we're pretty happy with it. One of the concrete plants has come down. That was in Stewart's side, so we're looking to animate that area just to the right of Verge. Of course, you've got the soccer stadium behind us. There's a lot of really good things going on over there. So we're pretty happy with it as of, you know, so far, so good.
spk06: Would you, and maybe this is jumping the gun a little, you know, you talked about an analyst day in October. Would you anticipate sort of a mini property tour again? Yeah, I think that would be part and parcel of it. Yeah, yeah, for sure. Circling back to Bryant Street for a second, did I hear there's still a construction loan on that, or are you moving towards mortgage? I mean, can a mortgage kind of come in under a 7.4 or whatever I heard David say is a construction loan?
spk03: Well, a permanent financing does. They usually come in about 150 basis points or more, less than a than the construction loan. But we've still got some wood to chop at Bryant Street. Obviously, the units, we showed average for the 487 units, the average renewal rate for the three buildings averaged about 2.86%. They went from 1.8 all the way up to 4.2%. So the residential side is starting to come into its own, where we feel The success of that project is really going to be, as it continues to mature, is in the retail. And Alamo, as I mentioned, Alamo has done, their sales are way up over last year, which was, I guess people still like the Barbie movies, but they've done very well, so we're happy there. Our inline retail, we have some new leases. They take a while to move the tenants in. And so the animation of that area and a sense of place is not there yet. So it's not the greatest project right now, both from a lending standpoint and just from as you walk around, it still needs to mature a little bit more. So, you know, we'll take a look at it at the beginning of 24 and see how things go. I mean, we do have a – we are looking at different options right now. We just haven't made a decision.
spk06: Is there anything going on across the street? I know there was a site across the street from Bryant Street that was – there was potential for development. Is there any movement there, or is it sort of – Is it an industrial site?
spk03: It is. It is. It's a couple of industrial-type buildings. Actually, one of them has a basketball court on the roof. But it's owned by a development entity. I believe they're going through the entitlement process and trying to figure out what they want to do. And that takes a while, as you know. We've been doing it down there since a long time. I'm embarrassed to say how long we've been doing it. So it takes a while. But like us at the Stewart property, we're going through the entitlement process. It takes time. And then if you see something that says you may want to change the use or whatever, then that adds more time. For example, our doc in Marin, we still have two more phases down there in phase three and four. We're going through a modification of that project that's going to take us about a year to change the use from office and hotel to residential. So it takes a while. But yes, to answer your question, there's some development, pre-development activity there across the street.
spk06: I guess I'll wrap up with one more question. It's sentimental lending ventures. Is that, you know, is the vision there to kind of strictly limit it to home builders? And is there a point when you say, let's wind it down? Or is this going to be an open-ended opportunistic lending venture? vehicle where you've got dedicated personnel? How do you see it?
spk02: Curtis, this was a great, great way to put money to use with a partner that David is at a relationship with for a long time going back. When we had post-sale a lot of cash on our balance sheet and no plans for it and you know, money market rates were roughly zero, um, this was a good way to get, um, a good return, uh, on our money and, you know, in a market and, uh, product type that we, um, were comfortable with. Uh, I think going forward, um, uh, you know, as we plan to put more and more money into, uh, our own income producing properties, uh, we'll be less likely to do, um, a lending venture.
spk06: Okay, I agree. I mean, I thought it was a pretty interesting way to deploy capital. I think you're getting good returns. It might be interesting if you have a page on that in your analyst day presentation to kind of summarize the ins and outs of the cash and the returns on that. It would be interesting. I guess it was an interesting way to take advantage of home builders who wanted to stay at that light and didn't want to commit and had options, you know, sort of used options to develop properties. Is that a way of thinking about it?
spk03: Well, there's some other ways, too. You know, the intangible advantages of that is that when the world knows that we're looking for property, whether it's residential or industrial, you know, it just gives us the ability to cast a wider net. For example, the property that we found at Chelsea, where the buildings are gonna go, those are two smaller properties that we put together. People know that we are active land developers. We've been doing it since the company opened in 1988. So it kind of keeps us out there in the market, and that's another advantage that this brings. But we have been very, very selective you know, on the choosing these properties. And we really don't, we usually don't even get involved unless we can buy them right, buy them wholesale and, and not even do that until the entitlements are there. So the risk is, is obviously is investing capital, but we would, we obviously don't have any loans and we certainly don't borrow money on these, but, So far, they've been very, very advantageous with IRRs 20% or above. But we are, as John said, we're going to take a look at it and see where the money is best spent, if it's spent at all or just invested. At least the returns right now on cash investments, I think, are pretty good right now.
spk06: Well, I'll just say keep up the good work. I'll Look forward to seeing you guys in October. And I don't know why anybody would give their money to a private equity real estate group when they can give it to you guys.
spk03: Tell everyone you know that. Thank you, Curtis. That's a very kind thing. Thank you, Curtis.
spk06: Have a good one.
spk01: And as a reminder, that is star one to ask a question. All right, and we have no further questions in queue. So I would like to turn the floor back over to our speakers for any additional or closing remarks.
spk02: Thank you all for your maintained interest in the company. I'd just like to offer a quick reminder. As Curtis referenced, we are holding an investor day on October 11th, 2023 in Washington, D.C. at our DOC 79 property. The event will feature presentations from our executive management team. And for information on the event and to RSVP, please email investorday at frpdev.com or check the investor relations section of our company's website. Thank you.
Disclaimer