Five years ago, as the U.S. economy was beginning its recovery from the latest recession, FRP Holdings Inc. was suffering like many real estate developers.
“We were very long on land and we had buildings that were not full,” CEO Tom Baker said Wednesday at the Jacksonville-based company’s annual shareholders meeting at The River Club Downtown.
FRP operated about 2.8 million square feet of office and industrial space that was 72 percent occupied at the end of fiscal 2010.
However, five years later, FRP’s properties have increased occupancy to about 91 percent while also growing the portfolio to 3.7 million square feet of space.
“I think it’s a nice story of what we’ve been able to do,” Baker said.
FRP develops and manages commercial properties mainly in the Baltimore-Washington, D.C. market.
It also owns land in Florida and Georgia that is mined for construction materials.
The company was originally spun off from construction materials company Florida Rock Industries Inc. in 1986. One year ago, it split with trucking company Patriot Transportation Holding Co. into two public companies.
FRP’s progress in the past five years highlights the success of its land development activity, Baker said.
“It’s the segment that really fuels our growth,” he said.
From 2010 through fiscal 2015, FRP was able to turn 172 acres of raw land into 766,216 square feet of developed, income-producing property, he said. That property is expected to produce revenue of $5.1 million in the current fiscal year.
FRP’s total revenue was $34.6 million in fiscal 2015, which ended Sept. 30.
The company also sold five developed parcels for $27.6 million and reinvested the proceeds in other projects, Baker said.
Executive Chairman John Baker (Tom Baker’s uncle) said selling property and reinvesting is beneficial because it makes the sale tax free.
“We’re really taking advantage of the money we’re getting in a very efficient way,” he said.
One of FRP’s major projects under way is a mixed-used development on 5.8 acres in Washington along the Anacostia River, adjacent to the Washington Nationals’ baseball park. The first phase of the project, consisting of apartments, is scheduled for completion this year.
“That part of D.C. has exploded. It’s amazing what is going on there,” Tom Baker said.
While the commercial real estate business is growing, FRP’s mining royalty business is also doing well, with its net operating income growing by 12.1 percent last year, he said.
Baker said the concentration of the mining properties in Florida and Georgia is important because those are high-growth markets for construction. He also said those properties have the potential for a “second life” as real estate development properties once mining activities are done.
FRP on Wednesday reported earnings from continuing operations of 76 cents a share for the first quarter ended Dec. 31, up from 12 cents a year earlier. However, this year’s earnings included gains from a land sale plus a settlement of environmental claims on the Anacostia River property that added 57 cents per share to earnings.
Chief Financial Officer John Milton cautioned the environmental remediation benefit, which totaled $3 million, will be expensed in earnings reports for the second or third quarter in this fiscal year, so earnings in those periods will be lowered.
Baker is very optimistic about FRP’s outlook for fiscal 2016 and future years.
“I feel like we’re heading in the right direction,” he said.
“We still have a lot to go,” as far as land waiting for development. “We’re not anywhere near done.”