Item 1A. RISK FACTORS.
Our future results may be affected by a number of
factors over which we have little or no control. The following issues, uncertainties, and risks, among others, should be considered in
evaluating our business and outlook. Also, note that additional risks not currently identified or known to us could also negatively impact
our business or financial results.
Risks Relating to our Business
A decline in the economic conditions in Baltimore
and Washington, D.C. markets could adversely affect our business.
Nearly all of our residential/mixed-use and commercial
properties are located in the Baltimore area and Washington, D.C. We are, therefore, subject to increased exposure to (positive or negative)
economic factors and other competitive factors specific to markets in confined geographic areas. Our operations may also be affected if
too many competing properties are built in these markets. An economic downturn in these markets resulting from factors outside of our
control could adversely affect our operation. Such a downturn could be triggered by such factors as the downsizing or relocation of government
jobs, crime or acts of terrorism. We cannot be sure that these markets will continue to grow or demand the type of assets in our portfolio.
We conduct a significant portion of our operations
through joint ventures, which may lead to disagreements with our joint venture partners and adversely affect our interests in the joint
ventures.
We currently are a party to several joint ventures
and we may enter into additional joint ventures in the future. In each of our existing joint ventures, the consent of our joint venture
partner is required to take certain actions, and in some cases will share equal voting control. Our joint venture partners, as well as
future partners, may have interests that are different from ours which may result in conflicting views as to the conduct of the joint
ventures. In the event that we have a disagreement with a joint venture partner as to the resolution of a particular issue to come before
the joint venture, or as to the conduct or management of the joint venture generally, we may not be able to resolve such disagreement
in our favor and such a disagreement could have a material adverse effect on our interest in the joint venture or on the business of the
joint venture generally.
Our business may be adversely affected by seasonal
factors and harsh weather conditions.
The Mining Royalty Lands Segment and the Development
Segment could be adversely affected by reduced construction and mining activity during periods of inclement weather. These factors could
cause our operating results to fluctuate from quarter to quarter. An occurrence of unusually harsh or long-lasting inclement weather such
as hurricanes, tornadoes and heavy snowfalls could have an adverse effect on our operations and profitability.
Our business could be negatively impacted by cyberattacks
targeting our computer and telecommunications systems and infrastructure, or targeting those of our third-party service providers.
Our business, like other companies in our industry,
has become increasingly dependent on digital technologies, including technologies that are managed by third-party service providers on
whom we rely to help us collect, host or process information. Such technologies are integrated into our business operations. Use of the
internet and other public networks for communications, services, and storage, including "cloud" computing, exposes all users
(including our business) to cybersecurity risks.
While we and our third-party service providers commit
resources to the design, implementation, and monitoring of our information systems, there is no guarantee that our security measures will
provide absolute security. Despite these security measures, we may not be able to anticipate, detect, or prevent cyberattacks, particularly
because the methodologies used by attackers change frequently or may not be recognized until launched, and because attackers are increasingly
using techniques designed to circumvent controls and avoid detection. We and our third-party service providers may therefore be vulnerable
to security events that are beyond our control, and we may be the target of cyber-attacks, as well as physical attacks, which could result
in information security breaches and significant disruption to our business.
Our revenues depend in part on construction sector activity, which tends
to be cyclical.
Our Mining Royalty Lands Segment revenues are derived
from royalties on construction aggregates mined on our properties. Thus, our results depend in part on residential, commercial and infrastructure
construction activity and spending levels. The construction industry in our markets tends to be cyclical. Construction activity and spending
levels vary across our markets and are influenced by interest rates, inflation, consumer spending habits, demographic shifts, environmental
laws and regulations, employment levels and the availability of funds for public infrastructure projects. Economic downturns may lead
to recessions in the construction industry, either in individual markets or nationally.
Our operations are subject to various environmental
laws and regulations, the violation of which could result in substantial fines or penalties.
Liability for environmental contamination on real
property owned by the Company may include the following costs, without limitation: investigation and feasibility study costs, remediation
costs, litigation costs, oversight costs, monitoring costs, institutional control costs, penalties from state and federal agencies and
third-party claims. These costs could be substantial and in extreme cases could exceed the value of the contaminated property. Moreover,
on-site operations may be suspended until certain environmental contamination is remediated and/or permits are received, and governmental
agencies can impose permanent restrictions on the manner in which a property may be used depending on the extent and nature of the contamination.
This may result in a breach of the terms of the lease entered into with our tenants. Governmental agencies also may create liens on contaminated
sites for damages it incurred to address such contamination. In addition, the presence of hazardous substances at, on, under or from a
property may adversely affect our ability to sell the property or borrow funds using the property as collateral, thus harming our financial
condition.
The presence of contaminated material at our Riverfront
on the Anacostia development site will subject us to substantial environmental liability and costs as construction proceeds.
With respect to
Phases III and IV of the Riverfront on the Anacostia site in Washington, D.C., preliminary environmental testing has indicated the presence
of contaminated material that will have to be specially handled in excavation in conjunction with construction. While we have recovered
partial reimbursement for these costs from neighboring property owners, we still expect to incur significant environmental costs in
connection with construction.
The Company has no obligation to remediate this contamination
on Phases III and IV of the development until such time as it makes a commitment to commence construction on each phase. The Company's
actual expense to address this issue may be materially higher or lower than the expense previously recorded depending upon the actual
costs incurred.
The geographic concentration of our properties
makes our business more vulnerable to severe weather conditions, natural disasters and climate change.
Climate change presents an array of risks to real
estate companies due to sea level rise, flooding, extreme weather, stronger storms and human migration. A significant number of our properties
are located in areas that are susceptible to hurricanes, tropical storms, flooding, sea level rise and other natural disasters. We have
accounted for the risk of flooding and sea level rise in the design of our Riverfront on the Anacostia development. Future developments,
including potential “second life” uses of our mining properties, could be impacted by these factors and the impacts that they
have on human behavior. Weather conditions could disrupt the business of our tenants, which may affect the ability of some tenants to
pay rent and/or their willingness to remain in or move to affected areas. [Additionally, the cost of insurance associated with our properties
has increased, and future weather conditions may cause premiums to increase in the future.]
Uninsured losses could significantly reduce our
earnings.
We self-insure for a portion of our claims exposure
resulting from workers’ compensation, auto liability, general liability and employees’ health insurance. We also are responsible
for our legal expenses relating to such claims. We maintain insurance above the amounts for which we self-insure with licensed insurance
carriers. Although we believe the aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible
that one or more claims could exceed our aggregate coverage limits. Additionally, there are certain losses, such as losses from hurricanes,
terrorism, wars or earthquakes, where insurance is limited or not economically justifiable. If the Company experiences an uninsured loss
of real property, we could lose both the invested capital and anticipated revenues associated with such property. We accrue currently
for estimated incurred losses and expenses and periodically evaluate and adjust our claims’ accrued liability to reflect our experience.
However, ultimate results may differ from our estimates, which could result in losses greater than accrued amounts.
We may be unable to renew leases or re-lease properties
as leases expire.
When a lease expires, a tenant may elect not to renew
it. If that occurs, we may not be able to lease the property on similar terms. The terms of renewal or re-lease (including the cost of
required renovations and concessions to tenants) may be less favorable than the prior lease. If we are unable to lease all or substantially
all of our properties, or if the rental rates upon such re-leasing are significantly lower than expected rates, our cash generated before
debt repayments and capital expenditures may be adversely affected.
We may be unable to lease currently vacant properties.
If we are unable to obtain leases sufficient to cover
carrying costs, then our cash flows may be adversely affected.
The bankruptcy or insolvency of significant tenants
with long-term leases may adversely affect income produced by our properties.
Should tenants default on their obligations, our cash
flow would be adversely affected, and we may not be able to find another tenant to occupy the space under similar terms or may have to
make expenditures to retrofit or divide the space. Additionally, we may have to incur a non-cash expense for a significant amount of deferred
rent revenue generated from the accounting requirement to straight-line rental revenues. The bankruptcy or insolvency of a major tenant
may also adversely affect the income produced by a property. If any of our tenants become a debtor in a case under the U.S. Bankruptcy
Code, we cannot evict that tenant
solely because of its bankruptcy. The bankruptcy court
may authorize the tenant to reject and terminate its lease with the Company. Our claim against such a tenant for unpaid future rent would
be subject to a statutory limitation that may be substantially less than the remaining rent actually owed to us under the tenant’s
lease. Any shortfall in rent payments could adversely affect our cash flow.
Our inability to obtain necessary approvals for
property development could adversely affect our profitability.
We may be unable to obtain, or incur delays in obtaining,
necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased
costs or abandonment of certain projects. Before we can develop a property, we must obtain a variety of approvals from local and state
governments with respect to such matters as zoning, density, parking, subdivision, site planning and environmental issues. Legislation
could impose moratoriums on new real estate development or land-use conversions from mining to development. These factors may reduce our
profit or growth and may limit the value of these properties.
Real estate investments are not as liquid as other
types of assets.
The illiquid nature of real estate investments may
limit our ability to react promptly to changes in economic or other conditions. In addition, significant expenditures associated with
real estate investments, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances
cause a reduction in income from the investments. Thus, the illiquid nature of our real estate investments could adversely affect our
profitability under certain economic conditions.
Our debt service obligations may have adverse consequences
on our business operations.
We use debt to finance our operations, including acquisitions
of properties. As of December 31, 2023, we had outstanding non-recourse mortgage indebtedness of $180,070,000, secured by developed real
estate properties having a carrying value of $246,804,000. Our use of debt may have adverse consequences, including the following:
· We may not be able to refinance or extend our existing debt.
Our uncollateralized revolving credit agreement
restricts our ability to engage in some business activities.
Our uncollateralized revolving credit agreement contains
customary negative covenants and other financial and operating covenants that, among other things:
· restricts our ability to incur certain additional indebtedness;
· restricts our ability to make certain investments;
· restricts our ability to merge with another company;
· restricts our ability to pay dividends;
· requires us to maintain financial coverage ratios; and
· requires us to not encumber certain assets except as approved by the lenders.
These restrictions could cause us to default on our
unsecured line of credit or negatively affect our operations.
Fluctuations in value of our U.S. Treasury debt
investments.
As of December 31, 2023, the Company had total investments
of $128,795,000 in U.S. Treasury Notes which mature through mid-2024. The Company measures the fair value of these investments on a quarterly
basis and recognizes the unrealized gain or loss in its comprehensive income. As a result, the Company’s comprehensive income will
be impacted by factors outside our control such as fluctuations in interest rates that impact the value of our investment portfolio. The
Company could incur losses should it sell the Notes prior to maturity.
We face competition from numerous sources.
As a developer of apartments, retail, flexible warehouse
and office space, we compete with numerous developers, owners and operators of real estate, many of whom own properties similar to ours
in the same submarkets in which our properties are located. If our competitors offer space at rental rates below current market rates,
or below the rental rates we currently charge our tenants, we may lose potential tenants and we may be pressured to reduce our rental
rates to an amount lower than we currently charge in order to retain tenants when our tenants’ leases expire. As a result, our financial
condition, results of operations, cash flow and ability to satisfy our debt service obligations could be materially adversely affected.
Construction costs may be higher than anticipated.
Our long-term business plan includes a number of construction
projects. The construction costs of these projects may exceed original estimates and possibly make the completion of a property uneconomical.
Building material commodity shortages, supply chain disruptions, construction delays or stoppages or rapidly escalating construction costs
may out-pace market rents, which would adversely affect our profits. The market environment and existing lease commitments may not allow
us to raise rents to cover these higher costs.
Risks Relating to our Common Stock
Certain shareholders have effective control of a significant percentage
of FRP's common stock and would have significant influence on the outcome of any shareholder vote.
As of December 31, 2023, our Chief Executive Officer,
John D. Baker, II beneficially owned approximately 15.8% of the outstanding shares of our common stock (79.4% of which are held in trusts
under which voting power is shared with other family members) and members of his family who are (i) officers or directors of the company,
(ii) required to report their beneficial ownership on Schedule 13D or Schedule 13G, or (iii) are members of his immediate family beneficially
own, collectively, an additional 21.2% of the outstanding shares of our common stock. As a result, these individuals effectively may have
the ability to direct the election of all members of our board of directors and to exercise a controlling influence over its business
and affairs, including any determinations with respect to mergers or other business combinations involving the Company, its acquisition
or disposition of assets, its borrowing of monies, its issuance of any additional securities, its repurchase of common stock and its payment
of dividends.
Provisions in our articles of incorporation and bylaws and certain provisions
of Florida law could delay or prevent a change in control of FRP.
The existence of some provisions of our articles of
incorporation and bylaws and Florida law could
discourage, delay or prevent a change in control of
FRP that a shareholder may consider favorable. These include provisions:
providing that directors may be removed by our shareholders
only for cause;
authorizing a large number of shares of stock that
are not yet issued, which would allow FRP’s board of directors to issue shares to persons friendly to current management, thereby
protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control
of FRP;
requiring the written demand of 50% of all votes
entitled to be cast on a particular issue in order for shareholders to call a special meeting;
prohibiting shareholders from taking action by written
consent; and
imposing advance notice requirements for nominations
of candidates for election to our board of directors at the annual shareholder meetings.
These provisions apply even if a takeover offer may
be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is not
in the Company’s or the shareholders’ best interests.
FRP may issue preferred stock with terms that could
dilute the voting power or reduce the value of our common stock.
Our articles of incorporation authorize us to issue,
without the approval of our shareholders, one or more classes or series of preferred stock having such designations, powers, preferences
and relative, participating, optional and other rights, and such qualifications, limitations or restrictions as our board of directors
generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value
of FRP's common stock. For example, FRP could grant holders of preferred stock the right to elect some number of its directors in all
events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights
or dividend, distribution or liquidation preferences FRP could assign to holders of preferred stock could affect the residual value of
the common stock.
Institutional investor focus on environmental,
social and governance issues may impact our stock price.
Many large institutional investors focus on sustainability
in managing investment risks, portfolio design and dealing with companies in which they invest. This focus extends to climate change and
the plan for transitioning to a net-zero economy, diversity and inclusion and other human resource matters, and social and governance
issues and corporate social responsibility. While we are proud of the returns to shareholders and our sustainable practices in construction
and environmental management, we recognize our responsibility to focus on these key issues that impact our long-term sustainability. Our
failure to demonstrate this commitment could dissuade institutional investors from holding our stock, which would result in downward pressure
on our stock price.
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
Item 1C. CYBERSECURITY.
We have processes in place for assessing, identifying,
and managing material risks from cybersecurity threats which could result in information security breaches and significant disruption
to our business. We have a multi-layer security approach including specialized hardware/software, access protocols, third-party
assessments, and regular training. Our servers are
hosted by a third-party that provides Service Organization Control (SOC) Type 1 and 2 reports annually with monthly bridge letters and
hosts a separate disaster recovery site. Our Firewall, Virtual Private Network, Multifactor Authentication, Email Gateway, Antivirus software,
file storage protection software, and other software applications help mitigate cybersecurity risks. Our IT Steering committee reviews
our access protocols and systems biannually. Our third-party internal auditing firm provided an assessment of our system design and performed
testing. Our IT consultant participates in our weekly operations meetings, requires cybersecurity training, and monitors the results of
test phishing and credential harvesting emails.
Our board of directors has oversight of our strategic
and business risk management and has delegated cybersecurity risk management oversight to the Audit Committee of our board of directors.
Our Audit Committee is responsible for ensuring that management has processes in place designed to identify and evaluate cybersecurity
risks to which the company is exposed and to implement processes and programs to manage cybersecurity risks and mitigate cybersecurity
incidents.
Management is responsible for identifying, assessing,
and managing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk
exposures are monitored, putting in place appropriate mitigation measures, maintaining our business continuity plans, IT security policies
and procedures, and providing regular reports to our board of directors, including through the Audit Committee. Our IT consultant monitors
the prevention, detection, mitigation, and remediation of cybersecurity incidents through a variety of software tools, and regularly reports
to management.
In 2023, we did not identify any cybersecurity events
that have materially affected or are reasonably likely to materially affect our business, results of operations, or financial condition.
However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced
undetected cybersecurity incidents. For additional information about these risks, see Part I, Item 1A, "Risk Factors" in this
Annual Report on Form 10-K.
Item 2. PROPERTIES.
The Company owns (predominately in fee simple but
also through ownership of interests in joint ventures) approximately 21,000 acres of land in Florida, Georgia, Maryland, Virginia, South
Carolina, and the District of Columbia. This land is held by the Company in four distinct segments: (i) Industrial and Commercial Segment
(land owned and operated as income producing rental properties in the form of commercial properties), (ii) Mining Royalty Lands Segment
(land owned and leased to mining companies for royalties or rents), (iii) Development Segment (land owned and held for investment to be
further developed for future income production or sales to third parties), and (iv) Multifamily Segment (ownership, leasing and management
of buildings through joint ventures).
Industrial and Commercial Segment. As of December
31, 2023, the Industrial and Commercial Segment includes nine buildings at four commercial properties owned by the Company in fee simple
as follows:
1) 34 Loveton Circle in suburban Baltimore County,
MD consists of one office building totaling 33,708 square feet which is 90.8% occupied (16% of the space is occupied by the Company for
use as our Baltimore headquarters). The property is subject to commercial leases with various tenants.
2) 155 E. 21st Street in Duval County,
FL was an office building property that remains under lease through March 2026. We permitted the tenant to demolish all structures on
the property during 2018.
3) Cranberry Run Business Park in Harford County,
MD consists of five industrial buildings totaling 267,737 square feet which are 92.1% leased and occupied. The property is subject to
commercial leases with various tenants.
4) Hollander 95 Business Park in Baltimore City, MD
consists of three industrial buildings totaling 247,340 square feet that are 100.0% leased and 100.0% occupied
Mining Royalty Lands Segment.
Introduction.
Pursuant to amendments to Regulation S-K of the Securities
Act of 1933 (“Regulation S-K”) adopted by the Securities and Exchange Commission in 2018, effective for fiscal years beginning
on or after January 1, 2021, registrants with material mining operations must disclose certain information in their Securities and Exchange
Act filings concerning mineral resources and mineral reserves, in accordance with to Subpart 1300 of Regulation S-K. This section of Item
2 provides summary information about our overall portfolio of mining royalty properties.
Our mining leases do not require tenants to furnish
technical report summaries that meet the requirements of Rule 1302, and the Company does not otherwise have access to the technical data
required to determine precise amounts of each class of mineral resource or probable or proven resources. In accordance with Rule 1303(a)(3),
the Company is providing all required information in its possession or which it can obtain without incurring an unreasonable burden or
expense.
The Company periodically engages consultants to examine
remaining sand and stone deposit estimates and geological studies conducted by tenants and their industry professionals.
Locations. The following map presents
the locations of the Company’s mining properties, which are discussed by segment (as reported in the Company’s financial statements)
below:
Mining Properties. The Company owns
a fee simple interest in 14 open pit aggregates quarries located in Florida, Georgia and Virginia, which comprise approximately 16,650
total acres. The Company’s quarries are subject to mining leases with Vulcan Materials, Martin Marietta, Cemex, Argos, and The Concrete
Company. Aggregates consist of crushed stone, sand, gravel, fill dirt, limestone and calcium and are used primarily in construction applications.
Nine of the Company’s quarries (located in Grandin,
FL, Fort Myers, FL, Keuka, FL, Newberry, FL, Astatula, FL, Columbus, GA, Macon, GA, Tyrone, GA, and Manassas, VA; totaling 13,876 acres)
are currently being mined, and five of the Company’s quarries (located in Marion County, FL, Lake Louisa, FL, Astatula, FL and Lake
Sand, FL and Forest Park, GA; totaling 2,778 acres) are leased but are not currently being mined. Our typical mining lease requires the
tenant to pay the Company a royalty based on the number of tons of mined materials sold from our mining property during a given fiscal
year multiplied by a percentage of the average annual sales price per ton sold. In certain locations, typically where the sand and stone
deposits on the property have been depleted but the tenant still has a need for the leased land, we collect a minimum annual rental amount.
In the fiscal years ended December 31, 2023, 2022 and 2021, aggregate tons sold with respect to the Company’s mining properties
were approximately 9,569,000, 9,525,000 and 7,575,000, respectively.
In May 2014, the Company entered into an amendment
to our lease with Vulcan for our Fort Myers location requiring that the mining be accelerated and that the mining plan be conformed to
accommodate the future construction of up to 105 residential dwelling units around the mined lakes. In return, the Company granted Lee
County an option to purchase a right of way for a connector road that would benefit the residential area on our property and to place
a conservation easement on part of the property, which the County exercised in 2020. Mining activity commenced in 2017 following Lee County’s
issuance of a mine operating permit allowing Vulcan to begin production.
In November 2017, Lake County commissioners voted
to approve a permit to Cemex to mine the Company’s land in Lake Louisa, Florida. The county issued the permit in July 2019. Cemex
expects to begin mining in late 2024 after completing the work necessary to prepare this site to become an active sand mine.
Brooksville Joint Venture. Additionally,
through a joint venture with Vulcan Materials, the Company owns a 50% interest in 4,280 acres of mixed-use property in Brooksville, Florida,
a portion of which comprises a ground calcium mine that is mined by Vulcan Materials. The Company entered into the joint venture in 2006
for the purpose of jointly owning and developing the land as a mixed-use community. In April 2011, the Florida Department of Community
Affairs issued its final order approving the development of the project consisting of 5,800 residential dwelling units and over 600,000
square feet of commercial and 850,000 of light industrial uses. Zoning for the project was approved by the County in August 2012. Vulcan
Materials still mines on the property and the Company receives 100% of the royalty on all tons sold at the Brooksville property. In the
fiscal years ended December 31, 2023, 2022, and 2021, aggregate tons sold were approximately 259,000, 244,000 and 280,000, respectively.
Other Properties. The Company also owns
an additional 36 acres of investment property in Brooksville, Florida.
Development Segment – Industrial and Commercial
Land.
At December 31, 2023, this segment owned the following
future development parcels:
Development Segment – Land Held for Development
or Sale.
At December 31, 2023, this segment was invested in
the following development parcels:
Multifamily Segment.
At December 31, 2023, this segment was invested in
the following stabilized multifamily joint ventures:
Item 3. LEGAL PROCEEDINGS.
None.
Item 4. MINE SAFETY DISCLOSURES.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There were approximately 315 holders of record of
FRP Holdings, Inc. common stock, $.10 par value, as of December 31, 2023. The Company's common stock is traded on the Nasdaq Stock Market
(Symbol FRPH).
Price Range of Common Stock. Information concerning
stock prices is included under the caption "Quarterly Results" on page 9 of the Company's 2023 Annual Report to Shareholders,
and such information is incorporated herein by reference.
Dividends. The Company has not paid a cash
dividend in the past and it is the present policy of the Board of Directors not to pay cash dividends. Information concerning restrictions
on the payment of cash dividends is included in Note 4 to the consolidated financial statements included in the accompanying 2023 Annual
Report to Shareholders, and such information is incorporated herein by reference.
Securities Authorized for Issuance Under Equity
Compensation Plans. Information regarding securities authorized for issuance under equity compensation plans is included in Item 12
of Part III of this Annual Report on Form 10-K, and such information is incorporated herein by reference.
Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
Total
Number of
Shares
Purchased Approximate
As Part of Dollar Value of
Total Publicly Shares that May
Number of Average Announced Yet Be Purchased
Shares Price Paid Plans or Under the Plans
Period Purchased per Share Programs or Programs (1)
Total — $ — —
(1) On February 4, 2015, the Board of Directors
authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time to time as opportunities
arise. On December 5, 2018, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization.
On August 5, 2019, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On May
6, 2020, the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization. On August 26, 2020,
the Board of Directors approved a $10,000,000 increase in the Company’s stock repurchase authorization.
Item 6. [RESERVED]
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION.
Information required in response to Item 7 is included
under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operation" on pages 10 through
21 of the Company’s 2023 Annual Report to Shareholders, and such information is incorporated herein by reference.
Item 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
Interest Rate Risk - We are exposed to the
impact of interest rate changes through our variable-rate borrowings under our Credit Agreement with Wells Fargo.
Under the Wells Fargo Credit Agreement, the applicable
margin for borrowings at December 31, 2023 was Daily Simple SOFR plus 2.25%.
The Company did not have any variable rate debt outstanding
at December 31, 2023, so a sensitivity analysis was not performed to determine the impact of hypothetical changes in interest rates on
the Company’s results of operations and cash flows.
For our debt instruments with variable interest rates,
changes in interest rates affect the amount of interest expense incurred. The following table presents the principal cash flow payments
associated with our outstanding debt by year, weighted average interest rates on debt outstanding each year-end, and fair value of total
debt as of December 31, 2023 (dollars in thousands):
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
Information required in response to this Item 8 is
included under the caption "Quarterly Results" on page 9 and on pages 22 through 41 of the Company's 2023 Annual Report to Shareholders.
Such information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9A. CONTROLS AND PROCEDURES.
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE
CONTROLS AND PROCEDURES
Under the supervision and with the participation of
our management, including our principal executive officer, principal financial officer and chief accounting officer, we conducted an evaluation
of our disclosure controls and procedures, as such terms are defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on
this evaluation, our principal executive officer, our principal financial officer and our principal accounting officer concluded that
our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive officer, principal financial officer and principal accounting
officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the
Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on our evaluation
under the framework in the Internal Control-Integrated
Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
This Annual Report does not include an attestation
report of our Independent Registered Public Accounting Firm, Hancock Askew & Co., LLP, regarding internal control over financial reporting.
Management’s report was not subject to attestation by our Independent Registered Public Accounting Firm pursuant to rules of the
Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the fourth quarter of 2023, there were no changes
in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
INHERENT LIMITATIONS OVER INTERNAL CONTROLS
Our internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
Internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human
error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent
or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or
procedures may deteriorate.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.
Not applicable.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
The Company has adopted a Financial Code of Ethical
Conduct applicable to its principal executive officers, principal financial officers and principal accounting officers. A copy of this
Financial Code of Ethical Conduct is filed as Exhibit 14 to this Form 10-K. The Financial Code of Ethical Conduct is also available on
our web site at www.frpdev.com/investor-relations/corporate-governance/.
The rest of the information required in response to
this Item 10 is included under the captions “Our Board of Directors”, “Corporate Governance, ESG and Our Approach to
Risk Management”, “Our Executive Officers”, “Securities Ownership” in the Company's Proxy Statement, and
such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not
later than March 31, 2024.
Item 11. EXECUTIVE COMPENSATION.
Information required in response to this Item 11 is
included under the caption “Executive Compensation” in the Company's Proxy Statement, and such information is incorporated
herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than March 31, 2024.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information
Number of Securities
remaining available
Number of Securities for future issuance
to be issued upon Weighted average under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
Plan Category (a) (b) (c)
Equity compensation plans
Equity compensation plans
not approved by security holders 0 0 0
payout of the performance share awards
has been assumed, and the number of performance share awards has been calculated using our closing stock price on March 6, 2024 ($60.51).
The performance share awards are subject to partial or complete forfeiture if the vesting criteria are not met. Because some or all of
the performance share awards may not vest, and because the number of shares of restricted stock to be issued thereunder is dependent on
future stock prices, columns (a) and (c) may overstate or understate expected dilution.
The remainder of the information
required in response to this Item 12 is included under the caption “Securities Ownership” in the Company's Proxy Statement,
and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission
not later than March 31, 2024.
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information required in response to this Item 13 is
included under the captions “Corporate Governance, ESG and Our Approach to Risk Management” and “Our Board of Directors”
in the Company's Proxy Statement, and such information is incorporated herein by reference. The Proxy Statement will be filed with the
Securities and Exchange Commission not later than March 31, 2024.
Item 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES.
Our independent registered accounting firm is Hancock
Askew & Co., LLP, Jacksonville, Florida, Firm 794. Information required in response to this Item 14 is included under the caption
“Proposal 2: The Auditor Proposal” in the Company’s Proxy Statement, and such information is incorporated herein by
reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than March 31, 2024.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULE.
(a) (1) Financial Statements.
The response to this item is submitted
as a separate section. See Index to Financial Statements on page 26 of this Form 10-K.
(3) Exhibits.
The response to this item is submitted
as a separate section. See Exhibit Index on pages 24 through 25 of this Form 10-K.
Item 16. FORM 10-K SUMMARY.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FRP Holdings, Inc.
Date: March 26, 2024 By JOHN D. BAKER II
John D. Baker II
Chief Executive Officer
(Principal Executive Officer)
By JOHN D. BAKER, III
John D. Baker, III
Treasurer and Chief Financial Officer
(Principal Financial Officer)
By JOHN D. KLOPFENSTEIN
John D. Klopfenstein
Controller and Chief Accounting
Officer (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on
March 26, 2024.
(Principal Executive Officer) /s/ Matthew S. McAfee Matthew S. McAfee Director
/s/ Nicole B. Thomas Nicole B. Thomas Director
FRP HOLDINGS, INC.
FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2023
EXHIBIT INDEX
21.1 Subsidiaries of Registrant at December 31, 2023
31.1 Certification of John D. Baker II.
31.2 Certification of John D. Baker III.
31.3 Certification of John D. Klopfenstein.
97.1 FRP Holdings, Inc. Executive Officer Compensation Clawback Policy.
101.INS XBRL Instance Document Taxonomy Extension Schema
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
FRP HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
(Item 15(a) (1) and 2))
Page
Consolidated Financial Statements:
Consolidated statements of income 52
Consolidated statements of comprehensive income 53
Consolidated statements of cash flows 55
Consolidated statements of shareholders' equity 56
Notes to consolidated financial statements 57-75
Report of Independent Registered Public Accounting Firm 77-78
Selected quarterly financial data (unaudited) 36-37
Consent of Independent Registered Public Accounting Firm 27
All schedules have been omitted, as they
are not required under the related instructions, are inapplicable, or because the information required is included in the consolidated
financial statements.
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
FRP Holdings, Inc.
Jacksonville, Florida
We hereby consent to the incorporation
by reference in the Registration Statements on Form S-8 (No. 333- 125099, 333-131475 and 333-216025) of FRP Holdings, Inc. of our report
dated March 26, 2024, relating to the consolidated financial statements which appear in the Annual Report to Shareholders incorporated
by reference herein.
Respectfully submitted,
Hancock Askew & Co., LLP
Jacksonville, Florida
March 26, 2024
Annual Report 2023
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended December 31
(Amounts in thousands except per share
amounts)
%
Gain on sale of real estate and other income $ 53 874 (93.9 )
Loss attributable to noncontrolling interest $ (420 ) (518 ) (18.9 )
Net income attributable to the Company $ 5,302 4,565 16.1
Per common share:
Net income attributable to the Company:
BUSINESS. FRP Holdings, Inc. is
a holding company engaged in the real estate business, namely (i) leasing and management of commercial properties owned by the Company,
(ii) leasing and management of mining royalty land owned by the Company, (iii) real property acquisition, entitlement, development and
construction primarily for apartment, retail, warehouse, and office buildings either alone or through joint ventures, (iv) ownership,
leasing and management of buildings through joint ventures. The Company’s operating subsidiaries are FRP Development Corp. and Florida
Rock Properties, Inc.
STRATEGY. Our strategy consists
of the re-deployment of cash from asset sales, real estate operations, and mining royalties, into new assets that allow management to
exploit its knowledge and expertise. The asset classes of choice are mixed-use, industrial, raw land, existing buildings, and repeatable
strategic partnerships located in core markets with growth potential. Emphasis will be placed on generating returns through opportunistic
disposition, as well as cash-flow and long-term appreciation.
OBJECTIVE. We strive to improve
shareholder value through (1) active engagement with properties and partners to grow asset value, (2) contributing our operating expertise
and connections to maximize value and NOI growth, and (3) manage our capital structure in an efficient and responsible manner, with a
watchful eye on projected future market conditions and trends to facilitate timely disposition of selected assets, (4) diligent, sustainable
growth.
To Our Shareholders,
It is a truth universally acknowledged,
at least in the investment world, that diversification on the company level is unnecessary if not out-and-out a bad thing. The heyday