FRP Holdings Inc

NASDAQ:FRPH

Earnings Call Analysis

FRP Holdings Reports Robust Growth in FY2023

FRP Holdings has seen a sturdy financial performance with key growth indicators on the rise. The fourth quarter net income reached $2.88 million, a slight uptick from $2.76 million the prior year, marked by both higher revenues in the Industrial and Commercial segment and increased interest income. For the 2023 fiscal year, net income climbed to $5.3 million, and revenues, operating profit, pro rata NOI, and net income increased notably by 10.7%, 46.3%, 24.8%, and 16.1% respectively year-over-year. However, this growth was partially offset by higher joint venture losses and interest expenses. In terms of valuation, the company estimated its asset value, net of debt and liabilities, at $69.14 to $77.58 per share.

Industrial and Multifamily Development and Occupancy Rates

The company has strategically utilized its properties for lease to generate income while awaiting construction possibilities, with projects potentially starting as early as 2025. They've successfully bolstered their industrial segment to over 2.35 million square feet with ongoing projects, including a joint venture with BBX Capital and a 50-50 partnership at Windlass Run with St. John’s Properties. Multifamily developments have also shown strong performance with their asset in Washington, D.C., Bryant Street, showing high occupancy rates and transitions to their multifamily segment planned for the end of the quarter.

Capital Source Program and Profit Expectations

The company has been leveraging its capital source program to finance residential land development, promising considerable returns. Amber Ridge, one of the current projects, is expected to complete by the second quarter of this year, with anticipated gains totaling $4 million. Their other venture, Aberdeen Overlook, has shown progress with a commitment of $31.1 million in funding under terms similar to Amber Ridge.

Challenges and Competitive Landscape

The company faced a leveling off of record-setting residential rents due to increased competition in D.C. However, their assets are largely stabilized, with expectations to weather the competition into 2024 and 2025. Despite market headwinds, the company maintains confidence in its approach, consisting of careful development and a patient strategy, built on strong foundations and a talented team.

Stock Split and Capital Use for Growth

A forward stock split has been announced to potentially improve the liquidity of the company’s shares. While there’s a cheer for more share buybacks as an effective use of capital, substantial portions of cash reserves are earmarked for development projects, indicating an optimistic outlook on the company generating significant cash flow. Moreover, the company aims to continue to reinvest capital into asset development over the next years.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, everyone, and welcome to today's FRP Holdings, Inc. Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded.

I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Chief Financial Officer, John Baker, III.

[John Baker, executive]

Thank you, Madison. 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 and Vice Chairman; John Milton, our Executive Vice President and General Counsel; John Koppenstein, 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 information.

To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures within the meaning of Regulation G formulated 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 financial performance. This measure is not, and should not be viewed as a substitute for GAAP financial measures. To reconcile NOI to GAAP net income, please refer to the segment titled non-GAAP Financial Measures on Pages 12 and 13 of our most recent earnings release.

Any reference to cap rates, asset values per share values or the analysis of the estimated value of our assets net of debt and liabilities are for illustrative purposes only as a reflection of how management views its various assets for purposes of informing management decisions and do not necessarily reflect the price that would be obtained upon the sale of the asset or the associated costs or tax liability.

Now for our financial highlights from the fourth quarter. Net income for the fourth quarter was $2.88 million or $0.30 per share versus $2.76 million or $0.29 per share in the same period last year. Net income for the fourth quarter of 2023 when compared to the previous year was impacted negatively by an increase of $879,000 in equity and loss of joint ventures as well as an increase in interest expense of $188,000 due to less capitalized interest. Net income was positively impacted by an increase in interest income of $423,000 from increased interest earned on cash equivalents as well as improved revenues from our Industrial and Commercial segment.

Fourth quarter pro rata NOI for all segments was $7.55 million versus $6.26 million in the same period last year for an increase of 28.6%. Net income for 2023 was $5.3 million or $0.56 per share versus $4.57 million or $0.48 per share in the same period last year. Fiscal year 2023 was positively impacted by an increase in revenues and profits in all 4 segments compared to 2022 and an increase in interest income of $5 -- or excuse me, $5.42 million from cash and cash equivalents as well as our lending ventures compared to last year. These were offset by an increase of $6.22 million in equity in loss of joint ventures compared to the same period last year. As we lease up the Verge and 408 Jackson as well as an increase in the management company in direct expense of $553,000 and an increase in interest expense of $1.2 million. 2022 was also positively impacted by $874,000 in gain from property sales, which we did not repeat in 2023.

Revenue, operating profit, pro rata NOI and net income all experienced strong growth -- pardon me, No. I apologize. Revenue, operating profit, pro rata NOI and net income all experienced strong growth this quarter and for the year-to-date. Compared to the fourth quarter of 2022, we grew revenues by 2.6% operating profit by 17.2% pro rata NOI by 20.6% and net income by 7.8%. For fiscal year 2023 compared to last year, these metrics grew by 10.7%, 46.3%, 24.8% and 16.1%, respectively. Yesterday, we posted to our website a brief slide show of financial highlights for the fourth quarter and fiscal year. For those who have not seen it, we are now publishing an estimated value of our assets net of debt and liabilities or analysis yielded per share value in the range of $69.14 to $77.58.

I will now turn the call over to David for his report. David?

[David deVilliers, executive]

Thank you, John. And good day to those on the call. Allow me to provide some operational highlights on the fourth quarter results of the company. First of all, a little housekeeping. We've renamed 2 of our business segments to better describe the assets in the Asset Management has now become industrial commercial and stabilized joint ventures has become multifamily.

So relative to our Industrial Commercial business segment, we currently maintain 9 buildings in-house, making up nearly 550,000 square feet, which are predominantly warehouses. At year-end, we enjoyed 95.6% occupancy throughout this part of the portfolio. Full occupancy at our 3 industrial buildings and Hollander Business Park in Baltimore, Maryland as well as rent growth on renewals at Cranberry Business Park in Harper County, Maryland, have helped lift the NOI to $1.17 million for the quarter, of 46.1% increase over the same period last year.

For the year, our $3.9 million in NOI for this segment represents an increase of $1.23 million or 46.2% over 2022. Moving on to the results of our Mining and Royalty business segment. This business segment saw total revenues for the quarter of $2.9 million, nearly flat versus $2.9 million in the same period last year. NOI in this segment was down $169,000 over the same period last year. However, NOI for the year was 11,720,199 versus $10,152,539 in '22, an increase of 15.4%.

In the multifamily segment, Dock 79 and Maren with its 569 apartments had average occupancies of 96.4% and 94.7%, respectively, for Q4 with all retail fully leased. Both projects enjoyed renewal success rates of 70% and 61%, respectively, for the quarter, with docking a 1.6% rental rate increase on renewals and Maren a 2.75% increase. Average occupancies for all of 2023 for Dock and Maren were 95.6% and 94.36% respectively. Riverside, in Greenville, South Carolina, with its 200 apartments was 94.5% occupied at quarter end with 53% of its tenants renewing and an average increase in net rental rate of 2.04%. Average occupancy for Q4 was 95.21% and year-to-date, 94.51%. The company's share to 2023 program NOI for this business segment was $8.1 million, including an $800,000 pro rata NOI from Riverside. Although we saw rent growth in all 3 properties, higher collection balances and operating expenses caused NOI to flatten year-over-year when you factor in the change in equity due to the tenant and common sale to the Stewart family at Dock and Maren at the end of 2022.

In the Development segment, we engaged in several strategies in this segment, which we use to grow the business. These strategies include our industrial and commercial, multifamily and principal capital source lending. These strategies have grown the portfolio from 1 apartment project in 4 commercial buildings since liquidating our legacy warehouse portfolio in mid-2018 and to over 750,000 square feet of commercial industrial products, 1,827 multifamily units and several land parcels capable of additional growth. Our industrial commercial strategy consists of ground-up development from properties that are acquired, developed, managed and, in most cases, own 100% by FRP and transferred from development to the industrial and commercial business segment when the shell buildings are complete. We currently have 3 projects in our industrial pipeline in various stages of development. During the second quarter, we broke ground on the 259,000 square foot state-of-the-art Class A warehouse building on our 17-acre site in the Permian Industrial section of Harford County, Maryland.

This spec building is expected to deliver to deliver at the end of this year. In Northeast Maryland, along the I-95 corridor, we were in the middle of predevelopment activities on our 178 acres of industrial land that will ultimately support a 900,000 square foot distribution center or smaller multiple buildings depending on the market at the time. Depending on favorable market conditions, we will be in a position to break down on this project as early as Q1 of 2025.

Finally, we are studying multiple conceptual designs for our 55 acres in Harford County, Maryland, adjacent to our existing Cranberry Run Business Park. Various configurations should yield from 600,000 to 700,000 square feet dependent on final design parameters and market demands. And existing land leases for the storage of trailers on-site helped to offsite our carrying and entitlement costs on this property until we're ready to build, which could be as early as 2025. Completion of these 3 industrial development projects will add over 1.8 million square feet of additional warehouse projects to our industrial platform that when completed upon completion will result in our industrial commercial business segment consisting of over 2.35 million square feet.

Subsequent to year-end, we finalized our first ever industrial joint venture with BBX Capital for the development of 215,000 square feet warehouse on I-4 highway between Tampa and Orlando, Florida, assuming favorable market conditions, we hope to begin construction here in Q4 this year. Also included in this strategy is a joint venture project, which is a 50-50 partnership with St. John's Properties called Windlass Run, which is part of a mixed-use development in Whitemarsh, Maryland, that includes 3,300 residential units and over 3.5 million square feet of commercial space.

Our project currently includes 100,000 square feet of single-story office and retail and 4 buildings. At year-end, Windlass was 87% leased and 78.3% occupied in the office product and 38.2% leased and 22.9% occupied on the retail side. Our second development strategy is multifamily, where apartment projects are developed in conjunction with third parties. For FRP is typically the majority owner, and we share acquisition, development and asset management tasks with outside local market leaders to facilitate day-to-day operations. These properties are housed in the development section until they are completed and have maintained a 90% occupancy level for a period of 90 days before being moved to the multifamily business segment. Currently, this strategy houses Bryant Street and Verge in Washington, D.C. and 408 Jackson in Greenville, South Carolina.

Bryant Street consisting of 487 apartments and 91,000 square feet of retail in 3 different buildings was 93.8% occupied. And this retail components were 96.6% leased and 82.7% occupied at quarter end. Overall, Department of Prime Street averaged the renewal success rate of 65% and rental rate increases of 3.8% as of quarter end. This project will be transferred out of this strategy in development to the multifamily business segment at the end of this quarter. Our newest project in the district, Verge received its final certificate of occupancy in the first quarter of 2023 and is 90-point -- excuse me, 90.7% leased and 85.8% occupied with 45% of its 8,400 square feet of retail spoken for at the end of the year. Lease up of this property has gone well. an average occupancy for the quarter at Verge was 78.9 7%. 408 Jackson, our second mixed-use project in Greenville, is located downtown and shares the Street Plaza with Floorfield, follow with the Greenville drive and affiliate of the Boston Red Sox. 408 Jackson was placed in service during the fourth quarter of '22 and is as of quarter end was 95.2% leased and 93.4% occupied. Bryant -- like Bryant Street, this project will be transferred to the multifamily business segment at the end of this quarter. Average occupancy for the quarter was 9.37%. It's 4,300 square feet of retail is fully leased and is targeting an opening date sometime this summer.

We're in the home stretch of lease-up for all 3 of these aforementioned joint venture properties. When they reach stabilization and are transferred to multifamily, that business segment will have 1,827 apartments and 126,000 square feet of retail. Unlike a warehouse in the Development segment, our multifamily assets are already in operation. So if you refer to the Development segment NOI on Page 13 of our press release, you will note that these assets generated over $5.46 billion in NOI in 2023 versus million last year, inclusive of an aggregate loss in NOI of $611,000 at 408 and Berg.

Still another strategy within development is our principal capital source program. It's a program where, among other lending strategies, we provide working capital towards the entitlement and horizontal development of residential land, which is presold prior to the commencement of any infrastructure improvements. and ultimately transferred to national homebuilders. This strategy 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.

The first of our 2 current projects is Amber Ridge and Prince George's County, Maryland. With a peak capital out of $12.8 million, all 187 lots have been transferred out to the homebuilders and a final development activity should wrap up sometime during the second quarter of this year. Completion of this project, interest income and profits are expected to total $4 million. Our other current lender lending venture is called Presbyterian Homes now Aberdeen overlook, a 344 lot 110-acre residential development project in Aberdeen, Maryland. We've committed $31.1 million in funding under similar terms on to Amber Ridge. $20 million was drawn at the end of the year. The national homebuilder is under contract to purchase all of the finished building lots. Horizontal construction has begun. The first 11 finished lots have been taken down and $4.5 million in interest and principal has been returned to the company by year-end.

In closing, we remain pleased with the company's performance and are optimistic about growth opportunities. Challenges we have foreseen for a while came to roost in the final quarter of '23, as we saw record-setting residential rents begin to flatten with increased competition. The surplus of new apartments coming online in Washington, D.C. over the next several quarters will directly compete with our Waterfront assets. Fortunately, 3 assets are stabilized and we expect the third to stabilize prior additional significant competitive apartment deliveries in the latter part of '24 and early '25.

We've been well served by the confidence we have placed in our design, amenities and management teams, coupled with our careful and patient approach to development. Weathering markets and competition is not new to us. We stand on firm foundations and a step test belief the challenges to get opportunities. With a strong dedicated and talented team in place, FRP will continue to grow its portfolio and in turn, its revenue and profits through a steady, careful and well recent approach to the market. We look forward to building upon our successes and further cementing our place in the market.

Thank you, and I'll now turn the call back to John.

[John Baker, executive]

Thank you, David. As many of you saw in our subsequent event note in yesterday's earnings release, we announced a forward split of our common stock at a ratio of 2 post-split shares for every 1 presplit share. As a thinly traded company with a small number of shareholders, we believe this has the potential to add some liquidity to our stock.

At this point, we're happy to open it up to any questions that you might have.

[Operator]

[Operator Instructions] We will take our first question from Curtis Jensen with Robotti Company.

[Curtis Jensen, analyst]

Thinking about Bryant Street, and I don't -- are we still in a -- we don't have permanent financing on that.

[David deVilliers, executive]

Correct. Yes.

[Curtis Jensen, analyst]

What's kind of the status there? And where do you see that? Is it just a function of waiting until rates get a little more attractive? Or...

[John Baker, executive]

David can speak to this. Go ahead, David.

[David deVilliers, executive]

Yes, I'll take a swing out of, Curtis. Yes, part of it is getting the retail in and occupying and there is some free rent that you always go through in that side of the business. So that's where we're really waiting which should some -- hopefully will be sometime during this year. But obviously, we're operating under a floating interest rate, and we're looking to hopefully see that the interest rates start to drop a bit, and then we'll look to permanently finance that program. We obviously were in a position to do that when the construction loan came due, which is why we did the interim financing, which is also -- again, we are on a floating rate. But that's the main reason. It's just getting the commercial side operating and a little bit of stabilization, then it will be a better time to go at the market also with hopefully, interest rates starting to go down a bit towards the end of the year.

[Curtis Jensen, analyst]

When you say retail, is that mostly referring to the food court, like the little...

[David deVilliers, executive]

It's that in part of it, Curtis, we have another, say, call that we've got 2 leases that are executed for about 8,000 square feet of the inline retail. They're under construction now. it took forever to get the building permits out of the district government agencies. So that's an issue. We have -- and we have another one, LOIs out for another one. So we're just trying to get all of that wrapped up. And again, we don't see a hurry right now because of the interest rates.

[Curtis Jensen, analyst]

And how do you -- how would you describe the verge as -- I mean is it kind of meeting your expectations?

[David deVilliers, executive]

For the most part, yes, there are significant units coming online towards the end of this year. And they have a positive, they will ultimately have a positive effect on that area. We're no longer kind of out in the middle of nowhere because we will be a little bit more of the center of the doughnut as opposed to the outskirts because -- there's about 1,400 units coming on that are further west, if you will, of the bridge than where we're located. So they all started right after COVID. And so there was a dearth of new projects that were -- that went under construction right after COVID. And of course, there was -- there's pretty low interest rates at that time, too. So they're up and going. The good thing is critical mass will, in some cases. But the interesting dynamic is there is nothing in the pipeline coming out after those 2 at the end of '24 and early '25. We think we're in a pretty good place.

[John Baker, executive]

Just a follow up on what David is saying, permanent financing is obviously the ultimate goal, but that's only after we are able to grow the NOI to where we had envisioned it. I don't think we'd go out and seek permanent financing at the NOI that we're at right now, our goal is to grow net operating income, increase the value of the property so that by the time we get to the end of the opportunity zone 10-year hold period we've got a healthy asset with an appropriate amount of debt on it. And I mean, when I say appropriate, I mean the right amount, not too little, not too much. And the fact that we expect to get a good interest rate on it in a few years. We've just -- it speaks to -- that's a benefit and -- anyway, I think between Bryant Street, Verge, Dock 79, Maren, the D.C. market isn't where we want it to be, but we've got really, really good assets. We've got good people running them. There's a lot of supply that's come on, but it's not Riverfront. It's not -- certainly not the quality of our assets. And we think in the long term, that's going to continue to be better for us.

[Curtis Jensen, analyst]

Your lending ventures, is the national homebuilder a publicly listed company -- have you named to the...

[David deVilliers, executive]

It's NBR, it's NBR. They were actually -- they had -- they had a soft opening for the Aberdeen overlook property about 4, 5 weeks ago. And as I said in the opening remarks, we transferred 11 lots out to them at the end of the year. we certainly have a pretty substantial deposit from them as well. And in their soft opening, they had over 400 people sign up. for some of their different products. Now signing up and buying is a pretty good distance between the lip and the comp, but it's a pretty favorable pretty favorable visual, and it's a beautiful area in one that's kind of once again is in the center of the doughnut, up in Aberdeen. A lot of construction is going on around them as it relates to retail. Large hospital has opened up and is stumbling its size. So we're really excited about the potential for this Presbyterian homes, which has now been entitled with now that is opening up Aberdeen overlook.

[Curtis Jensen, analyst]

All right. I'll jump off. Thanks and keep up the good work.

[Operator]

We will take our next question from Stephen Farrell with Oppenheimer.

[Stephen Farrell, analyst]

Just a quick follow-up on the D.C. market. Are you currently offering concessions at the Maren and Dock 79 small ones, if any?

[David deVilliers, executive]

Again, we see our rent growth in Dock and Maren for the year. we had 2.8% renewal rent growth in Dock 79 and 4.21% rental growth in Maren. Trade-offs in Maren were 1.9%. They weren't is good in Dock 79 because at the beginning of the year, Stephen, the first 2 or 3 months of 2023, we had we replace the manager on site. We have lost a little bit of the occupancy. And so we wanted to get the heads back in the beds and that kind of eroded some of our potential profitability, which is why we did have a little bit -- we had some concessions there. Everything is pretty much stabilized now, and so we're in pretty good shape.

[Stephen Farrell, analyst]

And I might have missed this at the beginning. What were the biggest drivers in the operating expense growth at those 2 properties?

[David deVilliers, executive]

They're across the board, probably one of the biggest ones. And Maren was -- we had some utility issues, and so that was pretty big. And the other 2 things Stephen, One is security. D.C., like in a lot of these cities have had problems with security. And we wanted to get out in front of the problem. So security was definitely higher there. And also rent collections, we are slowly getting better because we were unable to generate the collection process because of COVID. COVID, they did not allow people to get thrown out. You couldn't go to court, you couldn't do anything. And so there's an incredible overhang that is slowly starting to work its way through the system. It used to take up until sometime in the beginning of '23, it used to take over a year to start and complete the process of going through trying to collections and then ultimately, fictions to get the properties back. Now it's down to about 7 months. So we're going in the right direction. But those are probably the 2 biggest reasons.

[Stephen Farrell, analyst]

And we saw with Bryant Street when you refinanced the construction loan, the bank required us to commit some more capital. And I'm seeing this trend continue, whether it's construction loans or permanent financing that banks are refinancing at 50% to 60% LTVs as opposed to 70%. And I think there's an opportunity to provide a GAAP financing to the borrowers so that they can maintain their debt and equity levels. And I know FRPH is not a lender, but there was an opportunity to provide that GAAP financing along with the equity component. Would you consider it?

[David deVilliers, executive]

You mean the Bryant Street?

[Stephen Farrell, analyst]

No, for general properties.

[David deVilliers, executive]

Just generally?

[Stephen Farrell, analyst]

Yes.

[David deVilliers, executive]

I would say probably -- generally, I would probably say no. We've got a pretty strong development pipeline. We're focusing more on the industrial side in the near term, but we have some really good locations and some good projects in the multifamily side, too. So we don't -- we want to maintain as much dry powder as we can. And so I don't see us and I'd certainly defer to John, but I don't see us going out and being mezzanine lenders or that kind of stuff.

[John Baker, executive]

No, I think -- yes, you're absolutely right, David. I think we're going to use our equity to protect our own assets, but we'd have to get I think, number one, we are more than comfortable with the amount of exposure we have to the D.C. apartment marketplace right now. I don't think we're looking for additional exposure, and we would have to get really, really smart on another asset or another marketplace before we did something like that. And I just don't think that's the best piece of our time, more money. But you're right, that is an interesting opportunity. That's just not -- I don't think we have the bandwidth to take on kind of an additional investment strategy.

[Stephen Farrell, analyst]

Now that it's understandable. And with Amber Ridge, all the lots are sold, is there any more interest or principal payments that will come in from that?

[David deVilliers, executive]

Pretty much, no. It's -- we're just kind of wrapping it up. There's not a whole lot left, Stephen. There's some closing out of bonds and that kind of stuff before we can close the...

[Stephen Farrell, analyst]

David, correct me if I'm wrong, but aren't there some funds that are going to be released because I think if I'm right, the overall expected return of capital -- return of principal and interest and profit of $22 million. And right now, we've received $20.2 million.

[David deVilliers, executive]

Yes. There's -- from a cash standpoint, there's still roughly $700,000 that is -- we are holding as the lender to complete some of the remaining programs. And so we haven't finalized the actual interest and profit to FRP, but when the dust settles, we believe it's going to be about $4 million in interest and profit we received from that project, which will probably be tallied out sometime in the first or second quarter.

[Stephen Farrell, analyst]

Last question before I turn it over. The warehouse in Aberdeen, how [ much ] development cost was funded in 2023?

[David deVilliers, executive]

I think it was about 7 -- would have been about $17 million, Jon, are you there? Can you help me with that?

[John Baker, executive]

$16 million is what I remember, but...

[John Baker, executive]

Yes, I look I was actually looking at the Amber Ridge issue. What was the question again?

[David deVilliers, executive]

Chelsea. Chelsea, how much money have we put out in Chelsea. And I assume, does that also include what we have in the land?

[John Baker, executive]

It would. Yes. I'll pull it up. Is there -- mean time -- is there another question?

[David deVilliers, executive]

Actually, Stephen, let's see. Chelsea, Chelsea. No, I don't have it. Spec buildings, we spent -- we incurred in '23, about $9 million.

[Stephen Farrell, analyst]

Plus the land gets to the 30%?

[David deVilliers, executive]

Yes.

[Operator]

[Operator Instructions] We will take our next question from Bill Chen with Rhizome Partners.

[Bill Chen, analyst]

Could you provide a little more detail on the Florida industrial joint venture?

[David deVilliers, executive]

Yes. I mean it's -- we've always, again, take it -- take a step back. We've always -- likely done with the multifamily. Bill, we've always been -- we've been looking to expand our platform and our program, and we've always felt the best way to do that was to find people and locations where the project was actually going to take place. And we found -- I've had a relationship with one of the people for 20 years. You move back to Carl Gables, Florida. And anyway, they came to us late last year and said, look, we've got this project halfway between Orlando and Tampa, literally right on I mean, which is a main thoroughfare between the 2 areas. The market is very strong, and it's a 215,000 square foot building that we're working on developing. And it looks like it's -- if things pencil out, we will look to start that building sometime in the third quarter of this year. There are strong boots on the ground people like MRP. BBX Logistics is actually the name of our partner their subsidiary of PBX Capital. They're a public company. They're a big flip public company, very strong financially. They've been around since the late 60s. So there is a very good synergy between the 2 companies culturally as well as personally. So we're excited about this opportunity.

[Bill Chen, analyst]

Got you. And just so that -- could you talk about kind of the relative mix of the equity ownership? I mean would FRP be able to -- is this over 50%? Like would this be another equity line item? Or would it be like consolidated? Like could you talk about that a little bit?

[David deVilliers, executive]

We're going to be the controlling ownership interest. We're probably going to be -- because, again, we are holders and these guys are sellers. So we would rather be buying, take a number, 10% to 20% of their ownership at retail and holding and keeping our 80% or 90% at wholesale as opposed to getting so much into our partners that it would be -- would add a lot of money to the basis of our properties. So we're kind of treading water in that direction.

[Bill Chen, analyst]

Let me just clarify that. Your -- so we -- FRP will be the controlling holder in this project where we'll wind up with 80% to 90% ownership. Is that correct?

[John Baker, executive]

Yes.

[Bill Chen, analyst]

And I guess their role is to be boots on the ground, almost like the actual developer, they don't know work. Is that kind of the nature of the relationship?

[David deVilliers, executive]

Yes. So we will be actively involved. I mean, again, we've been in the industrial business for over 30-some years. And so they're going to be late lean on us for the design. We certainly have done a month of these. They have, to some extent, too. And so I think it's a really good relationship and a good balance.

[Bill Chen, analyst]

Got you. Okay. And I mean, if I -- if you don't mind, if I probe like what are we underwriting potential like stabilized unlevered yield on a project like this?

[David deVilliers, executive]

We haven't decided, but it's been on a straight return on cost basis. it's going to be above 6.5% or we won't start it.

[Bill Chen, analyst]

Okay. Okay. Okay. That's very helpful. And I mean is there a possibility now like in the Maryland in the Investor Day, we -- you guys have provided that a lot of those Maryland projects could potentially come in at an unlevered yield of 8% or even above 8%. Like is there a potential for this project to kind of hit those kind of numbers?

[David deVilliers, executive]

Sure. We hope so. The market is big and is strong and there's little vacancy. So you've been -- you understand the way the game is played, and we don't go -- we don't start these things unless we feel pretty good about the symbol-ready condition. We're not required to do anything. We're just -- we want to get to the point you get the contractors ready, get the numbers, get a guaranteed maximum price, look at the market, all of the above.

[Bill Chen, analyst]

Speaking on contractors, have you seen that the GC world kind of like, call it, capacity pull it to slack whatever you want to call it, just get a little bit better from like a development perspective?

[David deVilliers, executive]

If you're saying, are there prices getting tighter? Is that your question?

[Bill Chen, analyst]

The price is getting better, time lines improving, whatever you may be or just cost coming down, being able to move faster, more willing to work with you, et cetera?

[John Baker, executive]

All of those your comments, and thank you for that, Bill. All those comments are positive. Yes. As you know, we have the 259,000 square foot building under construction now. When we -- we're building that in-house, effectively in our subcontracts. So we have -- but from that standpoint, we're seeing pricing come down a little bit. We're seeing time frames coming down. To some extent, they're not back to where they were, but they're getting better.

[Bill Chen, analyst]

Got you. Got you. I appreciate the feedback on that. I have a big question, I'll say for later, but I just want to provide some commentary, I think that I want to thank the team for splitting the stock. I know that we really -- no one's really going to wind up owning more shares. But I think that -- I really do think that it will improve liquidity as just the absolute share price goes lower and the bid ask in terms of absolute kind of pennies could get a little tighter. I think that will help with the trading. So thank you for taking the initiative to take that action. I think it really demonstrates to the shareholders that you guys are thoughtful. You guys are thinking about that. And I also just want to commend the company for the share buyback. I've said this many times before, I think buying back at $54 is a great price, especially in light of the recent transaction that I'll talk about. But I think that even at today's price, in the low 60s. I think it's still a great use of capital. I know there's -- a lot of the cash is earmarked for a lot of projects. But I think we're also at a point where the company is generating a lot of cash. So I will always be a cheerleader for more share buybacks. So I want to really commend you guys for doing the share buyback. And I'm just nudging that it's -- more share buyback will always be better. And so which -- so my final question is sort of -- the -- we -- Martin Marietta recently announced the deal to 2 transactions, Bluewater Industries and there's 1 other transaction. And I looked at the numbers. And essentially, what I get to is they spend about $2.5 billion for those 2 transactions, roughly, and they bought about $1 billion of reserves. And if I'm doing my math right, that pegs the value at about $2.50 for a ton of aggregate reserves and a lot of the markets are kind of similar, right? And if anything, maybe we can even go so far to say that FRP's market, which is Georgia and Florida, which is probably growing even faster than some of those markets, which naturally kind of brings me to like some back of the envelope math, at $2.50 per ton of reserve times [ $500 million ]. Now I get it, like they bought the whole operation, right? They bought the operating company and the propco was the landco. And there's 2 separate streams of cash flow. But I think it's fair to say that the FRPs royalty structure and the land ownership accounts for at least half of that, which will peg the value at $1.25 a ton of reserves. And if you do the math multiple by 500 million tons of reserve that like peg the aggregate business as something like at $750 million. I mean, I don't know, like -- I'm just kind of like -- I'm just like trying to like figure out that's probably on the high end. Like if you use an EBITDA multiple, but like you really got stripped out the DNA because there is no CapEx or the royalty structure. It's kind of like peg it out pay 3x EBIT multiple is kind of what I get to you. Like I get to like a $400 million to $750 million valuation for the aggregate business owned by FRPH is kind of like -- I'm wondering like if you guys have any thoughts on that? Like if what I'm saying kind of makes sense or there's some like subtle differences about those 2 deals that they just did that's very, very dramatically different is assuming that the royalty structure plus the land ownership accounting for like 50% of a deal like that, like is that fair? So like -- and also commentary color or feedback that you can provide on more years?

[John Baker, executive]

Bill, I love your $750 million valuation. I'd say that's definitely on the high end, but on your bullish approach to the aggregates industry. Obviously, have some insight into the Martin purchase of Bluewater Industries. I would venture to guess that they didn't do it on a reserves basis, but more on an EBITDA basis. And that transaction is probably -- I mean I don't think they would have done it. Were it not accretive to their not an accretive transaction. And so if you look at their EBITDA multiples, it's going to be somewhere in the ballpark of there or slightly below. And that's -- I think that's probably an appropriate way to value it. You could make -- this gets into sort of granularity, but the -- the way you would value -- probably a more appropriate way to value our royalty stream is to apply an EBITDA multiple to the revenue, not our NOI just because that revenue is -- with my part of -- their EBITDA, yes, we have to take into account costs and overhead, et cetera. and that factors into our NOI. But I think that's the appropriate way to look at it. A multiple is obviously a perpetuity so that taking into account your reserves. I don't know that any operator values a transaction on a per reserve or per tonnage basis when they purchase -- when they make a purchase. But the way that we have gone about valuing our reserve stream, does not take into account the second life of the mining lands. And so your mileage may vary on how you apply a value to the second life. So a lot of them are coming up and a lot of them are way off in the near-term future, but I could promise you that EBITDA multiple takes into account nothing like that. So put your own value on it, but you would be correct in thinking that the -- using an EBITDA multiple would certainly undervalue the royalty and royalty lands.

[Bill Chen, analyst]

I mean like I was -- I mean I've been a shareholder since 2015, and it's been a lot of years. So I've seen what this royalty business has done. I mean it's grown, it's spit out cash flow, and there's only been 2 acquisitions. There have been no CapEx in this business. There's under $25 million of total acquisitions, one in 2012 and then the recent [ one asset ], right? Versus like Martin Marietta has to replace the machinery that gets worn down, right? So I would argue that the right multiple is really like an EBITDA less CapEx number? Like what that number -- and I want to like bring that out because that CapEx number could be like 1/3 of the EBITDA for Vulcan or more Martin Marietta. So like if the CapEx is 1/3 of EBITDA, then like your EBITDA multiple is really like you kind of get -- you need to get to like an EBIT multiple or EBITDA less CapEx, like -- so like the using EBITDA multiple is definitely too conservative, like a true apples-to-apple is really like a EBITDA less CapEx multiple because I haven't seen any CapEx with FRP's royalty structure, right, been a shareholder for 9 years now. So I just want to like kind of like get your thought on that, like if I'm looking at it the right way and at the end of the day...

[John Baker, executive]

I think that's an interesting way to think about it. And we would just need to kind of idle on that a little bit more. That's insightful.

[Bill Chen, analyst]

Yes, yes. At the end of the day, what I'm trying to do is, I think real estate and new asset investing inherently has a lot of perks because a lot of times, the depreciation is like, is the real and not -- and I'm trying to figure out owners earning, right? And what I've been very pleasantly surprised being a shareholder of your company is at the owners earning in this aggregate business has been way better than like any sort of BCF, any sort of like multiple -- like it's just like -- it's just consistently surprises me to the upside. And I think that like an EBITDA multiple just isn't reflective in an EBITDA less CapEx or an EBIT multiple is like way more accurate of a measure. So just some proof of thought there.

[David deVilliers, executive]

Thank you for that, Bill. We appreciate -- obviously, we appreciate all of your thoughts. And it's -- and hopefully, we can continue to stay the course and continue to build on the relationship.

[Bill Chen, analyst]

Yes. Yes. I'm not going anywhere, guys. I'm not going anywhere. You guys will have to deal with me for a long time.

[David deVilliers, executive]

That's a great problem for us to have.

[Bill Chen, analyst]

I mean, it creates a minor problem that I won't sell anything, so there's no liquidity in the stock.

[David deVilliers, executive]

Appreciate all the your royalty and your support, your candor, we really do.

[Bill Chen, analyst]

Yes. I appreciate everything you guys do, and that's all the questions and comments I have.

[Operator]

We will take our next question from Bill Ratner, private investor.

[Unknown Attendee]

I was just wondering if you could flesh out a bit the cash balance, how much of that is earmarked for capital versus what is essentially freely available for things like share repurchases and other discretionary types of investments?

[John Baker, executive]

Bill, I believe we have in the ballpark of $80 million earmarked for capital expenditures for 2024. And we obviously want to keep a pretty healthy capital cushion, and we have plans beyond 2025. The stock price will obviously dictate the extent to which we make share repurchases. But in terms of any kind of meaningful share repurchase program. I think that we would -- in terms of major blocks of capital, it's all going to go back into -- to developing assets as opposed to share repurchases. We're going to nibble opportunistically if we have a chance, but it's not going to be a meaningful amount compared to what we put into development.

[Unknown Attendee]

And then with respect to the aggregates assets, you said that you don't factor in the second life value into your NAV analysis. If you were to include that second life value, can you provide any parameters around what you think an appropriate second-life valuation would be for your assets?

[John Baker, executive]

Bill, I think that's -- it's so nebulous given the time line of those events. The 2 that come to mind Fort Myers and like Lisa Brookville as well. And we're a long ways away from Fort Myers and like [indiscernible]. Yes, I think that it would just be a pie in the sky number. It's essentially raw land and so in terms of going through entitlements and zoning and permitting, just if I were to give you a number, it wouldn't be based on anything in reality. So we have sort of nothing to base it on. So right now we prefer not to guess.

[Unknown Attendee]

Is your comment around entitlements, perhaps suggesting that there might not be as much land value as investors might think because the entitlement process, the costs involved would be pretty significant relative to the second-line value? Or is it just more that it's so far out in the future that...

[John Baker, executive]

[indiscernible].

[Unknown Attendee]

Okay. Okay. Yes. Okay. And then one last question. Going back to the previous questioner. So this Martin Marietta transaction seemed like a very high multiple. And if you look at Martin Marietta stock and stocks of comparable companies, these companies are trading at very high valuations. You guys are clearly very opportunistic investors. Can you just comment on why you would continue to own these assets as opposed to monetizing them and what appears to be a pretty robust environment for these types of assets?

[John Baker, executive]

That's an interesting question. I think if you look at the way that they've pushed price, just the accelerated growth of our income stream as good as the valuations are, I think we're going to take a bet on them outpacing the present value. And to Bill's point, slapping a EBITDA multiple on the royalty stream that maybe that's not the appropriate way to look at it. And I don't know Vulcan or Martin or any of our other tenants appetite for pouring money into reserves that they already control. I think everybody is kind of happy with the way things are. We certainly are. And just from an after-tax perspective, if we had a $300 million transaction that we -- desperate to make. Maybe that would be a source of liquidity, but to just sell the asset and pay the taxes on it. That's certainly not the best use of the money we generate from those assets. And they are also just a -- I mean, they have been -- I mean $10 million a year with no debt on it is a tremendous cash flow engine to fuel debt redevelopment. So I think we're really happy with that income stream the way it is. But if you want to pay those valuations for them, we're all years.

[Unknown Attendee]

Well, it just seems to me that you don't know until you go out and hire a banker and run a process. And in an environment maybe like 12 to 24 months ago, the likelihood of finding a good bid might have been not there, but the market has -- it seems like the market changed from my perspective. But maybe to your point, they already control the assets. So what's the point, but you never know until you hire a banker.

[John Baker, executive]

Very true. I think we would know just given our relationship to Martin and Vulcan, if they had an appetite for buying those assets, we'd probably hear about it. Astatula, the purchase of the Blandford property, we were able to accomplish that because of our relationship with Vulcan, and they just as the policy didn't want to put money into reserves that they already controlled. You are correct in that you don't ask, don't get, but I think if they wanted to buy them -- the second, they want to buy them, we're going to hear about it.

[Unknown Attendee]

Got you. Well, thank you explanations, it's very helpful. Appreciate it.

[John Baker, executive]

Yes, absolutely, Bill. And just to follow up on that real quick for the last 10 years. aggregates, valuations on an EBITDA basis have been historically high. And so 2 years ago, if we -- we could have looked at it and said, Vulcan's trading at 20x, let's sell these things. And obviously, we would have forgone a really incredible growth in our royalty stream. So we're long on the aggregates industry. It's in our blood. We'll -- unless something very seriously changes, we're going to continue to use that cash flow stream, Bill, to fuel development.

[Operator]

It appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

[John Baker, executive]

Before we go, I just want to congratulate David deVilliers, Jr. on his election to the Board of Directors yesterday as its Vice Chairman. David has given his professional life to this company. He is the backbone of what this company has become and it's a well-deserved honor. So I just want to congratulate him. And I want to thank you all. We appreciate your continued investment and interest in the company, and I really appreciate all the questions you had. So thank you, and that concludes this call.

[Operator]

This does conclude today's program. Thank you for your participation, you may disconnect at any time.