Good morning. Thank you all for being here. We appreciate you taking the time. I'm John Baker II, the Chief Executive Officer, and Executive Chairman of FRP Holdings. With me today are David deVilliers, our President, John Baker III, our Chief Financial Officer, and David deVilliers III, our Executive Vice President. If you'll bear with me, let me run through some of the boilerplate. As a reminder, any statements in this presentation which relate to the future are, by their nature, subject to risks and uncertainties which 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 as a result of future events or new information, except as imposed by law.
To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures within the purview of Regulation G of the Securities and Exchange Commission. The non-GAAP financial measure referenced in this presentation is net operating income, or NOI. FRP uses this non-GAAP financial measure to analyze its operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. This measure is not, and should not be, viewed as a substitute for GAAP financial measures. To reconcile NOI in the years referenced in this presentation to GAAP, please refer to the final slides in our presentation. So having warned you all of all these risks and uncertainties, let me welcome you, those of you who are here in person and those who are attending virtually, to the FRP Holdings 2023 Investor Day.
We appreciate your interest in our company and enjoy and benefit from your input, and we look forward to the Q&A and hope that you all will be able to stay. We have lunch afterwards, and then we'll take a quick tour next door to our Maren apartment building, and go up top from there, and then you can see in person what our plans are for this area going forward. To begin with, I'd like to give you some background on our company. Our, really, our story, which I think is important to understand where FRP is today, how we got here, and where we're headed in the future, because really, all these pieces are connected.
The origin of this company really goes back about 100 years ago with another company that I had a hand in running over the decades. That company was Florida Rock Industries, which started with a small sand plant in Interlachen, Florida, that my father, Tom Baker, ran during the Great Depression. Over several decades and several generations of Bakers, we built it into a really amazing business that we sold to Vulcan Materials in 2007. This company, FRP Holdings, was the brainchild of my older brother, Ted Baker, who was running Florida Rock Industries at the time. In 1986, I mean, you know, it's getting to be a long time ago, he realized, and we, as we all did, that we were not getting the full value for all our assets in the market.
I think we were trading at a 7 PE, and at that time, had 30,000 acres of land, and we said, "You know, we're just not being valued for that land." He came up with the idea to spin off that land, as well as a trucking company that we had, into a separate public company, which has now become FRP Holdings. In 1988, two years after that spin-off, Florida Rock bought a company in Baltimore that had a real estate department, and we grabbed that real estate department from that aggregate company and put it here, including its then leader, David deVilliers, who, along with he and his son, are still the main cogs of this wheel, and we're glad to have them.
Since 1988, FRPH has been a small, nimble, full-service real estate development organization with significant experience in property acquisition, development, and then finally, management. Our background is in ground-up development. From land purchase, to entitlement, to construction, to lease-up, through property management as owners. We've rarely or merely a passive minority investor in real estate. We're not interested in simply being a capital provider to real estate development projects or a passive income recipient through investments in existing and long-established properties. While we don't, of course, rule anything out in the future, we'd like to have our focus be on where we can add value. We have a very strong balance sheet, which we see as fundamental to our strategy.
We focus on real estate, soup to nuts, if you will pardon that term of art, from land purchase through ownership and management of the final development. The timeline for our projects can take years, and in some cases, even decades, to see through to an end. The push and pull of the business cycles make it paramount for us to maintain a capital cushion to see these projects through. A strong balance sheet with stable, growing cash flows and a conservative approach to risk management is fundamental to who we are. We've been in the aggregates business for nearly a century now and have run this real estate business for nearly 40 years. So while I won't say we've seen it all, we've seen a lot, and that experience informs our diligent approach.
When Mr. DeVilliers came on, starting in 1988, and for 30 years, we developed and operated a portfolio which we eventually grew to 4.5 million sq ft of industrial real estate. In 2018, we felt that the market was hot, too hot, too expensive, cap rates were too low, and we sold that portfolio for $347 million, and that's where the modern history of this company really began. Our goal for the last five years has been to put that fresh capital to work in the form of new investments, and as you can see, from the slides, we've done just that. Since the asset sale, we have invested in real estate, either through in-house development or investments in joint ventures, a total of over $319 million of equity in various projects.
We now have six projects. When we started in 2018, we had 305 apartment units in one building, this building that we sit in today. We now have six projects with 1,827 in Washington, D.C., and Greenville, South Carolina. Since the asset sale, we have rebuilt our industrial portfolio to eight buildings with 510,000 sq ft and are in various stages of development to build another 1.8 million sq ft. We've grown NOI since the end of 2018 from $13.6 million to a Q2 2023 annualized NOI of $29.2 million, for a compound annual growth rate of 16.4%. Despite this steady stream of investment, our cash balance has not dramatically changed in the last 5 years.
At the end of 2018, we had $187 million in cash equivalents, and midway through this year, we had $167 million. We came to you all last year with the announcement of our partnership with MRP and Steuart Investment Company to develop the Steuart family parcels in the Capitol Waterfront, along with our own Phases III and IV of Riverfront, Square 664 E, and Verge, that we believe that would put the bulk of our cash to work over a 10-15-year period. Much has happened since that announcement last year, and because construction costs have skyrocketed, interest rates have gone up 500 basis points, we're gonna put any plans for mixed-use construction in D.C. on temporary hold until rates soften, rents rise, and costs come in line with returns.
We believe this speaks to what differentiates us from other real estate companies. We have a patient, long-term focus, we're not fee developers, and we're not gonna develop just to develop. Management also has a significant investment in this company. Between the four of us, we own 18% of the company's outstanding shares. There's a very real alignment of interest with our shareholders because we're every bit as invested in this company as you are. My point of saying all this is to say this is who we are. We patiently and carefully invest and develop properties because we intend to hold them and build value. Second, we still have a plan to continue to reinvest our cash position in new projects, which we will lay out for you in this presentation. I'll now turn the podium over to David deVilliers Jr. For a brief overview of what we do and how we do it. David?
Thank you, John. Good morning, everyone. Thank you all for, for coming. That's kind of a tough act to follow. Thank you so much for, for, for filling in a lot of those blanks. I'll see if I can fill in, just a, a few more. What you see here, today I'm gonna concentrate on our four development strategies. As you can see them here, in-house, third-party joint ventures, obviously the mining and royalty, and lending ventures. In-house, which includes our industrial, commercial, and land development platform, these properties are developed, managed, and 100% owned by FRP, and are housed in the development segment until the buildings receive a certificate of occupancy, and then they move over to our asset management program.
The third-party joint ventures, which as the name implies, are projects developed in conjunction with third parties, where FRP is the major owner, but relies on its partner to perform much of the day-to-day operations. Like in-house, 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 stabilized joint ventures. Mining and royalty lands, these are the heritage assets spun off to us by Florida Rock Industries in 1986, and are housed in the mining and royalty segment. Lending ventures, which is a program that is also housed in the development section, and is a strategy where we are the principal capital source for residential land development activities in Maryland, where raw land is transferred into finished building lots and sold to national home builders.
We conduct these programs with a former head of a national home builder who resides in Baltimore, Maryland. So our mission is building value for stockholders. We develop assets to own and operate them, to generate cash flow, and reinvest that cash flow in additional projects. How do we do it? We have a patient, flexible investment strategy designed to maximize NOI growth over the long term. We seek markets that provide strong economics and employment fundamentals. We deploy our expertise in ground-up development. We seek Value-Add acquisitions. Our strong balance sheet creates the ability to opportunistically take advantage of elevated markets and market dislocations to harvest cash flow. We strive to achieve repeatable, strategic partnership approach to entering markets. This reduces risk and maximizes local experience and knowledge. It's our synergistic approach to partnering. In short, are we not stronger together than independently? What makes a market attractive?
High barrier to entries, employment and population growth, strong and efficient transportation infrastructure, and demographic profile. Our geographic focus is primarily along the eastern seaboard, stretching from northern Maryland through Washington, D.C., to Greenville, South Carolina, and finally to the great state of Florida. Our in-house strategy includes all of our asset management platform, inclusive of nine industrial buildings, one office building, and from our development segment, several land parcels that house interim use tenants and/or produce ground rents. This is where we take the property from raw land through entitlements, vertical construction, and finally, property management, performed by internal personnel. After the warehouse sale in May of 2018, by the end of that year, we had two office buildings and 1 recently completed spec house and several land parcels.
As you can see from this slide, we have grown from less than 200,000 sq ft to a bit over 548,000 sq ft, with a five-year pipeline of an additional 1.8 million sq ft. Of note, during this period of time, we sold two buildings totaling 157,000 sq ft along the way. Our industrial platform is made up of two types of industrial buildings. One is the core type, which this slide represents our high-quality, Class A, institutional-grade facilities designed to maximize flexibility. We underwrite these assets prior to construction at 7% return on cost. The buildings that you see in this slide come from several of the buildings that we built at a place called Hollander Business Park. Hollander Business Park was bought in 2008.
At an auction where I sat at the front door steps, and John Baker told me, "I think we finally have board approval, so now you can bid up to a certain amount of money." We built the buildings, sold several of the buildings to Blackstone, sold another one to Cabot. Then we decided, well, we're not gonna sell any more for the time being, and so this is a representation of the ones that we have today. The other type is Class B or value-add. This type of asset carries a higher risk profile than Class A because of the need for extensive renovations to enable higher rents and operational efficiencies. We leverage our experience and relationships to find these types of assets that usually are outside the focus of institutional money.
Cranberry Business Park, which is shown here, is a 268,000 sq ft, five building program purchased in 2019. We bought the property for $6.4 million. We then proceeded to invest $3.4 million in the properties. Over the last 12-month period, ending June 30, 2023, this project produced a 15.8% return on that investment. Since the warehouse platform sale, revenues have grown from $3.5 million in 2018 to a forecasted $6.9 million, based upon the annualization of our Q2 results for 2023, providing a CAGR of 14.4%. NOI has risen for the same period from $1.1 million to $3.9 million, providing a CAGR of 27.8%.
Of note, the last twelve months ended June 30, these assets generated $3.2 million of NOI, as these buildings were starting to lease up. From a capital investment standpoint, John alluded to earlier how much money we've put back into the business. We have or will, by the end of this year, invested over $78 million in the in-house program since 2018. This is our industrial building pipeline, totaling approximately 1.8 million sq ft. Based on acceptable market conditions, these buildings are being prepared for vertical construction over the next five years.
These projects are located in what and different people call it different places, so I'm gonna give a shout-out to CBRE, and they estimate this submarket at a little over 106 million sq ft submarket, that as of September 30, was 4.3% vacant. We call that the 95 North Industrial Corridor. So right now, we have under construction today, a 259,000 sq ft warehouse. We have another site that is, we're going through the pre-development process for a 900,000 sq ft building, and then we have a third site that we have under design right now, 635,000 sq ft in several different building styles, again, to maintain flexibility.
When you add this pipeline of projects to our current buildings in service, our industrial platform will increase to a bit over 2.3 million sq ft. Moving on to our third-party joint venture strategy, I have to say this is probably one, this is not a bad view, aerial view of the southern entrance to your and our nation's capital. I'll get into a little bit more of this in detail, but I thought this was a pretty good place to introduce our third-party, joint venture program. Apartment unit growth has gone from 305 units, this building you're sitting in, to 1,827 units in service, with another 1,000+ in the queue for the next five years.
Obviously, the development dynamics, including cost, interest rates, and supply-demand, will have an effect on the timing of these new projects, but we are readying them for vertical construction. So when the time hits, they're ready to put a shovel in the ground and not go through a one or a two-year process to get ready. Our commercial platform has risen from 14,000 sq ft to 226,000 sq ft, inclusive of a 72,000 sq ft single-story office component. Most of these retail programs are either sitting beneath the apartments or standing right next to them like they are at one of our projects. We don't do strip centers. All the retail is generally as an amenity to our apartment program. So presentation describing our apartment retail platform would not be complete without some pictures of some of our properties.
What you see here or behind me is Dock 79 and the sister building next door, Maren, which you all will visit today. 569 units with 21,000 sq ft of first floor retail. As of September 30, both buildings were 94% occupied. This is a JV with our partner, MRP. I don't see any of our buddies here, they're probably out trying to figure out how to generate some more rents, but MRP has been our partner here in D.C. since about 2011. Interestingly enough, in nine, in 2022, last year, John made reference to, to our Steuart Investment. We sold 20% of these properties, to Steuart Investment Company. Another JV with MRP, this is called our Bryant Street, Phase One in D.C.
Two stops north of, of Union Station on the Red Line, just one stop up from Gallaudet University. It's an Opportunity Zone development project. It's 487 apartments and just under 92,000 sq ft of retail. As you can see, the buildings are somewhat spread out. This is the total. This is residential. These two buildings are the residential. This is the Alamo Drafthouse program and our Metro Bar. All of these properties take up about five and a half acres of property. Phase Two and beyond takes up another seven acres. We have an option, we have a right, but not an obligation to proceed further down that program at such time as we deem that that's an appropriate thing to do.
Moving on, this is a picture of our 408 Jackson building in Greenville, South Carolina. The name 408 is actually .408 for the batting average of Shoeless Joe Jackson. We thought that we'd give a shout-out to him. It sits right next to Fluor Field in Greenville, which is the farm team for the Boston Red Sox. Well, we're kind of a little depressed here because some of us are from Baltimore. But last, this past weekend wasn't that great for sports in Baltimore, but in any event. So this is with Woodfield Development. Includes 227 apartments and 4,300 sq ft of retail.
Here, and the other project, which is called Riverside, down the street, has 200 apartments for a current total of 427 apartments, in Greenville, South Carolina. Of note, the velocity and market dynamics in Greenville have been quite encouraging. For example, the doors opened at .408 Jackson, as of the end of September of the year or the beginning of January, and as of the end of September, the project was 94% occupied, with little or no concessions given to the tenants. So revenues have grown in this platform from $6.8 million in 2018 to a forecasted $24.9 million, based on the annualization of our Q2 results for 2023, providing a CAGR of 29.5%.
NOI has risen for the same period from $4.3 million to $12.8 million, providing a CAGR of 24.3%. Of note, two of our projects were still in lease-up mode as of 6/30, which keeps the annualization a bit conservative, resulting in an 82% annualized occupancy level as of year-end. From a capital investment standpoint, we have invested over $190 million in our third-party JV program since 2018. Lost my clip. Future projects in our joint venture platform. John mentioned earlier the FRP, SIC, MRP, Steuart one, two, three, and four. These are and it's interesting, and I would be remiss if I didn't say this: we have a framework for this development.
We spent a year and a half, at least, and I'm looking for one of my partners, who you might meet later, David deVilliers III, who was the second member of the real estate department that FRP, excuse me, FRI bought in 1986. In any event, we have a framework for doing this. We have a right to do this program with Steuart, but we do not have the obligation. FRP, SIC, MRP, Riverfront 3 and 4, which is the buildings next door. FRP Woodfield, which is a Woven project, which is in South Carolina, 200 units. And then we have a joint venture with one of the top commercial developers in Baltimore, Maryland. Won the Developer of the Year award from NAIOP in 2021.
A gentleman and good friend, Ed St. John. That's Windlass 1, 2, 3, and 4, which is an additional 229,000 sq ft of office and retail. This pipeline stretches well beyond five years, but if and when all of this comes to fruition, we will add over 2,300 apartments to our existing platform of 1,827. This is a pretty good picture, again, ... This shows, as you see, you can see running from left to right, Audi Field, the soccer stadium, our project Verge, Square 664 E, which is currently owned by FRP. It was one of the legacy properties that we got from Florida Rock Industries. Actually, it isn't. We bought that property.
That we did, and then we put the concrete plant that was here over there on 664 E. And then moving from left to right, you see where Steuart Investments properties sit, one, two, three, and four. Then you have The Oval. Moving to the right, phases three and four of Riverfront, Dock 79, The Maren, and the Nationals Baseball Stadium directly behind us. Just a quick shot. This is the Steuart phase one property that sits right to the right of Verge. It's a pretty big building. Houses about 450 apartments and probably have some ground floor retail. We're going through the entitlement phase. As I said earlier, these projects, we want to get them to a shovel-ready program.
We take a look at the market at that point, we take a look at the interest rates, we look at the market data, we get a guaranteed maximum price from a general contractor, and we look at each other and we go to our respective boards and say, "Is this a good deal?" We either think it is or it isn't. If we don't think it is, it goes back. It sits as a pre-development program. It's developed, it's entitled, it's ready to go as soon as the market dictates those actions. Another one, Riverfront three and four, you'll see on the right-hand side of this slide, the first one almost in the center is Maren, the one to the right is Dock, and these are schematics, concepts of the two buildings, phases three and four.
They're gonna take about 550 apartments, plus or minus 600,000 sq ft, or about 300,000 sq ft in each of the two buildings. Again, both of these two are going through the entitlement process, and if we're lucky, we might get finished that in about 18 months. I mentioned earlier a project in Greenville, South Carolina. This is our project that's in pre-development with Woodfield Development, called, we call it Woven. It's a new project we are currently underwriting, and that is including 214 apartments and about 13,000 sq ft of retail that could be ready for vertical construction in Q3 of 2024. This is our commercial office retail program with St. John Properties in Baltimore, Maryland.
It's in an excellent location, but as everyone knows, the asset classes are not the greatest at the moment. They're single-story office, and they are single-story retail. It's a very heavily traveled street. We didn't necessarily get a lot of cars on that picture, but it's extremely well traveled street in Baltimore, Maryland, Eastern Baltimore County. That's our phase one, which is 100,000 sq ft. The offices are in the back, and the retail is in the front. Moving on to our mining and royalties program. As I stated earlier, with the exception of two properties purchased in 2012 and 2022, these are the heritage assets spun off to us from Florida Rock Industries in 1986. So we got 14 properties totaling 15,000 acres, 13 in Florida and Georgia, one of them in Virginia.
As of 12/31/2022, indicated total reserves are just a little bit above 500 million tons. This segment provides a source of steady cash flows through royalties paid to us, most commonly as a percentage of tons mixed, times the annual price. Tons of mine have gone up from just over 8 million in 2018 to little over 10.5 million in 2023. That's an estimated or forecasted amount, or a CAGR of about 5.5%. Royalty revenue in 2018, from 2018- 2023, rose from $8.1 million to $13.1 million, with a CAGR of 10%. NOI from 2018- 2023, went from $8.2 million to all the way up to $12.5 million at an 8.9% CAGR. The long-term growth in aggregates demand comes from infrastructure, public funding, federal state.
You all probably, some of them remember the 2021 infrastructure bill, the Inflation Reduction Bill, that for some reason helps us out in aggregate sales, non-residential, private-public funding, and then residential private funding, single-family house, multifamily development, under-built housing stock in the U.S., powerful democratic trends. A lot going on that drags, that moves this demand forward. This is a great slide. Excuse me. We call it the aggregate fundamentals. The graph shows an overall pricing in the U.S. going back 47 years. Pricing velocity has increased tremendously since 2004/5, as permitting of new operations became more difficult. The chart at the bottom shows our specific aggregate numbers for sand and stone, excluding cement and calcium. These are the numbers down along here.
I want you to note, even though 2006 remains the high point of 10,111,000 tons, that was the, the peak volume year. It's taken 17 years to get back to the volumes of the pre-2008 housing boom. But because of the pricing power of our tenants, the royalty income has almost doubled, or actually more than doubled, excuse me. Operational highlights. So we have our in-house, third-party joint ventures, and mining and royalty platforms performed as a whole. How have they done? Revenues have grown from $18.5 million in 2018 to an annualized version of our Q2 results ending June 30 to $44.9 million, providing a CAGR of 19.4%.
Our NOI has grown from $13.6 million in 2018 to an annualized version of our Q2 results to $29.2 million, providing a CAGR of 16.4%. Still another development strategy we focus on within our development segment is a land development program we call lending ventures. This strategy is a great example of this company's entrepreneurial attitude and how we leverage our relationships in the Baltimore area to generate cash flow in a manner that might never occur to your traditional real estate company. Unlike our in-house, third-party joint ventures in mining and royalty disciplines, this strategy is measured by interest income and profit versus revenue and NOI. Of note, this is a picture of our latest venture, Presberry, which is a 110-acre property in Aberdeen, Maryland, that will ultimately have 342 lots.
Let me explain a little bit as to how this game works. We charge a 10% interest on all the money that goes out the door, and it's compounded monthly. We have a 20% IRR threshold. This is our waterfall profit-sharing structure. If this project doesn't make it to 20%, our partner doesn't get any profits. He does get some—he does get paid for management and the producing through a lot of these programs. We don't make 20%, he gets no profit. We move on to entitlement, land purchase. We, we've got the land under contract in a wholesale value. We take the property through entitlement, and then we purchase the land when it's entitled. We then go to a contract to sale with the builder. We get a deposit, then the land development process starts.
The game for us is to try to maintain a 50%-55% peak capital as the target, and to hedge that, we use the builders' deposits to keep our cash flow out. This development strategy is all about properly managing a managed discipline of capital outlays. Considering the fact that we've been developing and doing land development work now for almost 40 years, and somebody that you're gonna probably meet later happens to have the same name, started his land development job when he was bolted onto a runway when he was 6. So this is a picture of our Amber Ridge project, which shows the project at 50% complete.
It's now about 95% complete, and there's a small amount of cash remaining to be spent, and the remaining 12 lots, of the total 187 lots, are scheduled to be taken down by the national home builder prior to the end of the year. The interesting story about this is the first dollar of this property was taken down on March fourteenth, 2020. Does anybody remember what that day was? On fifteenth of March 2020 is when the government shut down the country for COVID. Shown here are the three projects we've been a part of since the inception of this program in 2018. The first, Hyde Park, was different than the other two as we sold that property at record plat, where when all the entitlements were accomplished.
Property was under contract, we got the entitlements, we bought the property, we transferred it over to the builder. There was a little bit of cash involved between that came to us. This had a 29% IRR, so our partner shared in some of those profits. The next one, Amber Ridge, there's an asterisk on there you'll see under interest and profit, and this is a reminder that when the Amber Ridge project is completed, which should probably be at the end of this year, on or about December 31 this year, interest and profit for this project is expected to total $4 million. The IRR is at 18% or will be, so that profit will come 100% to FRP. The peak capital for that project of Amber Ridge, we had committed $18.5 million to the project.
The peak capital was $12 million, never got above $12.2 million. Our latest one, Presberry, as you can see here, just got started. But again, entitlements were completed in 2022. The property was not purchased until February of 2023. Now that the land development process is going, developer or builder profits, deposits are in hand. We have all 342 lots sold, and we're kind of off to the races. So there you have it. Thank you for the time. Sorry, I got a little wordy. I'll now turn this over to John Baker III. Oh, before I go, I do have a shout-out to a couple of our folks in the back of the room: Suzanne Mayes , our controller, Brandon White, Todd Evans, these guys. Without these guys and this one, this, this engine doesn't run too well. Thank you.
Yeah, need that. Good morning, and thank you, David. I want to rewind, for a second and revisit some of the slides we showed you earlier. So as we've been saying ad nauseam since 2018, our goal, post-asset sale was to put all of those proceeds to work into, new investments. You can see the year by year and asset class, of, our annual, spend in new investments. So to some extent, we've accomplished that. From 2018- 2022, we've made $319 million in real estate investments, all of it in the form of equity investments in land, development, construction, and investments in joint ventures.
On top of that, we've returned another $37.5 million to shareholders in the form of share repurchases. We've significantly grown our multifamily investments, we've restarted our industrial development business, and we've expanded into new markets with new partners. But we have barely dented our cash position, as we stated earlier. We've resisted the impulse to dividend the money back to shareholders. One, because just the nature of double taxation, that's not really an efficient way to return money to shareholders. Two, it is our view that dividends are sort of the bailiwick of a mature company with less growth opportunities, and too much cash, and that definitely is not us.
Because of conversations with so many of you that echoed these sentiments, again, we've resisted that impulse to dividend the money back. Our partnership with Steuart Investment Company and MRP to fully develop the Capitol Waterfront was supposed to be the answer to this problem, the means by which we would fully invest, with the exception of a capital cushion, the cash on our balance sheet. It's our view and the view of our partners that at this time, it doesn't make sense to put this plan into action and proceed, as planned on our original schedule with vertical construction. Construction costs and interest rates are just not where we want them, and the project doesn't make financial sense at this time.
We're gonna come back to it when interest rates soft and inflation materials has cooled. And there's also been a glut of apartment projects in D.C. after a COVID bottleneck, so it probably wouldn't hurt to let the market here settle momentarily. We truly believe in the long term, the D.C. and the Capital Waterfront specifically remains a really compelling place to pursue development. I mean, you're here, look around you. It's beautiful. I don't think we could have asked for a better day to see the city. This is the best new market and arguably the most important city in the world. This is a town with steady, high-paying job growth, abundant entertainment options. It's a cultural mecca. It's Washington, D.C.
It is as good a market as you could hope for. It just doesn't work right this second. The question remains how to spend the cash. We are putting money towards industrial products that are less capital and debt-intensive than multifamily projects because we aren't dependent on debt to do industrial projects in the way that we are with multifamily. Demand for these assets remains high, with less than 5% vacancy in our 95 North industrial market, and we are also in somewhat a unique position to fund these projects on an all-equity basis. At a time when construction rates are extremely high and, you know, getting a construction loan at that rate might prevent others from entering into the market, we can...
We're already in the process of building a 259,000 sq ft building, that'll cost around $30 million to build, with approximately $20 million of it coming next year in 2024. We have earmarked another $30 million in 2024 for two new industrial land parcels that we are currently pursuing. We're moving as fast as we can on the industrial land adjacent to Cranberry Business Park, that's David referred to earlier. It's capable of supporting over 600,000 sq ft of development, with a tentative start on construction in 2025. Rents in the sub-market we concentrate on are tremendously high compared to historical numbers. It's both encouraging, and I guess if you're pessimistic, you could say maybe we're chasing an asset class whose peak has maybe come and gone.
The low levels of industrial supply, so the small percentage that rents represent in the overall supply chain, which is about 3%-6%, imply to us that there's still plenty of room for rent growth, and I think Prologis estimates as much as 15%. We have a go, no-go start on a multifamily project in Greenville in 2024. That's more flexible on where construction loan rates might be right now. And because of the cost of construction in that market relative to D.C. and the velocity of rental rates, we feel a little more confident about pursuing a multifamily project there, again, depending on interest rates. In 2025, we will start construction on one and possibly two buildings at the property we have adjacent to Cranberry.
We will, in all likelihood, execute the first purchase of the Steuart parcel for approximately $40 million. We may join up with an institutional capital partner at our Mechanics Valley site to develop the 900,000 sq ft building that we have planned for there. If we can find a build-to-suit, we're gonna do it all ourselves, which is about $85 million CapEx project. Half of which would be funded by construction debt, and so that's a $43 million equity spend spread across 2025 and 2026. We have another lending venture opportunity in suburban Baltimore, which, along with our current project in Aberdeen, will use around $20 million in capital across 2024 and 2025.
So that's a lot of information, I realize. Point being, depending on how things shake out economically, we can invest as little as $80 million in 2024 and 2025, or as much as $180 million. If the stars align economically, we're gonna be aggressive. If they don't, we're gonna want, you know, the additional capital to play defense with our assets, repurchase shares, and, you know, potentially go out and find an undervalued or distressed asset. So, given the timeline for development, most of these investments that I've described won't translate into immediate NOI growth, in the next three to five years.
But with construction on a new warehouse this year and next year, and the increased NOI from our multifamily projects that are currently in lease-up, and you know, soon be stabilized. We expect to grow our proportionate share of NOI to $42 million by the end of 2028. So that brings me to an item of discussion that is of particular interest to a lot of our shareholders, and it's net asset value. I think a lot of you have your own version of this. Allow me a moment to walk you through how we see it. It is, you know, maybe the biggest cliché for public companies to tell you that they're undervalued. I'm gonna walk you through our NAV.
I think you'd be hard-pressed to present an argument that we're not actually undervalued. I'd be curious to see an argument that would suggest otherwise with this company. This is a very high level, sum of the parts. If you'll forgive me, I'm gonna get maybe more granular than people might find interesting, but pardon the extremely large print here. And we have paper copies here. I don't know if we have magnifying glasses. Again, I apologize for the small print. This is all the parts. So, again, very granular, but I think it's important to hear from us at least how we went about valuing this. This is a very, what I would describe, conservative net asset valuation. So the industrial assets, those are Cranberry and Hollander.
Simply put, market cap rate from CBRE, sort of a range of cap rates, and then added another 100 basis points for Cranberry as a Class B asset. The office and ground lease, the office is simple, just a suburban office cap rate on our 34 Loveton building. The ground lease is a little more, I guess, a little less obvious. We have three ground leases. It's our old Florida Rock Industries home office in Jacksonville. The building's torn down, we get paid a ground lease by Vulcan there. The ground lease down the street at 664 E for their ready-mix plant, and then we also get, we collect rent for trailer storage at our Krauss property next to the Cranberry Business Park.
This is simply a present value of the, you know, the NOI from those leases, and discounted back at 10%. Next are the stabilized JVs. Not particularly complicated, is the NOI total from all the buildings, you know, applied a cap rate to them, and then subtracted the debt, and applied our ownership percentage to the remainder. Not very complicated. Finally, you have our mining royalty NOI. I think through several investor presentations, we've made the... we have compared our assets to Vulcan and Martin Marietta. I simply took their EBITDA multiples for the last six months, averaged, and applied it to our NOI. So you have kind of a range of valuations between Martin and Vulcan's multiples.
These are, you know, Vulcan is our largest tenant. Martin is the closest, you know, comp to them. I feel it's pretty, you know, appropriate, EBITDA, you know, multiple to place on our, you know, mining NOI, and we're not cherry-picking here. The last six months, the NOI multiples are pretty consistent with what they, those EBITDA multiples have been for, you know, for years. Cash was, you know, pretty complicated to value, but, you know, managed to some proprietary black box technology, we came up with a value for that. These are our income-producing assets, you know, and then our cash. If you look at the per share value, it's a range of $45-$52, which is pretty much in the ballpark of our share price.
What that tells me is that the market really only gives us credit for our income-producing assets. You, as shareholders, enjoy all of the development potential for essentially, free. Move on to the development pipeline. Under development, the way that we valued our apartment assets that are under development is simply just our equity contribution. That is, you know, probably, too conservative, but that's at least a valuation that everybody can understand and agree on. The next segment is our industrial land. That is the Krauss property adjacent to Cranberry Run. That's the Chelsea property that we have under development right now, and then Mechanics Valley, which will support 900,000 sq ft.
Provided a range of values from, the most conservative, which would be the purchase price, and then the top range is just management's, you know, informed opinion of what, you know, the value that land represents in a building cost, per square foot. The next segment is future phases of Riverfront. That's phases 3, phases 4, 664 E. These are, you know, parcels that we own outright. Applied two values to those. One is the value that we contributed, the land at per square foot to, The Maren, and the next is what we purchased, The Verge at. So those are, you know, two somewhat recent comps and, you know, probably somewhat conservative.
The residential land that we have, you know, our Brooksville JV, some lending ventures, an investment that we made in Fort Myers with Woodfield. Either valued the land itself at basis, again, probably pretty conservative, or, in the case of the lending ventures, just capital lent less received. Finally, this is our loans that we've made to joint ventures. One for the Ed St. John joint venture, and then the other two, the Alamo Drafthouse at Bryant Street. This is simply the principal balance on those loans. The very last piece is future liabilities. Those are the Opportunity Zone taxes that we owe in 2026, and that's just a present value of the $26.5 million that we owe.
Finally, you get an NAV in a sort of a range from $68.30-$78 per share. I'm sure you all have your own opinions and your own NAVs. But again, a very conservative net asset valuation. At the low end, you have a 25%, you know, current discount to NAV, and you know, up to 40% on the high end. What do we do about it? Why am I telling you this? You know that the company is undervalued. What are we supposed to do about it? One, we pound the table and tell everyone we can, have investor days, you know, show the market that they are essentially leaving money on the table and we aren't properly valued.
That's one way to do it. The other is make the company as easy to value as possible. There are, as you can see, a lot of moving parts to this company, and we perhaps haven't done the best job of keeping our shareholders abreast of every single moving part. We don't do one single thing, we do a lot of things, and maybe that makes us difficult to value. Providing a net asset valuation with all those moving parts, you know, explaining them to shareholders, that's another way to make our company easier to value and hopefully get somewhere in the ballpark of a you know a true valuation of our assets. And then the final thing we can do about it is very simple, but it is not easy.
We are too small for probably, you know, a lot of people in the market to pay attention to, and the simple way to take care of that is continue to grow until we are, you know, too big to ignore. Simple, not easy. That's my portion of the presentation, and we'll turn it back over to our CEO.
Thank you, John, and thank you, David. Thank you all for bearing with us as we go through this. Before we open up the floor to questions, I just wanna re-pound a few points real quickly that I think are important to understanding FRP. One is that our industrial land bank, we talked about the properties we've developed, and the optionality of the Steuart partnership. In other words, we have the right to go build apartments when the time is right, but not the obligation.
So the land bank and the optionality of the Steuart partner gives us the ability to pivot our development focus to what is currently a much more profitable game plan, and that is industrial development, without leaving huge amounts of capital lying fallow in apartment lands that we own. Secondly, we've spent $319 million to rebuild our portfolio, yet we nearly have the same amount of cash that we did five years ago. That's a strong testament to the cash generation power of this company and a wonderful insurance policy as we navigate the normal ups and downs of the real estate market. And lastly, we have identified the markets and the projects for a development plan over the next 10-15 years that will dramatically grow our NOI and hence the value of this company.
So we've got a plan, we've got a machine, and we've got a focus, and we hope you all will enjoy the ride with us. And so now we'll... we're gonna, the four of us are gonna sit up here and try to answer your questions as best we can, and then we'll have some lunch, and if you have time, we'll go take the tour and see what the landscape looks like in person around here. Thank you, guys. Appreciate you. Okay, the floor is yours. I know Bill Chen doesn't have any questions. Yes.
Good morning. Thanks for-
Curtis, we got a mic for you.
Thank you all for the presentation. Is it on? Can you hear me? Thank you again. So I guess I'm curious about the lending ventures, and the first question is, you know, why aren't traditional lenders like banks involved in that, doing what you're doing? Or are they involved, and is that your competition for lending to home builders? Or why isn't there—Why are you able to get those kinds of returns?
I guess I'll take that, and David can certainly help. Obviously, there are banks that loan money for the lending ventures. One of the things that we think that we bring to the table is that we're land developers ourselves. We've been doing it for a long time, so when. And we know this, we will only do it with this particular gentleman, who happens to have been the head of two national home building companies over the last 20 years. So we developed a friendship. We've helped each other zone properties over the years.
... One of the things that we like about the lending, the lending ventures, which is a little bit of a, of a unusual piece, is that it enables us to cast a wider net when we're looking for land. Brokers will say, "Well, we've got this piece of land," and we'll look at it, and we'll say, "Well, that's either good for residential or it's good for industrial." We bring our residential guy in, he can do a due diligence from a national home builder level. But relative to that, we think that one of the things that we do is that we'll see these guys before the banks won't do. We'll spend some money of our own to do our own due diligence before we jump into it.
I think that, again, there are banks that do it. They usually require a lot of restrictions that we don't. We're a little bit quicker in making inspections, we're a little bit faster, you know, easier to deal with. And we only do it if the property serves a particular purpose. If it's the center of a donut, we're not out here to try to make this a long-term program. We think it's a great cash management opportunity in particular places that are seasoned, but we aren't gonna be spending a whole lot of time looking outside of the Baltimore or anywhere else to do that.
Is this kind of enabled by the idea that, you know, a lot of home builders have migrated to an asset-light model? They don't wanna own land, and so therefore, it's works for them and seems to be working for you as well. Is that kind of what's going on?
Well, it is. One of the things is a lot of times, things that you read in the newspapers are kind of holistic. They talk about the, you know, the national home building or the national, you know, supply and demand. Baltimore, interestingly enough, has a whole lot more demand than they have supply. That's why we've been able to find property that, that's made sense to us. The government has actually helped us out because they've become so restrictive and so long in creating the entitlement process, a lot of properties or a lot of developers have kind of given up because it takes a lot of time to do it unless you have a pretty good idea of how to do it. One, the supply and demand opportunities in Maryland have been incredible.
Obviously bowed by the banks-- or not the banks, but the different government agencies really being restrictive in allowing for future development.
And then just I'll do one more, and then I'll pass it on. We had a banking crisis in the first quarter in this country. Capital was flying around. You are sitting on a lot of cash, and if I don't ask this question, Bill Chen will probably ask a question about it. And, what was happening to your cash? Was it at banks, were you worried about your deposits, which are obviously over the guarantees, and where were they invested in treasuries? And just to comment on that, and-
Yeah, we moved really quickly to make sure that all of our bulk of our cash or cash equivalents, and those are, you know, interest-bearing treasuries. Our operating cash, which we had in bank accounts, we quickly moved to make sure or they were below FDIC limits. So that's... That was our response to that.
All right, thanks.
Thank you, guys. I think the NAV analysis is too conservative.
I do too.
And I can easily get $100 per share NAV myself, even in this environment. But I understand the conservatism. And I think you can—you could do two more things to address the NAV discount. One is share buybacks, as you have done in the past. And the other thing is one problem that maybe I have in Spain, because I have diversification limits in, on my fund, and I can't give you more capital. I'm at the max. At the maximum, I maybe have $6 million. It's an 8% is the first position of my fund. And I have seen recently Brookfield made a distribution of the asset manager, so they—It's just like an IPO, maybe.
They distributed 25% of the asset manager. So, now there are two stocks quoted in the stock market, the Brookfield Corporation and the Brookfield Asset Management. So now I can have more exposure to both of the company. And I don't know if it's possible to do the same with the Quarry business. I would like you to have control of the two of the companies and the capital allocation strategy because you are honest and patient and disciplined, and you are aligned with us. And maybe it's difficult or it's impossible to do that idea, but I would like to give you more, even more money to be partners.
We appreciate that sentiment.
I think, I mean... To answer your question on why we, you know, probably wouldn't spin off the aggregate royalty business, capital allocation standards in Spain notwithstanding. Having a separate public company for the aggregate royalties would, I think, you know, you'd have double listing fees, double administrative requirements from separate companies. I think probably our main concern would be that, again, you're taking a small company that's undervalued and creating an even smaller company that is probably, despite how easy it is to value, would also remain undervalued, and I think that would open us up to, you know, potential takeover bids. Somebody could buy something that is extremely easy to value at less than a market rate.
I don't think, you know, Revlon laws being what they are, we wouldn't necessarily be obligated to accept, but fighting off takeover bids would just require, you know, time and money that, you know, we is very easily avoidable. But we, you know-
I would say, in addition to that, $10 million-$11 million of pretty steady cash flow is a nice friend to have.
Yeah. For the current business.
Yes.
Thank you. Thank you for hosting. A lot has changed beyond your control since you signed the agreement with Steuart. I was wondering if you can just—you've been transparent on how you're thinking about things as things are evolving here. But just, are they in sync with you on future development, and how you kinda see that partnership evolving in the future?
Well, I can, I can take a stab at it. By the way, excuse me, shout out to John Begert , Michael Meyer, our partners from MRP in the back. John and I started taking this walk about 11 years ago, down in this, in this area. But what we have created here is a framework for a very large, what could be a complicated development. And the initial plan was to create a program that said, the Steuarts, you can come in and become parts of MRP and FRP. So we'll give you the opportunity to buy 20% of up to, no more, and that was in the framework of, of our Dock and Maren. You can also do that at Verge, but there's Opportunity Zone issues, they'd have to wait there.
They then-- we said, "Okay, we want to be fair to all sides, to the MRP people, to the SIC people, and the FRP people." We created a program that said, "We'll pick a lot." We created one of the, the, the lots. It was subdivided, and off we've gone in the, in the entitlement process. That entitlement process is extremely complicated. It's time-consuming. The MRP guys have done a fantastic job in designing these buildings. If there was one particular part of what FRP was not very good at, we were not apartment developers. MRP is. We went to Steuart, open book, this is what we're gonna do. We're gonna spend, FRP and MRP are gonna spend the money to entitle this property. You don't have, you don't have to, to do that.
We now have a date where we have to buy the property. How do you buy the property? The property gets appraised, third-party appraisals. The buyers, the sellers get appraisals, and then you decide what the, what the property is valued. Then you take a look at it from an environmental point. How do you know that the property is environmentally sensitive or not? The purchase price is decided, and then we determine, we take it back off, and we look at what we believe that the environmental costs are gonna be. We did that here at Dock and Maren, where we said, "Okay, any incremental increase to go from a clean property to a dirty one doesn't come off the purchase price." In our particular instance, we paid into that program. In the Steuart process, it will get reduced from the land value.
Again, everything is completely transparent, wide open. One of the things that determines the go, no-go is, A, ultimately, the cost of the land. We have a complete—take it completely through the entitlement process, all the way through, up to and including a guaranteed maximum price from a general contractor that's bid at least three times. Then comes the market study, the due diligence. You know, is the supply and demand right? And then finally, one of the big things we're all talking about today, the capital markets. What do we do about the, about the construction loan? Do all of those pieces when they come together, and then there's always usually a, a piece where there might be an additional requirement for capital. We have the right, not the obligation, to provide additional capital.
Same thing holds true, MRP has a lot of friends and family that they've done work with, so they would bring the capital in that way. So again, this whole project has to be ready to go. If it's not, then we take a step back, which is what we've done right now. We were supposed to start—we were supposed to actually settle on this property in October, and we had an ability to move that to February. We moved it around nine months. It's now July and then November. So we've just shifted everything around. Hasn't stopped the process.... We're going through the entitlements as if it never stopped. But this way, everybody's transparent. The simple, most important thing that we strive for, as I said in—as we said in our presentation, synergistic approach to development. Stronger than the independent parts.
MRP brings something incredible to the table, SIC brings something, so does FRP. If it works right, the way we believe it will, we think it's gonna be a wonderful trip to take down to phases 2, 3, 4 of Steuart. Eventually, over a period of time, that will ultimately be controlled by the market. This group of three different companies could wind up with most, if not all, the land on both sides of the Anacostia, the bridge that comes across the Anacostia.
Yeah. Partnership agreements aren't as important when everything's going great.
Yeah.
It's when things get sideways that the partnership agreement is really important. And David, and particularly David III, did an incredible job crafting an agreement that basically aligned everyone's incentives. If we were going to, you know, go purchase the Steuart land after doing all the, you know, pre-development work, and an appraisal gave it, you know, a depressed valuation, that obviously would reflect market conditions that we might not wanna build in, and they wouldn't wanna sell it at that depressed rate. So the important thing was to craft an agreement where everybody's incentives were aligned, so that when it was time to go forward, we were all ready to go forward.
To get it back to basics, they are solid people and great partners.
Yeah.
We're trying to be as straightforward and honest as we can be about it, and they have been... You know, they're big boys, and they get it. It's not much fun to go develop a project that's underwritten to make 5% or 6% and then borrow money at 8% or 9% to finance it. That is, that's the height of lunacy, so that's... They get that.
This isn't land they recently purchased and are trying to flip. I mean, this, these are their family's assets going back generations. So, you know, they were careful about who they chose as a partner, and they're gonna be careful about developing them. This is, you know, every bit as big a deal to us. It's a huge investment and a huge opportunity, and we don't have to move forward right now, so we're not going to, and when it's ready, we will. It's just such an amazing area and an amazing opportunity to dominate this whole Capitol Waterfront area, and to waste that opportunity would just be beyond tragic.
Did we miss anything?
No, you all are good. No, we're, we're all in alignment. I think it's three great, great companies, great teams, all coming together, with a vision of creating something really, really special at the southern entrance of the nation's capital. We've had our hiccups along the way. Everyone's stood up, honest, transparent, so we're all in alignment right now.
I'm sorry if I maybe missed an answer here. I think earlier there was a two-part question on buybacks and spin-off, and the discussion went into spin-off. Is there more background on why not doing buybacks with the cash balance?
We were really aggressive about buybacks, 2019, 2020, because the share price was really, really low. And the share price rebounded. We just, we really only wanna buy it when we don't have a plan for the money and when we can steal it. And, we love buying back our own assets. We prefer to put the money into new assets. I think we're going to do a consistent but small level of buybacks, each quarter going forward, but it, I think that it's... management's feeling, as much as we love our current assets, we wanna grow the company, and, and use the, the money to do that.
Let me flip that question on its head. I think you guys trade well below $1 million a day of volume. It's a bit challenging for any fund of any size. Look, I think many of us here maybe consider ourselves value investors. We love this NAV discount. But let's say overnight, this investor day achieved what it was hoping to do, stock went to 100. That'd be sad because now all these people are exiting the stock, because they're value investors, and it's no longer a discount, right? Real estate is a game of time. Would you consider issuing equity, growing if you saw attractive opportunities, becoming a larger company, increasing daily trading volume? Is that at all in discussion of creating that unlock?
Do we wanna be a company that's large enough, that's in an index, in a REIT index, et cetera, bring in additional volume? Is that ever something that you could see being as part of FRP?
I don't think growing the company just to achieve volume has ever been part of our growth strategy. I think, I mean, equity is probably the most expensive way to finance growth. And right now, we have the cash to grow, and between what we have on our balance sheet and what we generate each year—I think we can accomplish everything that we have planned, which is, it goes out 10 years. I think, you know, potentially if there were just a series of incredible opportunities that aren't on our, you know, that aren't in our plans right now came along, we might consider issuing equity to achieve those. I think you'd probably use debt first, and then, you know, pay it off with cash flows from what, you know, whatever.
If it was a rock quarry you were buying, and you could generate the cash flows to pay off the debt really quick. Equity is just such an expensive way. It comes at your expense, and it comes at our expense to grow the company. I think, unless everyone in this room agreed to take down all the equity, I'd hate to dilute our current shareholders.
But at $100-
Yeah, $100, that's all right.
Yeah. That we hadn't thought about that much lately.
No.
Good morning. Thank you for today, and thank you for your stewardship. Question, my eyes aren't great, but in looking at this document, from what I can tell, I don't see any sort of line items specifically for Fort Myers. I'm imagining, first of all, that that is embedded in the, kind of in the mining business. Am I correct in that?
I mean, there is no residual value of the land in the mining assets. It's purely a valuation of a royalty stream. Fort Myers is a piece of raw land, doesn't really have any entitlements on it. It is an incredible opportunity that we're gonna take advantage of, but they won't be done mining for several years. The Alico Road extension that is, you know, gonna make that development possible isn't coming for, you know, three, four, five years. And whether, you know, the county puts the, you know, water and sewer and power infrastructure in place with that road extension or wait for development to bring it to our site is an open question. It's just such a kinda speculative valuation you would put on it. I think that, you know, that's a bonus for y'all.
Okay. Sounds good. Thank you-
I think Brooksville is the same way.
We have at least a valuation on there for Brooksville at the basis, but what it might sell for is speculative.
Is multiple.
Gotcha. So the way to think about it might be that the second life value of some of these aggregate quarries is additional option value that may play out at some point in the future. You'll work towards it, but you can't put it in here from a conservative perspective-
Correct. I mean, there-
A public company, yeah.
There's Brooksville, Fort Myers, Lake Louisa is probably potentially the most valuable piece of land that we own. 1,200 acres in the I-4 Corridor, that'll, when Cemex is done mining, will all be above the water table. And then you want to talk about a hole in the donut; that is going to be a real hole in the donut. You could potentially develop it as the mining phases, you know, go through, so that you don't have to wait until, you know, 20 years to develop the whole thing. But that is a wildly, you know, valuable land corridor, and, and will be, you know, a, an extremely valuable second life mining royalty property.
Perfect.
Yeah.
Thank you very much.
Hey, guys.
Hey, Bill.
Yeah. Don't think that we're gonna get through this without me asking some questions. Well, I wanna start by thanking everybody for putting this together, and something I was gonna ask about, like, you know, you guys created the NAV, so thank you very much for that. Although, I agree with a lot of other gentlemen in here that I think this is quite conservative, you know. I kind of want to hear, are you guys getting phone calls for distressed deals? People know you, you're public, you got the cash. I mean, I would love to pick up another Hollander for $1.3 million that... you know, I calculated the equity return on them. That's got to be, like, 20, 30x-
Yeah
equity return on that, right? Like, minimum, probably. Right? So I, I would love to see another pickup like that. Like, are, are you, are you, is there-
Do you want another 2008?
What's that?
Do you want another 2008 to make it possible?
No.
No, but like-
Don't answer that.
No, but, like, knowing your balance sheet and how you guys manage everything, I actually don't mind, like, being a FRP shareholder.
Right.
If that makes sense.
Well, I want you to answer this question.
Go ahead.
I would say we're always in the dance, right?
Mm-hmm.
I mean, we're always... We're developing an industrial building. We're looking in, you know, Greenville, South Carolina. We're, we're always in this dance to develop real estate. By being in the dance, these unicorns do come to us, whether it's, you know, Cranberry, Hollander. Most of them are relationships that we've achieved, and someone says: "Look, I'm in trouble. I need you. Do you wanna step in? I'll give you all of our stuff.
Mm.
That's what happened at Hollander.
Mm-hmm.
Um, uh-
And even at Cranberry to some extent.
Mm-hmm.
The development, you know, people that do this stuff, you know, in Baltimore, it's small. We all know one another.
Mm-hmm.
So, they're gonna be out there.
Yeah.
I don't think we're quite there yet-
Mm.
but that time, you know, hopefully is on the horizon.
Yeah. I mean, you know, where I'm coming from is, I have relationships with private real estate GPs, and obviously, the news headlines, you're seeing the Tides E quities of the world, and, you know, there's some people who bought some bill at below four cap with floating rate debt and short-term maturity. I'm just wondering, like, are you seeing that type of deal flow? You know, I was at Citi doing sell-side work in 2008, and I just... You know, every week there was, like, five developer calling me up, crying, like, "I'm gonna lose this property. I need, I need you to find me an equity partner." I remember those times, and, you know, you, you- the company is uniquely positioned to take advantage of that. Wondering if there's, like, additional color in that?
Bill, I think... I mean, we agree with everything you say.
Mm.
And, I think at this point, office would be the ones that are surfacing because they're in the toughest shape of all. That's not our deal. The apartments, when they start to have to refinance, that could very well be a possibility. Right now, industrial is fine. I think it's doing fine, and I would be surprised if we got any super opportunities there. But we are absolutely looking. It's absolutely part of our game plan, but it just hadn't happened quite yet.
Mm.
I hope it doesn't, but if it does, we'll be ready.
Mm.
Just to add to what both David and John said is, we don't... There are some out there, obviously, and usually the bad ones are the ones that go first.
Yeah.
And we don't—we're not that driven to grow and buy things just for the sake of buying. We're not developers that have a huge burn rate, that have to pay that, you know, pay that debt. We're a pretty damn mall group of people, and we've exploited third parties, and we believe that we're actually bringing a whole lot of value to our third-party partners, not just in money, but in experience and knowledge. And one of the things that we don't want to do, and value-add, as we talked about in the presentation, they can turn upside down pretty quickly. You know, they can either be functionally obsolete-
Mm
They could be in a bad market. They have, they have to go through what we call our attractiveness index before we would even consider.
Mm.
One thing that we learned a long time ago is, when you don't have a whole lot of people working for you on the street, you gotta be careful about where you spend your time.
Mm-hmm.
Right now, we're going through entitlements, we're going through some refinancings of some of those crazy loans. We're trying to maintain the right percentage of what's going on under construction, what are we looking at? But we are constantly, to your point, we have people that, through relationships that we've made over 30 or 40 years, that know who we are, know where we come from, know that we have the money. They do call us, and one thing that we all don't have a lot of is time.
Mm-hmm.
So when they call: "What do you think? Where is it?" We can answer things pretty quickly so that you can go to the next person, and that's... So that's something that's really helped us as we do go through this period, where we hope that we can pick up another couple of, or one or two of these value adds. We haven't been that successful. We've probably, over the last 20 years, maybe bought five or six of them. They haven't been easy to come by, that have met our requirements.
If I may, I'll try to hog or I-
That's it.
Okay. On the, you know, like on the industrial side, so two questions there. On the... You mentioned you're trying to develop to a seven cap, and I'm assuming that's a $9 rent, triple net rent. Is, is that about right?
Yes.
Okay. Okay, so like, you know, if the market's at five, 5.25, there's like, I'm can't do math. I mean, probably like 30% upside. Is, is that kind of generally like the, the, the math, you know, behind the underwriting? Like, like just kind of trying-
Right
... to figure out, like, what's, what's the logic? What makes a warehouse project a go versus a no-go? Yeah.
Bill, you know, what's great? Most of our industrial lands that are in our pipeline-
Mm-hmm
... we bought before the big ramp up in rental rates-
Mm-hmm
... and the associated ramp up in land values.
Mm-hmm.
So a lot of our industrial lands in our pipeline are well, well below on our books-
Mm-hmm
... well below market value.
Mm.
We have rates continue to rise.
Mm-hmm.
Our legacy lands pipeline, 7% return on cost could be low.
Okay.
To your point, industrial buildings, let's say, you know, our legacy property is $125 all in-
Mm-hmm
... with rental rates 9% and growing.
Yeah.
Hopefully, they continue to grow. You can, you can do the math on that.
Okay. Thank you. Appreciate that. The 900, you may take on a partner, the 690, you may just do that outright, right? Okay. I think I... Would you guys consider putting debt on any of these property, or just keep it on unlevered?
The 900, you would- if we were gonna do it all ourselves-
Mm-hmm.
... if we found a build-to-suit-
Okay
... you know, an $85 million project-
Mm
... you would, you'd put debt on that because you'd feel comfortable-
Okay
... putting debt on a build-to-suit.
Okay.
But for just spec development.
Yeah
... no.
Okay.
We wouldn't do that.
No, I meant, but like after they stabilize, 'cause, 'cause now-
After they stabilize?
Yeah. I mean-
I mean, it would really just depend if we needed the money.
Okay.
You can obviously goose your return-
Mm
... with leverage. But for us, what would be the point if we already have the cash on our balance sheet?
Yeah.
I mean, our problem is not spreading our money around, it's spending it. So, you know-
Yeah
... until we need the money, we wouldn't put debt on those assets.
Okay.
Probably wouldn't do it at, you know-
Mm-hmm
... 7.5%.
All right. Are you guys seeing much...? No, thank you for that, I appreciate it. But I would also just suggest, like, if, you know, in, in that, like, God, give me like, you know, like that oil quote, like, you know, give me another oil, like, whatever. Like, like, if we get another 3% rate, like get locked in 10 years, like, let's do that, right? If we get there.
We're with that.
Yeah.
That makes sense.
Yeah.
Makes a lot of sense.
Yeah. Are you guys seeing much industrial outdoor storage opportunities? Like, I mean, you know, the strength of the company is kind of finding these sites at good prices, and that's kind of becoming the next hot, emerging, like, soon-to-be institutionalized asset class. Like, is that a potential opportunity to... I know, like there's some trailer storage where you're getting those rents, and assuming, like, the skills that you need to build a warehouse, like, you know, the sourcing the site, like, it's all very similar. But like, you know, that's just an asset class that's like up and coming. I keep hearing about, and I know GPs would do that. So just want to hear, like, if you're seeing any of those opportunities in the market.
You're talking about the, like the equipment storage business?
Yeah, like the-
Yeah
... the, you know, equipment, the trucks, you know, the cable companies that needs like-
Yeah
... to park 1,000, you know, trucks.
I mean, we are doing trailer storage at one of our sites. That's just a. It's a wonderful way to generate cash while the land is getting ready for higher and better use.
Mm.
I don't know enough about the, you know, the equipment storage business-
Mm-hmm
... but I would assume, you know, if it's like a public storage business, it is-
Yeah
... it's a way to generate cash flow until you find a higher and better use-
Yeah
... for the land. I think for our industrial pipeline, we have the higher and better use.
Mm.
We'll generate cash flow until they're ready to develop, but once we're ready to develop, we're gonna, you know-
Yeah
... take advantage of it.
Historically, we haven't really been searching for that type of asset class.
Mm.
You mentioned trailer storage, and then you mentioned equipment. I would say that equipment and that kind of storage opportunity is more of a heavy industrial area and use.
Mm.
We have not, we have not spent a lot of time in that environment.
Mm.
We did years ago, and we kind of moved out of that. We actually looked to get more in a light industrial program.
Mm.
It just seems like there's more, there's more value to be gained there. Not to say that you don't do that, and then watch that grow, and then go from a C to a B to an A-
Yeah
rea, which some of them have. Storage of trailers, as you said, we do. A couple of our guys are incredibly good at it, and finding them, and actually taking care of it. But that's, to us, at least for now, is more of an interim use-
Mm
T ype of program, as opposed to a final use. May change, but-
Yeah. No, it's just like, I kind of have, like, you know, study the history of self-storage, how that came about-
Mm-hmm
Kind of all these, and then like, what happens to Class B as an area densifies? Like, you know, a lot of these are kind of cover land plays, and if you get in at a good 6%-7% cap rate and sit on it, generate current income, and, and there's, you know, kind of a ton of optionality down the road-
Mm
I mean, I would just encourage, you know, the company to study, because I think I think the company has the experience and network to source a lot of land deals. I think that's a key that, you know, strength of the company that, you know, not to overlook that. Because if we're able to get them at a six to seven cap, and then at some point they may compress to a four or five, I mean, there's a tremendous amount of value to be created. So just, I would just encourage you to look at it.
Mm-hmm.
I'll let someone else. I don't want to hog. I'll come back later.
You do wanna hog it.
It's a good thought.
Yeah.
And, uh- I love hearing... No, I'm just kidding.
Hi, so have you guys thought about expanding in the mining business?
Every single day.
'Cause that- What's that?
Every single day, every hour.
I mean, to expand or find a mine, or maybe somebody wants to sell something. And also, Alico has been selling land. Is any of that of interest to you or near your operations down there?
We constantly look, you know, at expanding our mining royalty footprint. In the past, you know, the way you would think about doing that would be to go out to an aggregates company, not on the level of Vulcan or Martin Marietta, and pitch an aggregate royalty deal as a way to unlock some cash in their business to finance equipment, buy out a partner, et cetera, et cetera. That was not a really attractive business proposition to an operator when interest rates were 2%. Here we are with 10% financing in perpetuity. In a higher interest rate environment, that may make more sense. They don't have to go to a bank. Nobody's gonna tell them what to do with the money.
It's, you know, essentially a 10%-12% loan, but it, there is no principal payment. It just goes on and becomes part of their costs, and margins are so good in the aggregates business that you can, you know, pretty easily afford it. So it, it's something that we're constantly exploring, and then the other opportunities would be you go out and find, you know, a piece of land in Florida and get it permitted and go through all that. I've spent a good amount of time looking at sites in Florida. Unfortunately, nothing has come up yet. We're gonna constantly look. It's one of those things that you do a lot of work on, and nothing happens until it does, and that obviously pays for all the wasted time and opportunity.
So, we love that business. It's obviously very close to everyone here, and the ability to expand it is really, really exciting. It's just very difficult. That's why it's... I mean, it's such a good business.
Would you look in other parts of the country?
Potentially.
Georgia?
I mean, obviously we know Florida and Georgia relatively well, but you know, Seattle, that's obviously a you know a great market. Boise. You would just have to get... You'd do your due diligence. You'd have to know the operator, something like that.
Yeah.
Yeah.
What about Alico? Is any of that land near you guys, and-
Yeah
... would you look at that?
Yeah, it's near us.
They're selling, right? I mean, is that something-
They're
Selling individual some
Yeah.
Okay.
I mean, but they're not knowingly selling sand and rock deposits.
Yeah, okay.
John's description, I think, is a good one. You know, we have gone to the majors-
Mm-hmm
And talked to them about why we thought it made sense for them to consider letting us hold their land for them. And I think his point that as interest rates go higher, it may, it's well worth going back to them-
Mm-hmm.
And re-energizing that conversation because it's just a different world to play around.
Thank you.
Maybe one final one. This came in over the webcast, so I'll ask on their behalf. Earlier this summer, Prologis acquired 14 million sq ft of warehouse and distribution properties for $3.1 billion. Comes out to about $220 a sq ft. With the understanding that these properties are valued based on cap rates, do you think that that's a reasonable comp for valuing FRP's industrial real estate portfolio?
You want?
Go ahead.
You know, Prologis and even Blackstone I think are, you know, number one, number two in our industrial world. I would not go against their opinion. They, they're very good at data, very good at evaluation. And those numbers make a lot of sense to us as to what our industrial buildings, you know, are potentially worth. We wouldn't buy them for that, but we certainly will, you know, develop and understand our cost in relation to what that market value is that they're paying for these buildings.
Thank you, all. What is our situation now on lunch?
Why don't we end the meeting first, and then we'll-
Well, I was going to, but I-
For the people-
Wanted to tell them.
Who won't be eating lunch with us, let's wrap it up.
Okay.
You got the wrap-up to say thank you.
Thank you all so much for taking the time to come visit. We love your questions. We love, love the interest that you all have in, have in this company, and we love working with you and alongside of you to make it a great investment. Thanks for the time today, both for those here and those on the internet, and we'll consider the meeting adjourned. Thank you.
Thank you.