Bill Chen's questions to FRP Holdings Inc (FRPH) leadership • Q4 2024
Question
Bill Chen of Rhizome Partners asked a series of detailed questions regarding underwriting returns for new projects, the competitive landscape for development, the repositioning of the Cranberry and Chelsea industrial assets, and the timeline for future multifamily projects. He also provided commentary advocating for a dividend and suggested the company's NAV calculation uses overly conservative cap rates.
Answer
CFO Matthew McNulty and President/COO David deVilliers stated that they target a 6.5% to 7% trended return on cost for new developments. DeVilliers noted that construction starts have fallen to pre-pandemic levels, creating a favorable environment for FRP to build while competitors are sidelined. He provided significant detail on the Cranberry asset, expecting occupancy to fall sharply in 2025 due to known tenant departures, which presents an opportunity to re-lease at higher market rates. CEO John Baker responded to the commentary by thanking Chen for his long-term perspective and agreeing to review the cap rate assumptions in their NAV analysis to ensure they are not overly conservative, while reiterating the focus remains on growing NOI.