FRPH - NASDAQ

Good day, everyone, and welcome to today’s FRP Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call is being recorded and that I will be standing by should you need any assistance. It is now my pleasure to turn today’s program over to John Baker. Sir, please go ahead.

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; John Baker, II, our Chairman and CEO; John Milton, our Executive Vice President and General Counsel; John Klopfenstein, 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 new information. To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures with the meaning of Regulation G promulgated 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 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 GAAP to net income, please refer to the segment titled Non-GAAP Financial Measures on Page 12 and 13 of our most recent earnings release. Now for our financial highlights from the second quarter. Net income for the second quarter was $598,000 or $0.06 per share versus $657,000 or $0.07 per share in the same period last year. Second quarter of 2023 when compared to the previous year was impacted primarily by an increase of $2,281,000 in equity and loss of joint ventures from 2 projects in lease-up, an increase in management company expense of $235,000 due to new hires and recruiting costs as well as an increase in interest expense of $390,000, offset by an increase in interest income by $2,005,000. First quarter pro rata NOI for all segments was $7,610,000 versus $6,550,000 in the same period last year for an increase of 16.3%. Net income for the first 6 months of 2023 was $1,160,000 or $0.12 per share versus $1,329,000 or $0.14 per share in the same period last year. The first six months of 2023 compared to the same period in 2022 were impacted by an increase in equity and loss of joint ventures of $4.3 million as we lease up The Verge and.408 Jackson, an increase in management company indirect expense of $300,000, an interest in interest – an increase in interest expense of $658,000, offset by an increase in interest income of $3,489,000. The first 6 months of 2022 were also positively impacted by a $733,000 gain from property sales, which we did not repeat in the first 6 months of 2023. Revenue, operating profit and NOI are all experiencing strong growth this quarter and for the year-to-date. Compared to the second quarter of 2022, we grew revenue by 11.1%, operating profit by 33.9% and pro rata NOI by 16.3%. For the first 6 months compared to last year, these metrics grew by 13.5%, 63.9% and 24.5%, respectively, and yet net income has been more or less flat. The situation is not new to the company but the product of development and lease-up when equity and loss on joint ventures are at their highest and have a negative impact financially on our net income. This was the situation during previous lease subs, and it is quite literally the cost of doing business. We count ourselves very fortunate that we have a shareholder base that understands the situation and is patient while we transition these products into stabilization and income production. I’ll now turn the call over to David for his report. David?

Thank you, John, and good morning to those on the call. As I have done for the last few quarters, I’d like to provide you with a perspective on the results of the company from an operational standpoint. We report our business segments in designated silos, which are important in analyzing the company. However, operationally, we have overlap and synergies that are difficult to follow using the business segments as reported. So employing a day-to-day look at FRP, which we call our real estate operations, let me offer the following. Our real estate operations consist of a four-pronged approach that has been the core of our business programming since mid-2018 when we liquidated our legacy warehouse portfolio. One, in-house, which happens to be the same as our reported asset management business segment, includes our industrial, commercial and land development platform. These properties are developed, managed and owned 100% by FRP; two, mining and royalties; three, third-party joint ventures, which as the name implies, a project developed in conjunction with third parties, where FRP is the major owner but relies on seasoned and respected third-party operating partners to perform the lion’s share of entitlements, construction and day-to-day operations; and four, lending ventures, which we are the principal capital source for residential land development activities. Relative to our in-house or asset management platform, occupancy at our 3 buildings at Hollander Business Clark since the beginning of the year as well as rent growth on renewals at Cranberry have produced a healthy lift to our NOI. As of last month, our buildings in Hollander totaling 247,000 square feet are fully occupied, helping to lift second quarter NOI for our in-house properties to $834,000 versus $681,000 in the same period last year. This represents a 23.8% increase. Our industrial pipeline is strong with 3 projects in the queue. The 17-acre parcel in the Perryman industrial section of Harford County, Maryland, not too distant from our other assets in Aberdeen, received its building permit this week for our planned 259,000 square foot warehouse building, which based by current – based upon current market conditions, we plan to commence construction this month. Predevelopment activities on our 170-acre tract in Northeast Maryland are ongoing and pending favorable market conditions, we could break ground as early as mid-2024 from a 900,000 square foot distribution facility at this location. Finally, our 55-acre tract of land in Aberdeen, Maryland, adjacent to the Cranberry Run Business Park is being designed with multiple options to deliver several buildings or a single large distribution center. Options include 600,000 to 700,000 square feet under roof, depending on final design and market dynamics. Existing land leases for the storage of trailers on-site helped to offset our carrying entitlement costs in this property. Depending on market demand, we could very well begin construction here in 2025 or 2026. Completion of these 3 aforementioned development projects will add over 1.9 million square feet of additional warehouse product through industrial properties that when added to the assets already in operation will create over 2.35 million square feet. Relative to mining and royalty, as John, III stated in his opening remarks, our mining and royalty division saw revenues for the quarter of $3,264,000 versus $2,883,000 in the same period last year. This is record revenue for any quarter in the mining and royalty segment for the second quarter in a row. NOI was $3,125,000, an increase of 14% over the same period last year. Moving on to our third-party joint ventures. Currently, we operate both under development and stabilized projects with 4 distinct partners: MRP, Steuart Investment Company, Woodfield and St. John Properties. The difference between underdevelopment and stabilized being a sustained occupancy level of 90% for a minimum loan of 90 days. As of 6/30, our JV platform includes 6 – excuse me, 7 mixed-use projects; 6 mixed-use residential projects totaling 108 – 1,827 apartments and 198,000 square feet retail; and 1 mixed-use office project totaling 72,000 square feet of single-story office and 27,950 square feet of retail. 4 mixed-use residential projects are located in Washington, D.C. where MRP is our joint venture partner. Our neighboring projects, Dock 79 and Maren along the Anacostia River where our partners include MRP Realty and most recently, Steuart Investment Company, remained healthy with occupancies of 95.4% and 94.3%, respectively, at quarter’s end with all retail fully leased. Quarterly renewal success rates consisted of Dock 79 at 65.31% and Maren at 39.6% with rental rent – rate increases of 3.74% and 6.6%, respectively. Bryant Street, a multi-building, transit-oriented, mixed-use project located on the Wet Law in Northeast contains three residential buildings as well as a movie theater, anchored retail building and a flexible outdoor platform fully leased to a unique entertainment concept called Metro Bar. At the end of the second quarter, Bryant Street’s 3 residential towers totaling 478 residential units were 93% – 93.2% occupied, and its retail components were 95.9% leased and 79% occupied. 67.25% of expiring residential tenants renewed the lease with a combined average rental rate renewal increase of 2.86% for the quarter. For Food Hall, Bryant Street market opened in March and has seen early success with 8 of 9 stalls leased, and the first 4 tenants have opened for business. The grand opening for the Bryant Street market is planned for the fourth quarter this year. The Alamo Drafthouse theater and entertainment venue continues to see greater revenues that have been enhanced by blockbuster films, such as Mission Impossible, Oppenheimer and Barbie. Our fourth and newest mixed-use residential project in the district, Verge, received its final certificate of occupancy in the first quarter and is showing strong performance at 68.6% lease and 43.3% occupied. A significant boost in leasing over the first quarter was nearly half or 45% of retail spoken for as of the end of June. In terms of velocity, we gained occupancy of 22 units per month on average during the second quarter at Verge. Moving on, our 2 projects in Greenville, South Carolina with Woodfield Development as our development partner are seeing great success. Riverside in its 200 apartments was 95.5% occupied and renewed 61.76% of expiring leases with rental rate increases of 11.96% for the second quarter. .408 Jackson was placed in service during the fourth quarter in ‘22. And at quarter’s end, its 227 apartments were 85.9% leased and 76.2% occupied. Another strong performer in lease-up,.408 demonstrated a significant boost in occupancy over the second quarter, averaging 29 units per month. Its retail component is fully leased and targeting an opening date in the fourth quarter this year. Relative to the 6 aforementioned mixed-use residential joint venture projects, FRP’s share of NOI was $3,290,250 versus $3,049,948 in the same quarter last year, a 7.9% increase. The last or seventh mixed-use project that makes up our third-party JV division is undertaken with St. John’s Properties, a pioneer in flex and office development and former National Developer of the Year. With St. John, we are developing Windlass Run in Baltimore County, Maryland that includes 72,080 square feet of single-story office and 27,950 square feet of retail. This project is now 62.79% leased and 48% occupied overall due to an increase in lease space over the second quarter as a result of a new 12,000 square foot office lease. NOI for this past quarter for this asset was $109,213 versus $102,400 over the same period last year or a 6.7% increase. Funding ventures, the last leg of our operating stool. This is a program where we provide working capital toward the entitlement and horizontal development of single-family residential projects, and ultimately, a sale to national homebuilders. The first of our two current projects is Amber Ridge in PG County, Maryland with a total commitment to this project of $18.5 million. The investment includes a charged 10% interest rate and a minimum preferred return of $0.20 – 20%, above which a profit-induced waterfall determines the final split of proceeds. All the 23 of the 187 lots have been taken down as of June 30 and $19.6 million of principal interest and profits has been returned as of the end of the quarter. The final 23 units provide additional profits are on track to be taken down by year-end. Our other current lending venture is called Presbyterian Homes, which is a 344-lot, 110-acre residential development project in Aberdeen, Maryland. We have committed $31.1 million in funding under similar terms as Amber Ridge. The national homebuilder is under contract to purchase all the lots, which include 222 townhomes and 122 single-family dwellings. Horizontal construction has begun and we expect the first lots to be taken down in Q4 this year. In closing, we are pleased with the company’s performance this quarter. I would be remiss not to mention the headwinds facing us. In Washington, D.C., the volume of new apartment units being delivered is significant will present a challenge for our leasing trends and could impact our rental rate expectations. Additionally, a rising interest rate environment presents challenges for construction material pricing and availability as well as affordable financing terms. On a positive note, competitive developers who may not be buttressed by a balance sheet like ours might not be able to obtain or have the available capital to construct projects like our upcoming 259,000 square foot warehouse facility with Chelsea God. We have flourished in a constantly changing environment due in no small part to the strength of our financial foundation and the consistent efforts of our talented teams. We look forward to building upon our successes and finding new ways to exploit our skills in the marketplace. Thank you, and I’ll now turn the call back to John.

Thank you, David. At this point, we’re happy to open the call up to any questions you might have.

[Operator Instructions] And our first question will come from Curtis Jensen with Robotti. Your line is open. All right. We’ll move next to Stephen Farrell with Oppenheimer. Your line is open.

Good morning. How are you?

Good morning, Steve.

First question regarding your comments about the construction loans, what is the sensitivity of rental rates in relation to construction loans?

I don’t quite understand your question, Stephen. John.

In other words, with development on the sidelines, how do you see the restriction of new supply affecting rental rates?

Well, obviously, the – all of the construction loans out there are floating, right? So for example, year-over-year, these interest rates have gone up for us between 3.5% and 4%. The market is going to dictate what the rental rates. We’ve talked about our rental rates have actually done pretty well and favored pretty well over the last 12 months, whether they’re already there through trade-outs and lease-ups. I think where the big pull is going to come from, Stephen, is our buildings are done. And so we don’t have to worry about what’s happened with the increased construction costs and material pricing because that’s behind us. So I think that’s probably the big issue. And trying to get out and start a new building with these kind of interest rates is going to be very, very difficult at that.

And at what level do you think it does make sense to either from a rent level and increase in rental rates or cost perspective?

Well, again, the rental rates are really not subject to anything other than the market. There is a lot of competition in D.C., especially with a lot of the new units coming on. So that drives your rental rates. We look at the rental rate market for all of the competition every day. And so we raised in lower prices, depending on the type of unit, the location of units. So that kind of does its own thing. Interest rates, we can’t control. The only thing we can do is decide not to start something. But if the interest rates continue to go up, obviously, they do have an impact on our operating cash flow.

David, what would you say the interest rate on a typical construction loan would be today?

Well, for example, the 3 that we have at Bryant Street, that’s 7.4% as of June – the end of June. That’s probably the biggest. We have another one at 7.2% and another one at 7.4%. So they’ve literally gone from the 3s up to the 7s. And they usually run on a SOFR – an average 30-day SOFR and anywhere from 2.25 to 2.50 basis points. But anything coming out today, the new loans – or the basis points are in the mid- to high 3s. So it’s not another interest rate point with the new stuff rather than the existing.

Yes, I think you’d have to see sustained really high increases in rental rates in order to justify taking on that kind of construction line to build.

You do.

Yes.

For example, our Riverside property in South Carolina, we got almost a 12% increase in our rental rates for the second – for the – for all the tenants coming due in the second quarter. That’s a dramatic increase. But you need – you’re going to need, as John said, some sustain – not to be that high, but you do need to have some pretty strong rent growth to be able to support these kind of interest rates.

And longer term, maybe 2 to 3 years down the road, I would think that restricting the supply and development being on the sidelines would be beneficial to properties like Bryant Street and just rental rates in general. Do you think – did you have a similar view?

I think that will definitely help. And David, you can answer that.

Well, it’s interesting, Stephen – you’re absolutely right, we do. There’s going to be a slowdown in deliveries in ‘25 and ‘26 because of that. It takes basically 2 years to build these things. And the fascinating thing that’s happened throughout the country is that during COVID, there wasn’t a whole lot of construction. So it got ramped up in the – late in the year and early in 2021, which has led to a lot of units coming online over the last 6 to 9 months, causing a record number of units available in the market now. So as the project lease up, then there’s going to be – the whole thing is going to change. And we think ‘25 and ‘26 could be great years for rental rate increases.

And maybe I missed this in the call. Do you have an updated time line for development of Phase 1 of the Steuart deal? I know you just said now you’ll need either big rent increases or reduction in the rates on the construction loan, but do you foresee pushing it back farther, maybe ‘24 – end of 2024, ‘25? What are your thoughts on that?

Well, we’re still what – the plan right now, Stephen, is we’re going through the entitlement process, which takes a while. We want – which could probably – should probably be sometime here in this quarter to the beginning of the fourth. And then we’ll take a look at all the metrics, right? Part of our deal, and we usually don’t go into these things without guaranteed maximum prices from contractors and we have everything lined up, not to mention the fact it’s a good construction loan. So I would doubt unless something changes dramatically that we would consider starting that in ‘23, not to mention the fact, starting something in the winter, Washington is not very favorable from an efficiency standpoint. So I – probability says that we wouldn’t get it probably until sometime in ‘24 if – again, if the market conditions dictate such a thing.

And turning to Industrial. We have – starts are down, and we’re starting to see some pressure on rents in the country, whereas supply and demand dynamics around Baltimore?

We – not so much. The development is somewhat restricted. For example, where our Chelsea property is, which is the one that I mentioned earlier, which is getting literally ready to start this week, there’s a moratorium on all new construction in the area. So we’re like the – not only is it tough for certain people to spend that kind of money to build a building, they’re not accepting any permit applications. So we’re like the only game in town starting literally next, and it will come on a year from now. And we’re excited about that market because the vacancies are very low and the rental rates have done very, very well. I mean the vacancies are still well below the pre-pandemic norms. It’s a very tight market.

And with the timing of the phase one of Steuart being pushed back, do you envision using cash to opportunistically invest in additional industrial properties or just developing the pipeline?

We’re always looking for value add, Stephen, for example, our Cranberry Run Business Park with that, which we’ve enjoyed some really strong results in that property over the last several quarters. We’re always in the market for value-add stuff, for sure. And if something comes along and it works and we’ve kind it’s not, so it doesn’t require so much rehabilitation or refurbishment and the numbers work, we’d absolutely consider it.

And have you seen any opportunities in non-development properties or maybe the seller might need liquidity or anything of that nature?

We haven’t yet. We’re very particular in who we do business with. We’ve got a pretty strong team of folks in MRP and Woodfield, St. John. And so we don’t have – we were very careful as to being out in the market and looking for other platforms that would be in a joint venture type of business. That would be a tough one. We’re always looking. We look at properties every day in certain areas. Obviously, throughout the north, it’s the Southeast. North Carolina, South Carolina, we’ve got our eye on. Obviously, because we’ve got projects in South Carolina. So yes, we’re always – we’re looking in the banks that we’ve been dealing with. And the lenders know who we are and the fact that we’re fairly strong from a balance sheet standpoint, and we’re good boots-on-the-ground operators. So many of these people would develop properties before. And they were – there’s a lot of fee developers out there that would them and sell them and move on to the next one. But we’ve historically been pretty strong in managing these assets. So we bring a lot of – we think we bring a lot to the table with our joint venture partners, for sure.

That’s good. Thank you for taking my questions.

Sure.

Thank you.

[Operator Instructions] And next we have Curtis Jensen with Robotti. Your line is open.

Hey, good morning.

Hi, Curtis.

I got cut off earlier. Sorry it was my fault, but I apologize if I’m redundant here. I have a couple of questions. And the first one is sort of about presentation. Specifically when I go from the text – your text disclosure in the press release to kind of like the tables. And it seems to may even get a little cloudier when I think about the GAAP accounting for all this. But I like to take an example, Bryant Street. Is Bryant Street considered stabilized at this point? It’s been 90 days above 90%?

No, sir, it has not reached it yet. It’s going to probably make it next quarter. It has to be – we still got just because it’s leased got to be occupied. And the residential is not quite there for 90 days, which is what kind of the mark that we put on. And the retail is still having people move in, but it was close.

So is the – when I go to the table and I see the Development segment, and I see like the 3 months results of, the lease revenue was $467,000. Is that Bryant Street’s lease year portion of Bryant Street? Or is there something else? Or is Bryant Street revenue – lease revenue disclosed somewhere else?

This is John Klopfenstein. Our unconsolidated joint ventures, which includes Bryant Street, Verge, Riverside, all the Greenville, 408 Jackson, they’re all unconsolidated. So from a GAAP perspective on our income statements, they don’t run through revenue or expense. They all run through that one line on the income statement that you find on the main page called equity and loss of joint ventures. But we are going to be filing our 10-Q today and in the footnote about our joint ventures, you’ll find a breakdown of each of those joint ventures income statement showing the revenue and expense.

Okay. So when I go into the tables in your press release and I see Development segment, that’s not going to include Riverside or Bryant Street or anything like that? Anything that’s – like somewhere between development and stabilized and not...

It does not. And it won’t be included in stabilized joint ventures in revenue and expense either in the future once it stabilizes because those aren’t our revenues. They’re our joint venture partners’ revenues. So you’ll have to refer to the table we’ve been talking about in the footnotes.

Okay. And then I guess for GAAP purposes, it will continue to be showing equity and loss of – or equity and joint ventures?

That’s exactly right. They will always be there.

All right. So the only 2 things in your tables that are considered stabilized joint ventures are The Maren and Dock? So that’s been consistent over time?

That’s correct. Yes, Riverside is not reflected in that table in revenues and expenses because of the GAAP treatment that’s required.

All right. I just hope you – I mean it is – I understand how you disclosed it as like Bryant Street is a mixed-use joint venture between FRP and MRP, but it’s not it’s not disclosed the same way. It’s not – if I were a first-time reader, I’d say, "Okay, I’m going to look under joint ventures." And then I go to the table and I say how that stabilized joint venture, but that’s no, I’ve been around the company. Anyway, it’s a little bit confusing to me, and I’ve been around the company for seven years. I guess the one..

The feedback, we’ll see if we can improve that disclosure in the future to highlight...

Yes. I only say it because the NOI from your multifamily and mixed-use is going to becoming bigger and bigger and bigger over the next couple of years. And then, of course, you’ve got a whole other stream of income coming on in asset management. And so as a – from a place of trying to analyze the company, I’m going to have to go from kind of book value, asset values, development kind of assets to income-earning, income-producing properties. And it’s going to be harder to dissect all of this if there isn’t some more disclosure about that, I think is. Anyway, I don’t want to hold this up on that. But on The Verge, again, apologies if I’m being redundant here, consistent with your heads-and-beds philosophy, are you having to offer a lot of incentives to get people over there or unusual incentives? Or is it just kind of you’re pretty happy with it?

We’re actually pretty happy with it right now. As I said, we’ve been moving a lot of people in, and we actually did a temporary program with a group called Placemaker, which takes on –which actually takes it on 27 units as of June 1. And then they lease them – they master lease effectively that way. So we’re really – and so that’s 27 units that we would not have been able to get occupied that quick because they – interestingly enough, they rent these spaces to professionals and that kind of thing for 30 – a minimum of 30 days. And in fact, when they moved in, in June 1, they took all 27 units. We had them for a year, and we’re wondering – and that’s – we kind of do a 60-40 split. We get 60% of the revenues, and they get 40%. And the place is leasing up so quick, we’re wondering if that was a great idea or not. But things are going very well with The Verge. But look, we are giving it 1 to 1.5 months concessions, which is not overly panel. But once – just like we did with Coda and that kind of thing, when you open these things up in December, the early months of the year and the late months of the year are not the best months to be opening up for lease. And now that we’ve come into the summer and into the fall, the rents are getting a little stronger, as you can see. So – but yes, we’re – so far, we’re pretty happy with it. One of the concrete plants has come down. That was the Steuart’s side. So we’re looking to animate that area just to the right of Verge. And of course, you’ve got the soccer stadium behind us. There’s a lot of really good things going on over there. So we’re pretty happy with it as of – so far, so good.

Would you – and maybe this is jumping kind of a little. You talked about an Analyst Day in October. Would you anticipate sort of a property tour again? Just...

Yes, I think that would be part and parcel of it.

Yes. Yes, for sure.

Circling back to Bryant Street for a second. Did I hear – there’s still a construction loan on that? Or are you moving towards mortgage? I mean, is – can a mortgage kind of come in under a 7.4% or whatever I heard David say is the construction loan?

They – well, a permanent financing can – does. They usually come in about 150 basis points or more less than a – than the construction loan. We’ve still got some wood to chop at Bryant Street. The – obviously, the units, we showed average for the 487 units, the average renewal rate for the 3 buildings averaged about 2.86%. They went from 1.8% all way up to 4.2%. But – so the residential side is starting to come into its own. Where we feel the success of that project is really going to be as it continues to mature is in retail. And Alamo for – as I mentioned, Alamo has done – their sales are way up over last year, which was – I guess people still like the Barbie movies, but they’ve done very well. So we’re happy there. Our in-line retail, we have some new leases that take a while to move the tenants in. And so the animation of that area and a sense of place is not there yet. So it’s not the greatest project right now, both from a from a lending standpoint and just from as you walk around, it still needs to mature a little bit more. So we’ll take a look at it the beginning of ‘24 and see how things go. I mean we do have a – we are looking at different options right now. We just haven’t made a decision.

Is there anything going on across the street? I know there was a site across the street from Bryant Street that there was potential for development? Is there any movement there? Or is it sort of status quo? Second, is it an industrial site of...

It is. It’s a couple of industrial-type buildings. Actually, one of them has a basketball court on the roof. But it’s owned by a development entity. I believe they’re going through the entitlement process and trying to figure out what they want to do. And that takes a while, as you know. We’ve been doing it down there since I won’t – I’m embarrassed to say how long we’ve been doing it. So it takes a while. But like that’s the Steuart property. We’re going through the entitlement process. It takes time. And then if you see something that says you may want to change the use or whatever, then that adds more time. For example, our Dock and Maren, we still have 2 more phases down there in Phase 3 and 4. We’re going through a modification of that project that’s going to take us about a year to change the use from office and hotels to residential. So it takes a while. But yes, to answer your question, there’s some development – predevelopment activity there across the street.

And I guess I’ll wrap up with one more question. It’s kind of on the lending ventures. Is that – is the vision there to kind of strictly limit it to homebuilders? And is there a point when you say, "Let’s wind it down." Or is this going to be an open-ended opportunistic lending vehicle with its – where you’ve got dedicated personnel? And I mean, how do you see it?

Yes, Curtis. This was a great, great way to put money to use with a partner that David has had a relationship with for a long time going back. And when we had post sale, a lot of cash on our balance sheet and no plans for it, and money market rates were roughly zero. This was a good way to get a good return on our money in a market and product type that we were comfortable with. I think going forward, as we plan to put more and more money into our own income-producing properties, we’ll be less likely to do a lending venture.

Okay. I agree. I mean, I thought it was a pretty interesting way to deploy capital. I think you’re getting good returns. It might be interesting if you have a page on that in your Analyst Day presentation to kind of summarize the ins and outs of the cash and the returns on that would be interesting.

Yes.

I guess there was an interest effect to take advantage of homebuilders who wanted to say asset-light and didn’t want to commit and had sort of used options to develop properties at a way of thinking about it.

Well, there’s some other ways, too. The intangible advantages of that is that when the world knows that we’re looking for property, whether it’s residential or industrial, it just gives us the ability to cast a wider net. For example, the property that we found at Chelsea where the buildings are going to go, those are 2 smaller properties that we put together. People know that we are active land developers. We’ve been doing it since the company opened in 1988. So it kind of keeps us out there in the market, and that’s another advantage that this brings. But we have been very, very selective on the choosing these properties. And we really don’t – we usually don’t even get involved unless we can buy them right, buy them wholesale and not even do that until the entitlements are there. So the risk is – obviously is investing capital. But we would – we obviously don’t have any loans, and we certainly don’t borrow money on these. But so far, they’ve been very, very advantageous with IRRs, 20% or above. So – but we are – as John said, we’re going to take a look at it and see where the money is best spent, if it’s spent at all and/or just invested. At least the returns right now on cash investments, I think, are pretty good right now.

Well, I’ll just say keep up the good work. I’ll look forward to seeing you guys in October, and I don’t know why anybody would give their money to a private equity real estate to open, I can give it to you guys.

Tell everyone you know that.

Thank you, Curtis. That’s a very kind thing to say.

Thank you.

[Operator Instructions] And we have no further questions in queue. So I would like to turn the floor back over to our speakers for any additional or closing remarks.

Thank you all for your maintaining interest in the company. I’d just like to offer a quick reminder. As Curtis referenced, we are holding an Investor Day on October 11, 2023, in Washington, D.C. at our Dock 79 property. The event will feature presentations from our executive management team. And for information on the event into RSVP, please e-mail Investor Day at frpdev.com or check the Investor Relations section of our company’s website. Thank you.