Company agrees to $358.9 million warehouse sale, leaving it “a very different company.”
At FRP Holdings Inc.’s annual shareholders meeting Monday, stockholders approved a deal that will transform the Jacksonville-based real estate developer.
“It’s a very different company than you saw two years ago when you came to the annual meeting,” CEO John Baker said at The River Club Downtown.
Shareholders approved a deal Monday that was announced in March to sell FRP’s portfolio of 41 industrial warehouses, mainly in the Baltimore-Washington, D.C., area, to an affiliate of Blackstone Real Estate Partners for $358.9 million.
When the deal closes next week, FRP’s remaining assets will include a mixed-use development project in Washington, D.C., called RiverFront on the Anacostia, three office buildings and 14 quarry sites leased for mining construction materials.
The company expects net proceeds of about $250 million from the Blackstone deal, FRP President David deVilliers said.
FRP is looking at options for spending that cash, which will be its largest asset after the sale and could determine the company’s future direction.
“Obviously, $250 million is a lot of money,” deVilliers said.
The company is looking at development opportunities in the Baltimore-Washington market. It can avoid taxes on the building sale by using the proceeds to buy other properties, but the company has only 45 days to identify properties to take advantage of that tax benefit, Baker said.
“It’s hard to do in a short period of time,” he said.
If FRP can’t find good development opportunities, it may use the proceeds to pay a large dividend to shareholders.
“We will look for good deals that make sense,” Baker said after the meeting.
“If we can’t find anything that’s good, we’ll give the money back to our shareholders.”
One fund manager is confident of Baker’s ability to find the right deals. Third Avenue Management disclosed in a quarterly shareholder letter that its small-cap value fund bought an unspecified number of FRP shares.
Portfolio manager Victor Cunningham said in the letter he bought the shares before the Blackstone sale was announced, and he saw the deal as good news.
“It gives the Bakers excess capital to build out their development assets or acquire other properties. Given their distinguished track record, we are confident they will create wealth with the excess capital,” he said.
The track record includes running Jacksonville-based construction materials company Florida Rock Industries Inc., which was sold to Vulcan Materials Co. for $4.2 billion in 2007.
FRP was formed in 1986 as a spinoff company of properties owned by Florida Rock. The properties included a concrete plant site in Washington, D.C., which now is being transformed into the RiverFront project.
FRP, through a joint venture, completed Phase I of that project last year and has begun building Phase II alongside it.
The company will use $20.25 million of the proceeds from the Blackstone sale on Phase II, deVilliers said.
The building sale will be the second big deal completed recently by companies run by Baker’s family.
Two weeks ago, Martin Marietta Materials Inc. completed its $1.625 billion acquisition of Bluegrass Materials Co., another Jacksonville-based construction materials company.
Baker said his family owned 15 percent of Bluegrass and wanted to keep the business but private equity firm Lindsay Goldberg, which owned 70 percent, wanted to cash out.
“We didn’t want to sell but we had to,” he said.
Cunningham cited the Florida Rock and Bluegrass sales as examples of Baker’s success.
“The family has a long history of creating value for shareholders,” his letter said.