FRP HOLDINGS, INC. (FRPH) stock intrinsic value fair value estimate & owner earnings analysis

FRP Holdings owns four kinds of real estate. The steadiest is about 15,000 acres of land leased to aggregates companies such as Vulcan and Cemex, which pay royalties on every ton of stone and sand they dig, with contractual escalators and minimum payments; this produced $14.6 million of property income in 2025. The company also owns two apartment buildings on the Anacostia riverfront in Washington DC (Dock 79 and The Maren, owned with a partner), stakes in further apartment partnerships in Washington DC (Bryant Street), Greenville SC (The Verge and Woven) and Florida, a small portfolio of warehouses in Maryland, and a development arm that is building three Florida industrial projects totalling about 762,000 square feet, now joined by the Altman Logistics platform bought in October 2025. How we measured earnings. We start from operating cash flow, strip out working-capital swings and stock compensation, and charge only the capital spending needed to keep existing buildings and land in shape (about $1-2 million a year according to the company's own segment tables), treating the $50 million a year now being spent on new buildings as investment rather than upkeep. We also deduct the interest the company capitalizes into construction and the share of Dock 79 and The Maren cash that belongs to its partner. On that basis owner earnings were $0.78, $0.39, $0.79, $1.22, $1.00 and $0.76 per share from 2020 to 2025. These figures are lower than our earlier estimates because they no longer include the apartment partnerships, whose cash never reaches the company's own cash flow statement; instead we value those partnerships separately, alongside the debt they carry. A large part of the 2023-2024 peak came from interest on roughly $155 million of cash, which has since been spent on construction and the Altman purchase; cash at mid-2026 was about $101 million. Earnings fell 24% in 2025 from Altman deal costs, lower interest income and vacancies in the warehouse portfolio, and the first half of 2026 showed a small net loss. We therefore anchor on the property income the business produces today rather than the 2023-2024 peak, and our first-year cash flow in every case is below the 2025 level. Debt. The company's own borrowings are $180 million of fixed-rate loans at 3.03% on Dock 79 and The Maren, due April 2033, plus newer construction loans that took total consolidated debt to about $215 million at June 2026; its share of partnership mortgages adds roughly $166 million. We value the property cash flows before interest, then subtract the company's share of all of this debt, less cash, lending-venture balances and land held for sale, and plus about $40 million still needed to finish projects under way. The cheap 2033 loans are worth about $14 million to shareholders compared with borrowing at today's rates. Base case ($17.25). Royalties grow about 3% a year in line with the escalators and per-ton increases the company has achieved, then 2% beyond year ten as the leases keep running. The roughly 400,000 square feet of vacant warehouse space is re-let over two years, which management says is worth $3-3.5 million of income; we credit about $2 million because the space is existing and only needs tenants. The three Florida industrial buildings, already under construction and funded, reach about $7 million of income to the company by 2029 against management's $9.3 million target. Apartment income grows 2% a year, overhead rises with the larger Altman team, and nothing is credited for future projects that have not been started. The business is worth about $535 million, the company owes a net $205 million, leaving about $330 million. Bear case ($5.54). One full construction downturn of the 2008-2010 kind, when US crushed stone volumes fell by roughly a third: royalties drop 35-38% for three years before recovering, apartment income falls about 10% as it did in 2009, the industrial pipeline leases slowly to only $4.6 million, the vacant warehouses stay empty, and the cheap 2033 apartment loans must be refinanced at materially higher rates. In the trough years property cash only just covers the interest on the company's share of debt; because the partnership loans are secured on individual buildings and the parent has no drawn borrowings, this is survivable, but little is left for shareholders. The business is worth about $340 million, the company owes a net $234 million, leaving about $106 million. Bull case ($24.47). Royalties grow 4% a year as they have recently, the warehouse vacancies are fully re-let, the Florida buildings reach the full $9.3 million management targets on schedule, and apartments grow 3%. The business is worth about $667 million against $199 million of net debt, leaving about $467 million. Previous analysis. Our previous estimates were built on a different basis and are not directly comparable; the business itself changed modestly since then, with a further loss in the second quarter of 2026 and another $26 million spent on construction in the first half. Margin-of-safety price. We are reasonably confident in the royalty income, which is contractual, inflation-linked and backed by land that has been mined for decades, and less confident in the rest: the warehouses are a fifth empty, much of the company's value now depends on buildings that are not yet leased, and a large share of apartment income is concentrated in one Washington DC neighbourhood. The worst plausible outcome is a long building slump that cuts royalties while new buildings sit empty and the 2033 loans reprice; the land and buildings are hard assets with secured, non-recourse property debt, so the company would very likely survive, but shareholders could be left with only a few dollars a share. If we are wrong about the pipeline leasing up and the vacancy recovery, the shares are worth around $11-12; if a downturn arrives, around $5-6. The company pays no dividend, so any return must come from the value of the business rising as projects stabilise, which we estimate will take three to five years. At $8.00 the price is little more than the bear case, covers the royalty land and the company's share of the existing buildings for less than their earning power before any new project succeeds, and implies about 20% a year if the base case is reached over five years; above that price the return depends too heavily on the pipeline working.