Yet Another Value Podcast - Bill Chen breaks down $FRPH's SOTP

Episode Date: February 22, 2022

Bill Chen, an institutional real estate investor, goes through his thesis for FRPH. FRPH is a conservatively managed real estate company with a great management team and a history of growing NAV and monetizing assets at opportunistic times.You can find all my writings here: https://yetanothervalueblog.substack....My notes on FRPH: https://twitter.com/AndrewRangeley/st...A rough SOTP for FRPH: https://twitter.com/RhizomePartners/s...Chapters0:00 Intro1:20 FRPH overview3:30 Discussing FRPH's management team / majority shareholder8:00 Understanding the royalty business14:15 Valuing the royalty business21:20 FRPH's balance sheet and net cash22:15 FRPH's real estate value32:00 Pulling the SOTP together33:45 Opportunity cost and alpha at FRPH39:25 FRPH's history of selling assets40:30 How is FRPH still acquiring warehouse plays?43:00 Why FRPH versus other REITs under NAV?47:10 FRPH versus SRG52:00 Why isn't FRPH buying shares right now?57:00 What keeps Bill up at night for FRPH?1:02:30 Closing thoughts

Hello and welcome to yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm happy to have my friend, Bill Chen. Bill is a managing partner at a institutional real estate fund. Bill, how's it going? Great. Thank you for having me on. Appreciate it. Hey, thanks for coming on. Let me start this podcast the way to do every podcast. First, a disclaimer, to remind everyone that nothing on this podcast is investing advice. Please consult your own financial advisor, do your own work, all of that type of stuff. And then second, a pitch for you, my guests, I mean, the obvious pitch here would be to let listeners know that you are by far the best croquette player. I know. I will take you over anyone on Finch with. Bill gave me quite the beat down last fall. But look, I've known you for a couple months. You're a great guy. You're a great investor in New York City real estate in particular. Maybe that's because, as you were telling me before, you've seen a hundred different ways to lose money in New York real estate. But I've seen yourself. I know you do great. great, great due diligence on the companies you invest in. And for that reason, I'm really excited to go to the company we're going to talk about

today. So that out the way, let's dive right in. The company we're going to talk about, I know this is a high conviction idea for you. It's FRP Holdings. The ticker is FRPA. And all of that out the way turned over to you. What's so interesting about FRPH? I think what's really interesting about FRPH is a good way to think about is that there's

a billionaire family that, and they own a collection of high quality hard assets that works in an inflationary environment, that works in a deflationary environment that you could buy today at, you know, you pay $55 for it. It's probably worth 90. And, you know, it is my personal opinion that it would be worth about 110, two years out, right? And again, it's got like, it's got a good collection trophy asset. You could buy it at roughly 60 cents on a dollar. It probably grows, you know, 10% at its fair market value. So actually, in a look-through basis, you're actually compounding at about 18% roughly, give a take.

And then there's a huge kind of, you know, gain that you could potentially get from that gap closing, right? But just the fact that you're buying at 60 cents at a dollar and the in-asset. is growing at 10%. That gives you an 18% compounding. And I think that's really, really attractive. I think I'm a brick and mortar guy. So I get really into the assets. And I kind of think about the public market, the private market, what the private market will pay for this collection in the asset versus what you could buy in the public market. And frankly, you know, any big REIT will love to own this collection of acid and a big kind of family office that's managing more than $10 billion will love to own this collection of asset at the price today.

And investors, you know, this is one of the advantage of being public, right? I mean, a public investor is that you could own a collection of asset like this at a fraction of what it will cost in the private market while the billionaire family, like you get to tag along while they're doing all the heavy lifting for you. So that's what gets me real excited about it. That was a great overview because everything that I've got on my question list and everything, you basically hinted out there. So we're just going to be diving into everything you just went in the overview.

So let's start with the controlling shareholders. You know, I don't think FRP is a REIT yet, right? Right now they're just a normal public company. There's been talk of rete conversion. But one of the things with big public companies with chunky real estate like holdings like this is you've really got to trust in the management team, right? because a big building, it's going to throw off lots of cash flows, they're going to have to reinvest it, and it runs the gamut, right?

We all know of public companies that have lots of real estate holdings and the money just goes into management's pocket one way or the other, or there are real estate companies that compound value over time. So let's start with FRPH's management team. I know there's a really interesting history here of how they got to the current set of assets. Let's just go in the background there. Sure, let's go into background a little bit. So the Baker family owns about 30% of shares outstanding.

And who are the Baker family? So right before the financial crisis in, I think, around 2006, Volcan Materials approach a company called Florida Rock Industries. So Florida Rock Industries, FRP, hence the FRP holdings, right? So Baker Family used to run the Florida Rock Industries. That was a multi-fillion dollar company. In 06, housing was hot. They got approached by Vulcan. They got a bid, and they said, this bid is too good.

We have to do share me to our minority shareholders. We don't want to sell this, but it's not just us, even though they own a lot of Florida Rock industries. They basically said, we needed to do the right thing for our shareholders, and they sold the conflict of Vulcan materials. So that was one instance where someone approached him with a bid. You know, they weren't looking to sell. Someone approached him with a bid that they thought was very, very attractive, and they took

the bid. The second time that happened was in 2018, Blackstone, for people. the last 10 years been basically approaching everyone who owns a warehouse portfolio. Yeah, that's more than 4 million square foot. They've accumulated, I think, about a billion square foot at, you know, at this point of warehouses. Oh, I take it. I live in a one-bedroom apartment in New York City.

I think if it was a two-bedroom, they might have approached me about turning into a warehouse and making a bid on it. Yeah. So Blackstone approached them, and they went out and got an opinion from Investant Bank, and They said, okay, like, we'll sell it to you, but it has to be the absolute highest end of our valuation. So if you look at the proxy that was filed when they sold that, sold the warehouse before we afford $359 million to Blackstone in 2018. There's a lot of background of, you know, how much time it took them about a year of going back and forth and negotiating. And they said, you know, I think Blackson originally approached them for $300 million.

They're like, no, no, like it has to be $359. and they got the deal done at $359. So this is a family, and we have a lot of conversation with them over time, where they've said that there's, you know, given a high enough price, you know, like every asset is for sale, right? So, you know, there's a history of the family selling Floorock industries when they got approached by Vulcan. And it seems like that they're always selling when they're getting a really good price.

Yep. So I think that takes away perhaps 90% of these, quote-unquote, you know, high-insider ownership will controlling families for real estate companies, right? Because they could kind of treat it like this is our little, this is our family office, you know, this is our family business like go away, like we don't want to be bothered, right? And then if you look at also their GNA, right, the GNA runs about $6 million a year. And by my estimate, this pool of assets is about $700 million. So, like, if you were going to give money to a private equity, real estate private equity, in that sense, you're getting, you're paying no preferred, and you're getting, you know, you're paying 80 basis point management fee, and you get daily liquidity, right?

So, like, again, like, I'm constantly looking at, what can I get in a private market and what can I get in a public market? And in my opinion, this is a much better approach. You know, this is a much cheaper, much better, and much cost-effective way. get this kind of high quality real estate exposure in the public market. Fantastic. Fantastic. And I'm with you, right? Like, look, 80 basis points of, I hadn't thought of putting it like that, but 80 basis points annually of management fee, as you call it, versus, you know, if you went to Blackstone and you took someone with this track record

of two sales, you know, maybe selling warehouses in 2018 wasn't the top of the market, but they got a very good price for it. You know, that history, you'd be paying two and 20 in a heartbeat, right? So 80 base points versus two and 20. That's great. Lots of places to go here. Again, this is a real estate company. So I think there are lots of interesting things to talk about here, but we don't have to make it too crazy complex, right? Like a real estate company is, it's a sum of the part, sorry. There's real estate.

We need to value it. We can talk about interesting optionality. But I think the most important thing is share price is 55 right now. You mentioned NAB is around $90. Let's talk about what goes into the NAV to get around $90 per share. Sure. And I think, you know, what do we start with the royalty, royalty business, right? Great.

That's interesting. And this is probably one of the harder assets to, I think most real estate people could value a multifamily. They could put a cap rate on it, right? They could put a dollar per square foot on it. And the royalty is kind of a different beast. But, you know, from my conversation with the big family over the years, we've owned this, you know, since 2015, right? So, like, we've gotten to know them very, very well. And they've been very, very candid in terms of feedback and whatnot.

In essence, they said that given, you know, like, given the choice of buying a multifamily or a warehouse, right, like a four and a half cap rate or whatever you want to call it, right? They would rather buy the royalty business at the same exact cap rate, like on any given day. And, you know, why, like, let's think about like why, right? Like aggregates, but before like we get into any of it, if you look at the historical performance off this aggregate business, they have to. $200,000 of CapEx since 2006, right? And in essence, I think they pulled out more than at this point, probably somewhere around $100 million from 2006. Hey, Bill, can we just take a step back? Because I agree, it's a great business and they've got some slides of stuff, but I just want to define for listeners who haven't dug into the filing yet. What is the royalty business?

What are the aggregate business? Absolutely, fantastic. So Peter Lynch, you know, this goes to like the cumulation knowledge, right? Like, I found this couple like, because I read Peter Lynch's book, one up on Wall Street, right? And Peter Lynch on one up on Wall Street, like, very bizarrely mentioned, the aggregate business is one of the best businesses

out there, right? Because you, it's, what is it? It's literally like you're buying a ton of sand, gravel, crush stones, and it's worth next to nothing, right? Like, there's like really no value for these assets. And that is the inherent

moat of an aggregate business, right? Because it costs you probably $10 a ton for something, you know, it costs you $10 a ton, but if you want to ship it 50 miles, the trucking cost is $10 a ton. So it forms like you kind of draw a circle, you kind of draw a circle, and within that radius, you have a ton of pricing power, right? And, and, you know, if you're competitive, that's why, like, if you're doing a construction project, say, in New York City, you'll never go to Chicago to buy rock. It doesn't matter how good the rocks are. You actually won't even go to New Jersey, right? Because by the time you bring it over, it's going to cost you more to buy it locally.

So these are at worst local monopolies, right? A lot of times, and the industry is very, very consolidated. There's more Marietta and there's Balkan, and then there's some, you know, Blazzi, CMEX and a few other French boys. But they're local, at worst, local monopolies, the either local monopolies or local monopolies or local holocaplies, local holocaplies are worse that you could get. Yeah. And the other thing is, there's a very strong NIMBY angle to this. It takes probably five or six years for you to get a permit approval because, let's face it, right? Like, everyone loves that lovely neighborhood. They don't want a big rock corny in their backyard and heavy trucks and, you know, noise dust and you got, you know, rocks falling off. And like, it's just like, there's not a curb peel.

So we love investing nitty assets because what it means is that basically your chance of new supply coming onto market is very, very well. So typically, I mean, we've seen it where people sit on this waiting for waiting for the permit. And they'll go, you know, they'll wait five, ten years before permit is granted. So if you've got a portfolio, that's already cash flow and that's already being mine, that's got a minimum 60 year life with a half a billion tons of rocks of reserves, that's incredible. incredibly valuable. And so FRP, they own these quarries. These are aggregates. They own them, but correct me from wrong, they don't really operate them, right? They'll lease them to Vulcan. You mentioned they sold a lot of these to Vulcan in 2006, but some of the ones they still own, they'll lease it to Balkan and Vulcan basically just pays them pure profit. They get a, I think it's

a percentage of sales or percentage of Williams mind. Yeah. Yep. Yep. So, so this is the other, This is the other aspect, you know, that why they're specific business model, so beautiful. It's a pure top line royalty, right? Like, they've never disclosed what the actual percentage is, but we estimate that it's about 10%. So 10% of top line. So there's no cost overrun. There's no, like, inflationary concern where, you know, your labor cost goes up or your equipment cost goes up. If anything, you know, inflation is so top of mind, this is probably one of the best assets to own, my opinion, in an inflation.

their environment, right? Because, you know, inflation goes through this, this is an asset that naturally has a lot of pricing power. They could usually, usually increase prices by three, four percent, usually like CPI plus two, right? So you could beat inflation. And there's no, like I said, you know, I look back to 2006. I think there was like $200,000 of CAPEX in the entire business that threw off close to, I guess, around $100 million of royalty income. Yep, perfect. So, as you said, this is a great business for inflation, because especially what they own, they're just taking a percentage of the royalties.

Local Logoply, as you said, the rock, it's not very expensive to mine and sell, but if you want to transport it more than 50 miles or something, the transport costs are going to eat into all the costs. So you get nice pricing power and everything. Let's talk valuation, right? So great business. how do you look at the value of this? And I think this is one of four different pieces of value,

just so people can keep that in mind as we do to some of the parts. How do you look at value in this business? So I think if you look at, you know, a company itself has kind of, you know, in their investor day presentation, they have a great investor day presentation. And they have kind of said that, you know, more Marriott and bulk in the good comparables, right?

And they use EV to EBIT up metric. But the reality with this is that I think you really should be using EV to EB, right? Because they have no CAP-X, as opposed to the Warren-Mariator and Vulcan has CAP-X, right? So I think if you look at Moore-Marietta and Vulcan, I think they trade at over 20 times, which, like, if you invert that, that's about a 5% cap rate, right? So on a run rate basis, this business, this royalty business is doing about $10 million in royalty income that, The reality is that all you're doing is you're sitting around collecting, you know, a royalty check, right? You're, they saddle it with a little bit of extra kind of GNA overhead, but if they were to sell it, this is probably a 98% EBIT margin type of business, right? So you could basically use the revenue as like NOL.

You really just need one bean counter in there to make sure the checks are hitting the account really, right? Exactly. Exactly. So if you do 10 million divided by 5% capers, rate, right? I mean, that gets you to about $200 million, roughly. Now, there's more to it, right? We just pass it. We just pass infrastructure plan, right? And spending on infrastructure project is going to go up 20%. It's commonly expected that, you know, on the investor day, they mentioned that you could probably see very large increases in pricing and about 5% increase in volume, right and that will probably translate into the royalty income you know revenue hitting about 12 million in the next two years so if you go out two years you know 12 million on a five cap now you're in that

I think I think you're you're in a 240 range right like you're in a 240 range so but there's there's more to this business right there's more to this business that there's a terminal value component to this right like like let's step us to take a step back 5% cap rate like Is that appropriate? Well, there's 60 year life. There's a 60 year of life, right? When you DCF out, right, it, like, if you run the BCF with, like, a 4% price increase and at 5% initial yield, like, like that, that's a very, very reason because you're actually

getting a probably like a 9% return on an asset by owning this, by holding onto it for 60 years. And, you know, like, we can get really technical. It's probably worth, like, it's probably got a hundred year life because as you dig down, you tend to find more rocks. Like from a county perspective, you can't really report it, right? But typically when you dig down, you find more rocks, right?

There's probably a hundred year light there. Now, there's a little more because they own two, they own all the land. When the mining gets completed, they own all the land. And what's super interesting is that they own a site down in Florida in Fortmeyer, where this, like, so big picture,

they own 19,000 acres of land in Georgia, Florida. And being a real estate nerve, like, I've actually physically seen all these rock quarries in person, right? I've seen the pictures of you at them. He's not lying. I've seen the pictures to fill out there with hard ads. So what's interesting is that if there is a parcel of land in Fort Meyer where they're going to dig down and then this area is going to fill with this turquoise blue water. And it's been zoned for 101 luxury waterfront, like it's the best business that I come upon, right? Because someone's paying you to dick out the rock

and create an artificial lake for you. And then you now can sell the lakefront lots, right? Like, I don't know a better business than that, right? And, you know, what we see on Zillow is at Len Lod's down in that neck of the woods would go for probably, you know, we've seen on a one acre lot, probably one half million, right, today. And you figure, but they won't be able to sell. until 2028. So if you DCF that back at 12%, right, you know, with like little 3% annual

price increases on it, you know, that gets us to about $60 million for that for that. What we should be able to get about $130 million in 2028, right? Yep. And that's something that there's another kind of call at 4,000 acres in Brooksville, which a few years ago was probably a depressed area, but with, you know, Florida being so high. like it's about an hour north of Tampa. I mean, that could potentially become like a housing development, right? And we valued that at 20 million. I think, you know, that's just like a little bit further away, right? So I think if you add everything up, like you, you get to a high 200's, like right around that 300 million. But what's important to understand about this asset is

that we've owned this company since 2015, right? Every year we sit down to do a value. where, like, oh, like, yeah, they took more rocks out on the ground. They took, like, another 6 million or 8 million than, like, tons of rocks out of ground, but, like, the values actually increase, right? Because of that, because of that pricing power, because that ability to keep pushing 4% CPI plus 2. And this is an asset that took us a really, really long time to, like, understand. But this is, you know, I'm starting to see the world the way they view it, that

that, you know, between a multifamily and this, like, like, I'd rather own this. And you get, and you get in the long run exposure to Georgia and Florida, like, you know, where demographics and, you know, you got all the right trends going for you. That can be one of the most fun things about following company for a while, where there's like one segment or one thing they do where you're like, I just wish they wouldn't do this or I wish they'd do something else. The company tells you, no, you're going to love this is going to be so good. And sometimes three years later, you look back and you're like,

God damn, why did those people keep doing that that was so dumb? But I love it when it comes this way where it's like, no, they were right. This is better. But just to put those numbers in perspective. So right now, about $55 per share price for the whole company, you mentioned on the very low end, the first number you threw out was $200 million. And then as you started throwing in some more things, I think you said a $300 million. There are a little under 10 million shares outstanding. So we'll just round up and call it 10. But so on the lowest end, this side of the business is worth $20 per share. On the higher end, it would be a push. over $30 per share. So that's serious numbers, right? We've only talked about this one segment and we've already got somewhere between over 40% to over 50% to over 50% of the value of the company done. I think that's good on the royalty business. The second part I'm just going to throw out the company, they have no recourse debt that I'm doing. They do have debt, but it's all at the property level, not at the company level. They've got $170 million or so of cash, 16, 170. I'll do the math for you. 10 million shares are under outstanding. That's about $17 per share. Do you want to say anything else on the cash? Because we will come back to it later

when we discussed it. No, I mean, nothing really. I mean, I think that, I think one of your question is like the opportunity cost of the cash. Let's come to that later. I want to establish some of the parts. And I just wanted to jump through the cash because you add that to the royalty business. And now we're talking like, hey, we're at at least $40 per share of value. And we haven't even talked about the things that I think most real estate investors know this company for and get excited about. So let's dive into that. They've got a lot of real estate projects, asset management, JV. Let's talk about the last pieces of some of the parts here. Sure. So I think the, and this is a little bit hard to do verbally, you know, I think, I think

if you look at some of the photos, you know, they own a few multifamily projects. Most of them in Washington, D.C. in an area by the National Baseball Stadium. And it's, hold on a second. So they own eight multifamily assets, right? And the way to think about it is that there's a D.C. waterfront play, right? So Washington, D.C. kind of revitalized the baseball area. That was kind of like a very run-down industrial area. And there's a lot of both private and public capital that went into it. And there was a company called Four City, Four City Enterprise that built out a big, kind of mixed-use, multifamily office that got bought by Brookfield, right? And where their assets sits is they sit on the water between the Anaccia River and the Washington National

Baseball City. So inherently, like Buffett talks about moats all the time, right? They're like, oh, you want to own, you want to own businesses with a moat. It's like, it's like, what is a physical mode. A physical mode is a body of water, right, where people can't attack you, right? In the real state business, a moat is some sort of geographic constraint, right, where people can't build anymore, right? So if you're right on the edge of the water, you got a real moat because they can't build anymore. Like you got the river view, right? And that's what gets me really excited about the location, right? Like you're in this up and coming, like it's not up and coming because it's it's already like one of the uh you know one of the favorite uh favorite neighborhoods in

Washington DC and what makes it really cool is that you got this uh river walk down there you've got you got an entire kind of park outdoor park here you're about a 15 20 minute walk to Capitol Hill so you like like there's if you look at the staffing right like a lot of people who live in that area is that there are 15% I think is like military there's there's like if you watch NCIS like on the outside like Like, that's right next to there, right? You got Capitol Hill, a lot of people are lobbyists who live in these buildings. You got a lot of big four accounting people, folks who live there.

And those categories are about half of the residents. And what's most impressive about this asset, right? People talk about, okay, like when you, why don't we stress tests? It's like, how bad did it get, right? Like, during COVID, you know, dot 79, you know, which is one of buildings on the water there, their occupancy, like, was basically only down about 1% and they kept rent flat, right? Like, it is one of the most impressive for an urban location. That's one of the most impressive performance that I've seen.

And, you know, we, like, we really added to our position when we saw that. And then if you look at the Merrim, which is a new building right next door, they went from 0 to 45% lease in 2021 and doing Q2, right? Like, it was literally leasing up with people using iPhones to, like, life, you know, kind of like, like, give people life towards, like, through iPhones. It's easy to forget. I mean, Q2 is before, that was right before the vaccine roll up really got going, right? Like, by July, people thought that we were going back to normal and then Delta and Omnacromacomacom came back. But in Q2, I mean, that is the right at the start of the vaccine days.

So that was still a very tough time. And New York City, I know you know New York City. Well, that was the end of, hey, get four months free on a one-year lease in New York City. April and May was right at the end. So for them to go zero-45 is pretty impressive. But I think you're thinking April of 21. This is April of 2020. Oh, it was April 2020.

Oh, yeah, yeah. Yeah, that is way, way worse. But my bad, I thought it was. There's like no clarity. There was like no clarity. They went from zero to 45 in Q2. like when we were just locking down, like if you think about, do you want to lease a multifamily in their urban location, like this is like not the time. And they got 45% lease in one quarter.

I mean, that was, I completely misread the investor presentation. That's way more impressive than I was. You know what? I think it was I had a mental block that there's no way anybody could rent out a multifamily in April 2020. That's probably it. Yeah. Yeah. So I mean, it's like, I think if you start with the worst case and you look back where you say, How bad could it get, right? Yeah. This is the worst it could get, and they had this type of performance. So I think in this category, Doc 79 and the Marin, it's kind of easy to value, right?

Like the Marin, when it stabilized, there was a press lease that basically said it valued at $150 million, and then you could kind of, like, work through the $88 million of mortgage debt and, like, arrive out of value. You know, Doc 70 and I would generally use a $7.3 million dollar NOI. Like that's what we think when we kind of normalize, like what that would be in our cap rate assumption is about four and a quarter, right? Like most multifamily in the U.S. trade in a full handle with the Sunbelt being in the threes, right? And this is, you know, these buildings were built in 16 and 20, right? So these are brand new, like trophy, class A, like great location, waterfront, right? So between these two buildings, we get to about $97, $98 million, like $96, $97 million of equity value for those two buildings alone, right?

And then there's two more land parcels right next to it that they could build. We value that at about $51 million. And there's a lot of comps. Like, you know, we've done a lot of digging where there is land transactions. sold in those areas that were away from the water. And they're generally, you know, we're valuing those at, you know, $85, $85 a square foot. And those were from years ago, right? Like, as a neighborhood gets further built out, the value increases and we're using a comp further away from the river, right?

So we think that's very reasonable. And then there's 1,800 Half Street and Bryan Street. you know, we value that at $38 and coal like $59 million. And that's very simple. We're just using book value. Now, when you think about a real estate development, as you, you know, pour the foundation, as you build that out, as you stabilize and do the interior and lease it up, right?

Like the value actually gets created on a, you know, daily, weekly, monthly basis, right? But because of GAAP accounting, you basically say it is. is worth, you know, like, it is worth this initial book value. And then there is a quarter where they'll issue a press lease and say, oh, you created, you double your equity value in this development project, right? And that all happens once. And that's what happened with the merit, right? The Marin, I think, during Q1 and Q2 of 21, when it stabilized, they came over a big press lease that says either $40, 50 million of gap net income. And we got adjusted for like the joint venture value, right? But nonetheless, what I'm getting at is that there's a big headline. There's a big

press release that's going to say, you know, there's a big gap income, a big step up. And what that, what that is supposed to convey is that that's how much value they create it through the development process. And then they usually get that value from a bank appraisal when they put a permanent mortgage on it, right? Yeah. No, that was going to, my question. So where you're getting those equity values. It's not like they're pulling them out of nowhere. It's either, hey, we sold a piece of this to a JV partner and this is the equity value that they valued at or more likely, hey, you know, it's on our books for 80 million, but we just went and took out a $140 million loan on this thing because it was a phrase that $200 million or something is where you're pulling

these numbers on the development projects. I'm pulling them from the tank queue. And it's historical costs. It's historical costs from, I guess, like, for these two projects. You know, I mean, these projects are like two, two years in, two and a half years in, and they're, you know, in Lysup. And, you know, I talk a little, so, you know, I'll talk about catalysts a little bit, but I'll go through it. You know, they got a project down in, you know, bring Greenville, South Carolina.

So now you're in like more Sunbelt territory, and those projects should do really, real well. So if I aggregated, you know, all those, all those assets, right, I got about a $297 million equity value in that in that bucket, right? And this is net of debt and net of JV interest, right? Like, you know, there's a lot of like, so let's talk about like, so you do 296 divided by, it's actually 9.5 million shares that I use. I was rounding up, Bill. Come on. I was making the math easy. Yeah, no, we make math easy. So, you know, you're talking about like $30 a share in the multifamily.

And this is probably one of the best portfolios because it's order front. It's, you know, it's in like this really exciting neighborhood in D.C., right? And like someone like Blackstone, someone like Brookfield, Blackstone would be like a very natural buyer, like an Avon Bay, you know. And insurance company buying already leased up multi-family. I think that's great. So let's just pause right here. So some of the parts, right? We've got $17 per share and net cash on the balance sheet. No recourse that. So there's $17 per share. Then we've got, call it $30 per share in the royalty business that we mentioned earlier. If you include the value of the Fort Myers land and everything, it's called $30 there. And then a little bit around $30 as well in the multifamily. So we've got $30 plus $30 plus $17. If I'm doing a math right on the fly, that's $77. And I was probably conservative because I was using 10 instead of nine and a half. And then there's probably another 100 million of miscellaneous, you know, office, warehouses and stuff. I don't think there's anything too chunky in there that we need to dive into. But again, that's another

$10 per share. Add it altogether, that's 87. Again, I was using 10 instead of nine and a half. So we're at your 90. Is that about right at that point? Yeah, no, that's that's about right. And I think one thing you may want to just take away from is that they do have something for income taxes, you know, as you sell real say. And what they've done is they've done. a really good job, either using 1031 exchanges or investing in opportunities on those taxes, right? So I think the actual report, the book value is something in the 50, 60 million range, but like you're not really going to pay it today. And the opportunity zone has a lot of energies where if you hold it for 10 years, you kind of almost indefinitely defer them. So I MPV it

and I call it 25 million, right? So you probably want to take away to $2.5 away from it, you know? And I think, like, we're in the right ballpark. Like, I have in my model, about an $89 value, like, you know, cohort. Like, we're in the right ballpark. And look, if it's 86 versus 90, the share price is 55, so that's fine. So let me get into my pushbacks here, right? Like, I think this is great because the thing that jumps out as me, it's really hard to, you know, people talk about the pre-mortems, right, where you kill an investment before you invest.

It's really hard to see how you do poorly. Too poorly here, right? You've got a management team that seems committed to shareholder value that's done well over time. They're not raking their pockets with fees. $17 per share of Nat Cash on the balance sheet. That gives you a long way for downside protection. You know, DC already leased apartment buildings. This is a great asset portfolio. So it's tough to kill yourself on the downside. But the things I worry about here are things like, first, opportunity costs, right? I worry that this is an investment where 10 years from now, you and I are you're beating me at Croquet. Maybe I've gotten better and I'm beating you. But 10 years from now, we're out in the croquet fields and I say, oh, hey, how's that for PH doing? Say, oh, you know, it's great. And I, NAV is at 180 now. It's at 140 or something, right? So that's not too bad.

Two and a half over 10 years. But that's not outstanding. You know, we didn't make any great alpha. So my first pushback would be just, are we really going to make a lot of alpha here short of the, you wake up in three months and they've decided to sell the whole company thing? Sure. I mean, I think that, so what's important to, to, let's talk about catalysts, right? Like, why made the gap close? And I think that, you know, the way that the, so a couple of things.

Let's talk about catalysts and let's talk about their track record. And I think the track cooker is also a real, real important items to talk about, right? I think that if you look at how they've allocated capital since 2015, you know, when we started owning this company, every project that they've done, they have achieved, by my estimate, you know, 20% IRAs will higher. Okay. They, you know, that applies to multifamily development. That applies to warehouse development. that applies to opportunistic residential, you know, home building lot development where they're getting 20% IRAs on those projects as well, right?

So I think I think when you, and they're very, very selective, right? Like the process is that they've seen 800 deals. Last time I talked with them is that they've seen 800 deals and they've only invested about a handful of them. And that was since they sold the portfolio to Lasson, right? So I think that's really key because if you're invested with the family where they could get, they could get you 20% IR on the capital that they do deploy, right?

They're very conservative, very selective, but when they do put capital to work, you're getting 20% IRA on it, right? I would say that I'm willing to bet that over time, people will start to agree with me because of that track record, right? Like if we're talking five years from now, I think people will see a lot of these assets, you know, stabilize. And there's also a, on the capital,

side, there's a resource conversion, right? I think it was Marty Whitman who going to term resource conversion, right? Like you take land that's not just thrown off any cash flow, you put a building on it, right? Now it throws off, you know, call it like $7 or $8 million of net operating income and you put something that on it, right? Like you could get $5 million. And where like even as soon as two years from there, like if we're fast forward year in next year in 2020. By my estimate, I think they could do $35 million of FFO or, you know, operating cash flow, right? And most reads, most high quality, you know, multifamily reads, trade at 25, 30 times FFO. And that's just, you know, you could pull up like, you know,

the big industrial reads, the big multifamily reads, like a high quality read will trade at 25, 30 times FFO multiple, right? So in the short term, there's that catalyst. potentially working for you, right? In that, in that, you know, I like to own these assets when it's hidden land value that doesn't grow up in cash flow. And over the course of three years, it gets converted into cash flow and then people could put a multiple on and say, oh, yeah, this is really obviously cheap, right? So I think that's one of the mechanisms, right?

The other, the other angle is that, you know, you mentioned, the opportunity costs 170 million dollars of cash right uh you know they're putting that to work and and and part of reason why they have this cash is because they're so good at these developments you know when they when they do a development project that sometimes they'll finance it with both equity and preferred and when it gets stabilized they get that preferred back now they got more cash on the balance sheet right but yep they recently identified a couple of projects that uh so remember why this is this is a company that has its roots in warehouse development right They built up this warehouse portfolio from nothing to full million square foot and sold it to BASO.

So they recently gained, you know, they have the rights to about 2 million square foot a warehouse. So you figure to develop, you know, usually buying the land. I think, you know, they've been buying it for about $10, $15 a square foot, right? But it's actually worth $20, $30 a square foot. But it will cost them probably another $9 to kind of build the shell, build the foundation, and get that lease. So there will be a use, a very productive use to that capital. And, you know, they'll probably do 40% return on asset on that deployment into the warehouse space. No, that's perfect.

That was actually going to be my next question on how they did it play cash? Let me just ask two questions in the warehouse space. So obviously the first sale of the warehouse they did from kind of 2010 to 2015 and sold to blacks, and that was great. Do you know what the IRA that they invested, that they kind of realized on that portfolio? us? Sure. I mean, I think I think the cost basis was about 180, like somewhere in that 180 to 200 million and they sold it to 3459, right? And a lot of it was built. Now, keep in mind, they're also collecting, I think was doing about $21 million in that operating income when they sold it, right? So they were getting $20 million of cash flow every single year

and they sold it for essentially double what they what they pay for. you do the IR and something like that, you're like in the teens. And the thing is, these guys, the family doesn't really use a lot of leverage, right? Like how they use a lot of leverage, like we probably have an IRA, like lever IRA in the 20s, right? If Bill and Andrews optimally leveraged, optimally financed shop had done what they did, we would have been in the 30% IRAs. No, that's great. So second question, this warehouse portfolio that they're about to build up. You mentioned, hey, they got the land for about $10 per square foot. You think the land's worth $20 per square foot and they're going to go build it out,

you know, $90 per square foot of cost, but they'll build it out and I'm sure at the end will be very successful as most of stuff they didn't. I mean, my pushback there would be, all right, these guys have been great at developing, but it's not like the warehouse game is exactly a secret at this point. Like who's selling to them for $10 a square foot when there's a warehouse by at this point? How are they getting access to this great deal? No, but to answer the question. And this is where I think that the thing about their experience and where they have a lot of knowledge, right? They're, like, very in the D.C. Maryland, like in the Middle Atlantic area, that's their,

that's the backyard, right? That's where they have a real edge. And they're, you know, historically, from a corporate perspective, they built four million square foot. Now, everyone, everyone's looking to do, to do warehouses, right? Because that's, that's like one of the hottest asset class. The reality is that when you buy something for $10 a square foot, you got to take the time to get that entitled and get that, you know, get that approved, get that ready to build, right? And that entitlement process, remember going back to the $6 million GNA, right? That's what you're paying these guys for, right?

What you're paying these guys for is that anyone could buy a parcel lamp, but to get it shovel ready, there's a value creation process. And that's part of it. Like, it's like, why did you buy it at 10? I think one, they found a good deal. But, like, maybe someone else may have to pay $15.20 a square foot, but to take it through entitlement, you know, there's a time component and then there's a cost component to it where, I mean, frankly, you know, when I spoke with them, they think that if you got shovel ready land in the Atlantic right now, it's probably $35.40 a square foot. Yeah. Yeah. I mean, that's, you know, we own another warehouse company. So we're very, like, you know, in tune with, like, what land costs, what construction costs, like, what construction costs, like, what.

rent is in each market so this this is you know this is a market where i you know i remember correctly i think i think for brand new class a warehouse you're getting seven dollars a square foot net right so if you could buy land at 10 dollar take it through entitlement and built you know the shelf for nine dollars like you're getting you're building to a seven percent cap rate and warehouse cap rate is probably you know in that market like four and a quarter today you know um so like you're creating a ton of creating a ton of value by development of these warehouses. Let me ask the next question. You mentioned earlier the private market valuation versus public market valuation.

And people go look, I put this in my notes, like I can point to a lot of REITs where I think they would say, hey, our private market value is a lot higher than our public market value. And the one I put in the notes was SL Green, which is all New York City. Now, that's New York City, which has its own unique things. They've been saying it for a year. They've been pointing out, hey, our NAV is way higher than our stuff. stock price. They buy back shares pretty aggressively. They have slides. They say, look, we've been saying this for years. And every time, like, this is not some illusory thing. We actually sell assets at or

above our NAV. There are, you know, there are lots of comps where the building next door sells to us for a 3% cap rate. And our NAV has our building at a 3.5% cap rate. So they've been saying something similar for years, right? And it's actually kind of, I think it's along the same lines. they're, I think they say their NAV is like 115 and their stock 70, which is kind of the same as you say, NAV here is 95. So I guess my two questions here are, again, opportunity cost. Why FRPH over one of the many other REITs that are trading at a discount of private market value? And then the second thing is just as an investor, whenever I look at these things, I get it. Like I can see, and not just have to be SLG, Vernado, all these guys. I can see that the public market, the private market cons are a lot higher

than public market. But I just say, like, what is the public market missing? Public markets are smart. They're not going to discount a whole sector for no reason. Is it just like they think cap rates are unsustainable? Is there something else they're missing? Well, I think, I think so, so that's a great question. And obviously, this is something that I pay a lot attention to in my premortem analysis, right? And I think, I think it's so in the case of tornado SL green, I think specifically it has to do with that. These are office assets. And if you look at the last 10 years, kind of rent growth, what you have to pay in terms of concession and leasing commissions and TI to like get in the office, lease up in New York City, what the actual owners keep hasn't really gone up a lot, right? Like it's just been a very challenging.

And then you got COVID and this whole work from home, I think. So a better way to think about it is terminal value is extremely important in real estate because you're naturally buying. assets at, you know, call it like 20 times cash flow, right? So, you know, if there's any sorts of doubt on terminal value risk, right? Automatically, it kind of doesn't work. People may not want to own that, right? So like, let's let's kind of walk through this. What gets me really excited about FRP is, let's, let's think you got an infrastructure bill, right, for the next five years that's going to result in strong demand for aggregates, right? And then the other thing is what how would you impair, you know, 14 sites in Georgia and Florida of aggregate royalty

business. It's like, try to, try to nuke that, right? If you wanted to get really crazy, like one of the reasons I had Vadim on and we talked B-fit, and one of his things was, hey, you know, I can't, they're gyms. And there's an out-there risk where we all go into the metaverse or we invent a pill that you take once a day and get you super fit. I mean, we could invent a risk here where Georgia and Florida, Florida's underwater five years from now from global warming or something. Right now, that's great. But you can invent some really strange. One thing, my wife always talks like, oh, we should buy real estate and sometimes we should buy an apartment. Sometimes like, yeah, we should.

Let's get our rent payment out of here. But other times like, well, it sounds nice when you've been in New York City and you're riding the 80s to 2020 boom. But if you did Detroit real estate from 80s to 2020, I don't think anybody thought Detroit was like going downhill at the time, but it wouldn't have been great. So I don't know. I'm kind of rambling. But I definitely do hear you on that. I agree with you. Georgia and Florida have got a great future. I think Georgia, Florida, I think given the, let's say for the next 10, 20 years in terms of kind of the tax regime, in terms of demographics, like where people migrating to the demandful home building, housing, affordability, like, like, like, I think, I think you don't have any of that New York City.

Like, will people go back to the office? like you just don't have any doubts right and i think i think that's a critical factor and and like you know people who've been pitching me will bill like serratage is really cheap right and and i've been pitched that name for the last 10 years and it's it's been cheap on a sum of the parts no this is like super important and i don't mean to like um you know talk negative about serratage investors but but i think oh i'm just laughing because i once every two years i look at saratage on the same thing i'm like it looks cheap but there's a lot there's a lot of there's a lot of heavy lift in here. This is, it's too hard, man. Well, there's, there's, there's a, there's something to be

said about owning an asset where you could sleep really well at night, right? You pay 5% cap rate for 20 multiple, but you can wake up next year. We got five years from now. I get 10, 10 years when I get, you're like, they got pricing power. This is not being impaired, right? First is like, retail, right? Like, even five or 10 years ago, like, yeah, I had this conversation with people say, hey, Bill, like, when do you all get seratodes? It's so cheap on some part. I'm like, it interests me less when you're buying into a melting ice cube, right? Or potential melting ice cube. And I don't think, yeah.

Yeah, no, the older I get, you know, Warren Buffett said, I think it was Buffett, Time is the friend of the wonderful business and the enemy of the poor business. And it sounds so tripe, but the older I get, those Trite Warren Buffett sayings, they have so much. And I think one of the reasons buying good businesses, buying good assets like you are with FRPH versus probably, well, Syriottage does have some good assets. But the nice thing is, if you buy. F or PH and it is a good business and I think you've said you've made made a good case like the value just keeps growing. So yeah, maybe your 55 to 90 gap doesn't close until they announce a deal 10 years from now. But guess what? The value just keeps growing over time. So as maybe the discount stays the same, but it just keeps going. And that's just such a nice tail one to have behind you. Yeah. Yeah. Yeah. Well, not meant like going back to our original math, right? Like say it takes 10 years for you to to close this gap, right? To I don't know.

whether, like, investors actually paid NAF, like, the actual private market value, or you get, or you get, you know, you get bought out or something, you know, something, some sort of event happens. You know, if you think the private market value compound that's 10% a year, right? And why 10%? Usually when you put leverage, you know, usually when you put mortgages on a good, a multifamily asset, right? you could usually get to about a 10% liver IRA. That's usually from my experience. I mean, that's why pension funds, endowments, the big insurance companies, they all love these multifamily assets, right?

Because when you put 50% mortgages on it with like 3, 3,500% debt on it, and you get by 2, 3% rent increases, you could get to a 10% lever IRA on it, right? So the agribusiness, you know, you get a 5% yield, you get like a 4% price increase, get to around a 9% return. on that without the use of any leverage, right? And then any sorts of development that they do in the other bucket, they tend to hit, you know, 15, 20 percent IR. The only project that

they haven't done well is this kind of like mixed use retail slash office asset. And that's been a little slow to lease up, but that's like 1% of the AUM. I mean, other than that, and all their projects since 2015 has been home runs. And I think that's the aspect that the market doesn't necessarily appreciate, right? And I just kind of look at it and I say, I kind of look at FRP in my portfolio. Like, why do I own it? Like, I kind of view it at drafting

like a really good offensive linemen, right? Like, they're not the, like, like this is a position that's where you're like, you draft a really good left tackle, like someone like Joe Thomas of the Cleveland Browns. And you're like, he's got to like, you know, create a lot of value for you for the next 10 years. Hey, how can you argue with the last 10 years of Cleveland

Brown football results, Bill? Come on. You can't bring the Cleveland Browns up. fear. Well, I'm taught specifically about Joe Tom as well, never miss us. I know. I agree. This is one of those ones. I mean, I'm just getting bullet shots. We go through the podcast, but it's almost like everything you look at. It's the same way I do charter in my portfolio. Like, everything you look at, I think charter can do mid double digits IRA pretty easy for the next couple of years. Like, I feel so confident in the thermal value. Everything I look at, it has to be compared to buying more

charter. And for you, I'm sure it's the same way like FRPA. I'm getting it at a 40% discount to NAV. The nav's going to grow 10%. There's no recourse debt, so it's really hard to get it, you know, like anything you're going to do, that's sleep at night, double-digit IRA. Like, it's tough to beat that. Let me ask you, I've got two more questions here. First, as you know, I share repurchase.

I'm just obsessed with share repurchase. I love share repurchases. And I always find it interesting when a company goes from aggressive share repurchases to slowing share repurchases. And the company, I tweeted this out, you know, they said, hey, in 2020, we did a really nice job buying shares back. Our stock was screaming cheap and we took advantage. And I think they retired about 5% of their shares outstanding. I'd have to check my math. But they did a nice job buying back shares. They're not really buying back shares today, despite the undervaluation we've

discussed, a great balance sheet, no recourse debt. They say, hey, we're not really buying back shares. And that's fine. They've got some projects. We talked about the warehouse projects that can deliver solid IRAs. But it does strike me as interesting. If the company isn't buying back shares and their history is when they're undervalued, they buy pretty aggressively, why should I be buying shares today. Does that make sense? Yeah, no, absolutely. That's a very valid. And this is something that took me a really long time to kind of like understand the nuance of this, right? So first of all, like not every company is like a John Belong share by back optimizer, right? And I, you know, my understanding is that if you look at previous, the higher range of previous

share by backs, it's in a high 40s, right? So you could make an argument that, that it would be $55, right? Like, you could potentially, where they will start by that year will probably be a $49, like a high full handle, right, is worse. So you're maybe 10% off. So that's just another reference point. In terms of like, why not? I think that, you know, like people say, yeah, there's so many companies out there

are trading at some parts discount, right? Like, why own this one, right? they're trying to solve that problem, right? It's like, I think sometimes shareholders could kind of be like, like, oh, like, why would I want to know it? I think what they're trying to do, I think they have a board with some really competent people on it who basically told them, well, you know what, like for you to get fair value, you need to convert these assets into cash flow and assets.

So that's in the long run, Wall Street could, you know, put a cap rate or put an FFO multiple on it and you will trade to full value. And, you know, another company that we own is a company called Griffin Industrial, which is now converted into induced realty trust, right? And Gabli owns a lot of that company. You know, I spoke to Mario Bowen at a conference very briefly. And, you know, Gabelli was very public about asking them to buy back shares, right? If you look at what happened with that company, have they bought back more shares,

they would have owned a lot of land in Connecticut with, like, very little cash flow, right? that market would not care about. But instead, they pivoted into Lehigh Valley. They went into Charlotte. They sold in in, in, you know, Hartford, Connecticut, and they used 1031. They went diversify, went into all the market. Now their warehouse platform, right? I think when it comes to real estate, there are really unique traits in terms of, like, how do you, this is what I think about daily, right?

Like you mentioned Charter. Charter is a deeply liquid stock where you could wake up on any given day, you could buy back as many shares. you want, right? There's, I mean, there is a trading liquidity, right? And I think like how you solve that, how you close that gap in the long run is you go about the route of resource conversion, right? You convert your, your land into cash flow and assets that the market could put a cap rate on or multiple on. And then you build up enough of it where, and then it brings in enough investors. So if you buy that shares, you actually like, you know, further creates that. illiquidity problem, right? Like, like, as a value investor, you're like, you're like,

yeah, but like, if you're having a discount, like, like, just, just buy back, you create so much more value. The reality, like, at the same time, like, like, if someone who's big want to buy, you know, build a $10 million position, it's going to take them really, really long time. I think there really is an element. And 10 years ago, I would say, that's hot wash. Like, I don't care, right? But trading liquidity and who could own the stock actually makes a difference in terms of the discount that you trade at. Yeah. No, I 100% agree. And as you're saying here, like, as we're talking, it's almost the end of the trading day. The stock's traded 3,000 shares, right? So that's 55 shares. I'll make the math easy on myself. We're talking $150,000

of trading value. Like, yeah, it'd be nice that they were buying back shares at this discount, but they can't buy back all of the shares, right? So it's going to be a drop in the bucket. you know, for these companies, I'm with you. Five years ago, I would have said, screw that. They need to buy back shares. And say, I'm like, well, look, there are dynamics behind this. I'm sure they're trying to create value.

And honestly, with that trading volume, it might not even be worth the headache to try to retire shares versus, hey, let's go do 20% IRAs to build out the next great warehouse platform and we'll sell it again to Blackstone in 2024 and make a huge premium or something. Last thing, I said a couple times. One of the nice things here is great DC. multi-family assets, right? $17 per share in cash on the balance sheet. I think pretty inflation resistant. You know, everybody's talking about inflation these days. You've got the

rock course. Multi-family should be pretty inflation resistance because your leases are turning over about every year and everything. What kills you here? What keeps you up at night when you're investing in FRPA? What am I missing as a big risk here? I think that the, you know, like we talk about like this continuing to trade out of this big discount in that, right? Like, like if, if this perpetually trades out of 60% discount in that, then you may, you know, like, then like your return is actually lower, right? Like, like then, um, so that's one concern, you know, I tend to think, yeah, that doesn't kill you that just, you know, you're, about like fundamentally, right?

Yeah, that's just, hey, you know, I'd like to do 15%. annually for year, but I ended up doing 8%, right? It's not the end of the world. It's not great, but it's not the end of the world. Is there, but it sounds like to me, you're saying it's tough to see something that kills you. It is, it is, it's tough, you know, um, you know, my, my, my lawyers may tell me. I'll throw, I'll throw one more. Yeah. You know, lots of people have said, real estate, one of the reasons it's been such a great asset over the past 30 years. years. His interest rates went from 15 to zero or something, right? You even said when you were talking about the math behind them running, building warehouses, if I remember correctly, they build it.

And basically, the all in math, they can build it to about a 7 or 8% cap rate, but warehouses are worth about a 4% cap rate. And I'm just making it. So they've built it real cheap. I do wonder, you know, interest rates, we get seven hikes this year or something. Interest rates are fundamental gravity going from, I'll just, going up to 4%, right? Cap rates go from four to, at six and a half percent, all of a sudden these warehouses that we thought they were building really accretively, they've basically built value neutral and there's not that much margin of safety there where if interest rates were a little higher or cap rates were a little higher for some reason, they actually built at a loss. Do you worry that so much of, I hate this because

again, interest rates higher, inflation's higher, so the multifamily probably does good, the quarries does good, but do you worry that some of it is just interest rates are so low that almost any build out looks good right now. Yeah, so, so, I mean, that's, I think, I think that's a great question, right? Like, and, and frankly, that's a question that a lot of messers that are, you know, 50 and younger, right, or maybe, like, definitely 40 and younger, like, never have to deal with, right? Like, like, we've been, we've been, since the 80s, we've been in a clienting interest rate environment, right?

And, and it's something that I'm very, very cognizant of. So let's walk through the mechanism, right? I think when you have rising interest rate where it kills you, and this is what I saw it at same group a lot, right? Usually you get into a lot of trouble if you get a mark to market, it is not as bad. If you get a sudden need to repay the principle, that's when you get into a lot of trouble, right? And I think that if you look at how they're financing it, like Doc 70 Ameren has 12-year fixed rate, 3% interest, right? You could say if interest rates go up to 5% tomorrow, right?

On a marked-to-market basis, you may say, oh, that's worth a lot less now, right? I think the mid-again is that you don't have to deal with that balloon payment until 12 years from now. And 12 years from now, if we're in a 5% interest rate environment, there's probably a pretty good chance you're able to go from 2% to 3% rent decrease to 5% to 5%% rent increase, right? because it probably indicates like a high inflationary environment. So I think when you pay, like you got to pay attention to not just the, you know, the terms of the debt is just as important as the interest rate. Now, I, you know, we've done an internal analysis where I think if you get to a six cap

for 6% cap rate for the multifamily and you put a 6% cap rate on the aggregate business and kind of like impair everything else by 50%. You get roughly what the stock is trading at today. And I think, I think like if you ask most private guys, like would you want to buy trophy waterfront class A DC multi-family at a 6% cap rate? Like, I mean, I think there's going to be a lot of people like knocking down doors. Like, you know, looking to buy that.

It reminds me of a lot of times I'll talk to someone and I'll say like, oh, this company, just to make it simple, trades for eight times EBDA and all the comps trade for 10 times EBIT. And they'll say, and I think this company is slightly better, right? They'll say, oh, well, what if the comps trade down to eight times EBIT? And I think, you know, it sounds interesting as a pushback because the bear case always sounds more interesting. But the answer is, well, I'm already buying at eight. So everybody else is down 20% and I'm flat. And in your case, like the market has already priced us in at a 6% cap rate. So if everything comes to a 6% cap rate, well, we got cash in the meantime and we're breakeven.

So again, it doesn't kill you. Anyway, we're running pretty long. So I just want to last thoughts on FH, I think we did a really nice job covering, but anything we didn't cover, you wish we had hit? Anything you wish we had hit a little harder? No, I think we did a pretty good job. I mean, maybe one last thing would be, I mean, there are ways to hedge out some of that interest rate and market exposure.

Like, you know, this is a smaller company. You could buy, you'd go 15, 20% of our money, just buy puts in like an Avon Bay or like a prologis. you could even buy 20% out of money puts in Marrary and Vulcan, right? Like, like, as part of risk management for my portfolio, like, I just wrote this. And, you know, Bill's out here worried about giving it. And then he's talking complex hedging strategies. No, I'm totally with you, though.

Like, again, it comes to, if you're buying something for 8x and all the peers are at 10x, like you could just take the market risk or you can go hedge with peers, you know. One thing I've looked at a lot with a lot of oil companies seem to imply like $55 oil in their stock price, but oil's at 90. There are ways to hedge that, right? So, and capture that spread. Again, that gets more complex. Everybody should do their own work, do their own diligence.

But I'm definitely with you there. Anything else on FRPH? No, I mean, I think we did a pretty good job covering it. And this has been a fantastic conversation. I really enjoyed it. Hey, I know you do great work. I saw all the photos of you with the hard hats here, but this has been even better just like diving in here.

This is why I love the podcast. I've been in these things. Bill Chen, a great real estate investor. Thanks so much for coming on. We're going to have to have you back so you can tell everybody your New York City apartment thesis at some point because that's a banger one as well. Hey, you know, maybe I do you have to come back to talk about that one? Bill, thanks so much for coming on and we'll talk soon, buddy.

All right, sounds good.