Five Point (FPH) 19 Jan 232022 Q4 Earnings call transcript

Greetings and welcome to the Five Point Holdings LLC Fourth Quarter and Year-End 2022 Conference Call.

As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial condition, operations, cash flow, strategy and prospects.

Forward-looking statements represent Five Point's estimates on the date of this conference call and are not intended to give any assurance as to the actual future results.

Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. statements. future results may the to results in affect actual Five activities could anticipated or activities differ forward-looking factors results cause and Point's and Many materially from press These with release including factors the in Factors recent SEC. Point's Risk of the described Form annual included in report those and Point's on SEC those Five filings, Five most section today's XX-K filed any Five Point assumes forward-looking update statements. that to note Please obligation no

Hedigan, Dan Executive And call would over now, Officer. like the Mr. I turn to to Chief

Thank today our and our is joining our Tobler, Legal you, Executive Chairman Officer; thank you call. I Chief Good afternoon, Miller, Kim Joe. everyone, our Vice Financial for President have Leo Chief our remotely. and joining with us Interim Treasurer Alvarado, me and Mike Officer; Stuart Kij, Tax.

quarter to of on our update the and for current down cycle also update today XXXX. Company you through our estate strategies we XXXX. through market will team's and as you the pleased I the for on the move I'm progress focus full real of year the fourth

overview the Next, team. give an management to line condition. for open of Leo questions our and company's financial We'll will then performance the

for three of the we're It is the earnings our within time notable our weeks quarter. reporting first close of

We control are in of our business.

team up increase on a the it was through Federal Reserve's our and XXXX the to team organizational rates. CEO wrap in has of very recognize priorities. of our efforts remained of operational impacts interest Through Five of my them. the as I first year from transition, to say As extraordinary Point, aggressive focused I'd all, resulting the like year proud operating I'm

$XX.X and equivalents to a XXXX. fourth our consolidated in XXXX. with our million cash million, the compared Consolidated was We million for of SG&A million, reduction XX% cash financial net $XX.X QX million. was reduction our year $XX.X ended quarter results, to year $X.X a and SG&A the Turning in SG&A income $XXX.X was from

successes contributed fourth positive our results. quarter key Two

the for on The of $X.X $XXX Venture first execution land was on closed our approximately where very sale of our land a acre. XX commercial acres million or sales Great per million Park strategy commercial strong

the Venture, a received of sale position distributions Park and and of we this Great payments from Great Park cash incentive the strong Venture $XX approximately As compensation result the million. of

brings Our our development agreement that with second a was add is of Park partnership. XXXX. extended reflects team value extension key Great of Venture during the the success the through strong renewal to quarter now end which This management our management

should New rates capital revenue, aware priorities and the Year generating capitalize market allow on liquidity increased the expect three stabilizes. generate focused that these priorities: to managing on be well start we to provide being that the flow opportunities XXXX main interest us spend net and for and to the positive when dynamics, Execution our SG&A. we will cash As have available on we changed market be managing the

two the land revenue, now meaningful With of commercial. potential residential have source we our establishment business, commercial and of

end and will housing the expanding we environment, interest Fed the new cycle the progresses. as rate interest anticipate demand rate will the During market XXXX, year tightening that adjust buyer

homes California is reality still XXXX in communities. there in for and one in is that year the we planned supply be markets, short transition denied that Although cannot master in is a see residential, still our demand as well-located housing

business patient the manage of and current our realities remain to will We market.

balance prices and we'll markets. builders work market looking end, reflect land the of scarcity inventory in conditions sell current the that between that entitlement to to be our To a with at

land with land our of land Valencia, remain optimistic Park are and Park at which Great and constrained in moving land both the unique commercial commercial successful with Great last Following markets. sale offerings positioned we forward the the constrained at positioned quarter,

this continue to which to rates class. we historic demand vacancy have will expect rent in continued coupled asset continue we drive growth the industrial market, Additionally, preferred in with low

industrial only and many not developed its the uses, With continued confident for over other the industrial the in for offering in and half well. commercial of but remaining the land have as and kind only in interest already uses our in remain in market. sites on continued negotiations demand Park initial commercial that commercial Great markets we instances, of entitled In ready land sold,

us enables $XXX.X with our balance million our offerings. value million debt on desirable revolver At ratio XX.X%. us drawn and a patient complemented quarter cash reflected communities, to balance on sheet by unique hand sheet a available Our a assets of to $X are and capitalization million $XXX giving of that end, maximize of $XXX.X liquidity

debt principal notes obligations in no XXXX. XXXX senior our or have also We repayment on

now reduced some The of each open at the neighborhoods I'll to sell provide rates but at absorption continue on our Park homes, builder last year. Great updates to communities. compared

and coastal markets As the is we're new prior up at than California has in holds been better seeing our pattern communities. slowdowns, the home what that sales in

in XX During Great up quarter, for our in sold fourth from homes, the and the community homes QX XXX sold year builders Park XXX homes.

omni small home again be model time which model on will pace currently current for for new of July there sales of builders historic in period XXXX. had believe again home first has for its position XXX home themselves original standards, at need even homes land based homes, these to from numbers sold XXXX, though sales, Solis complex buying XXX XXXX acquisition by the the are a in that the we typical to remaining in and land move builders Park,

began XXXX. Park Great brought XX be this will right and is purchases. Our in Reserve neighborhoods, next rate residential aggressive market We after strong paused homes which before their the its community focus and builders Federal our in interest, previously community XXX District land new X-South increases of community initial

Great selling offering. of residential initial we're conversations with would of balance the builders at Park, commercial year. We've engaged moving of anticipate on land opportunities some in this the new and top our forward done the sites actively On ongoing the

offer zoning multitude a something parcels and County South market of parcels life among land available uses, been to including for allows office commercial large the years, that industrial that's not sciences, of others. R&D, of entitled Our flexible

new builders down fourth Valencia, reflecting the by home available quarter, In quarter during homes XXX the limited third from in inventory. totaled sales the homes XX

the available year, and of for encompasses year a total X,XXX Valencia, offerings. to sold XX For currently builders now their continue XX at on XXX our Builders with XXX programs models and next homes which XXX work homes home initial out sold homes. XX remaining neighborhoods of only from

sales. the additional creating this These quarters second third neighborhoods inventory open expected are year, and in drive to builder to

home mix in currently still we're the with to floor sites XXXX, at rent add opportunities multifamily While family builders and engaging and offerings. like products we any rent of our did not to floor looking close single

particular, In could during this this that market time residential is is sale] even strong when options estate a provide housing residents for pressure. real us for multifamily [per and under revenues segment land

of have Bay quarter Finally, of along and a Point approved with mix sites XXXX. for irreplaceable opportunities Francisco. a XX-acre we of the San is and opportunities. at development -- It county in Valencia Francisco San we also commercial remains land bring Francisco city first the in market San broad plan to and sign priority for Five

moving process development obtain still facilitate have maintaining Shipyard initiated New forward plan of we overall the the community development mix. entitlements while rebalances Point that we approvable ahead current the As start to Candlestick Year, Hunters' the to

issues as the these Concurrently, existing we the update Point. as we're financing navy will pivotal the and Francisco working the for with of standalone to delays timelines the of San Hunters city Candlestick through be work account mixed groundwork the increment to the phase use for a tax development community. at larger for XXXX first year set

In provide general of an comments next be how it market Therefore, year we to nature. see some remains Clearly, challenging uncertainty to I context some helpful amid feel sense effort provide will be more conditions. coming my progressing. to in there would these much year, the this

First, I'd to us that commercial like our gives XXXX the confidence positive finish to strategy. reiterate land in

ways sales price site commercial the acres provide sales. home to valuable find Further, the our will reengage number We we of prudent to be and XXXX. At as to Park don't estimates few feel builders residential during time, it months, expect our at Valencia beneficial expect land or commercial mutually potential to able next land. of over we we structure and Great be this with guest to have

third We expect in fourth quarters. as the majority and occur of XXXX sales land will

million, Generally first million cash $XX the first XXXX, million to million the or $XX $XX generate and of expenditures and of a $XXX payments expect of $XX and anticipated total year. million quarter the $XX SG&A approximately million million for other million service $XX capital for of by and other million by $XXX debt of half $XX approximately $XX sources for $XX we to from million between between offset expenditures of of accruals million per cumulative expenses between of and and half expenses all

for opportunities savings look in to SG&A. continue additional will our We

While half first and constructive is our which the cash cash believe we will negative, to to half to flow for of positive obtained of the make be the the be progress flow into mildly model, continue we expected a by year second the year future.

and the of In well entire facing. aware the headwinds we summary, was half are challenging last are our of industry for we XXXX still

fortify we're performance, opportunities positive capitalize about our are With create bottom looking balance drive shareholder sheet a XXXX and value. to on cash us to we're the and them. optimistic our line available building in accountability, ability on We confident flow cautiously in focus while to

the We communities. buyer adjust by and and proactively ever of our maximize housing the will the future. momentum feeling and interest about our positive continue Despite master we are value to recent optimistic and have inflation plan rates more demand on our challenges conditions, to of created plans for impact market rising we'll preserve monitor

will turn report our Leo me results. Now over let who financial to on

Thanks, Dan.

million management quarter. today recognized was A results release we income net mostly our by and in million revenue the generated that was in earnings $XX earlier company issued the financial reported segments. of which in for included $XX.X Valencia summary of consolidated our We

Selling, land unconsolidated Park described entities our year. share XX.X% general from was The Venture first decrease result was that quarter Great the reflects reported earnings of the the and our administrative million as $XX.X reduction expenses last Dan to represents quarter commercial which million recognizing call. reduction of headcount net during previously our a a $XX.X same at sale and in Equity earnings our compared primarily the were generated earlier. income from and of

for reimbursement the This as received since have is started or Valencia. part the public certain development we we of and infrastructure have balance for Valencia capitalized includes CFT $XX.X the to of $XX.X interest million our senior from net This Communities million. the million liquidity, our the notes sheet of on Turning reimbursement $X.X inventory quarter costs increased was development our the process in decrease increase District that CFT for at been a Facilities accrued segment. incurred first current and

qualifying more As a the reimbursement. expect we community grows, to and receive are costs incurred,

paid party Venture $XX.X against a in We also Great Gateway interest incentive of our we Venture on our compensation paid and our Distributions including semiannual the in million. from from Park received interest of reimbursement EB-X $XX.X million of interest was related of million notes and our $X.X million received we distribution obligation. $XXX,XXX the and interest $X.X senior

Park As our X-K through filing, agreement on development management compensation renewed monthly Venture a distributions X% Venture equal of payment fee was to The reported to and remains XX/XX/XXXX. -- an recently monthly holders unchanged percent and a base payments base the renewal Great Park to the our by company during term management made compensation with payable Great includes incentive includes interest. any of which the

million million credit cash facility. as No cash of Total outstanding $XXX.X liquidity million of were equivalents under borrowing $XXX end. borrowings of credit capacity $XXX.X December This of was or quarter our is comprised XX. and and at of revolving letters available

four ratio and our Our San debt account stable Valencia, XX.X%. Francisco, Park at to debt-to-total balance into reporting ratio was capitalization company and was The has Commercial. cash after Great capitalization taking XX.X% segments our net

for for in $XXX,XXX quarter segment are results fourth land a closings Segment follows. Valencia. the the no recognized The sale Valencia quarter. loss as were There

prior amounts that collect the $X.X million. of participation homebuilders. from Most this we to However, recorded estimates of changes sales on related the in profit including land variable report consideration did our revenue previously revenue from of segment

revenue as Francisco The offset reassessing $X.X in costs of administrative selling, Segment million was for administrative active million marketing as San that and incurred of costs compensation, development process the the $X.X selling of for were by and our comprised costs San to mostly of support on employee segment and plan is continued loss well the the areas. This segment's a quarter. recognized general focus support general assets. our and comprised loss Francisco approval development

for of million venture's the income Our the reported which Park of generated quarter, by income Great management is net and $X.X operations. our net $XX.X million net of and company segment million from $XX.X comprised income

Five fee which to expected million the monthly $X As fee quarter, million in was it Point relates $XX future non-cash venture estimated during management of and management payments for million in changes the recognized revenue recognized company, payments from of the from which makes when $XX base was distributions. incentive compensation revenue

were revenues as million management for of our primarily of $X.X of intangible cost well team million the development these providing comprised compensation, as million management Offsetting services associated $X.X of expense amortization with expenses $X.X asset. project the

and is of million. of $XXX.X from of fee change of $XX.X million in XX is of being monthly commercial revenues aggregate for This land venture of during accrued these incentive the mostly of of and million future distributions. of in party management $XXX.X expense increase fee SG&A fee purchase million. million $X resulting comprised payments The million quarter. of compensation acres Management Offsetting payments made approximately estimate makes venture's operations cost of related probable expense $X.X comprised the sale million, the $XX.X recognized as were price base sales of a a $XXX revenue land of

interest XX.X% XXX% Great the and Venture of company. management of Park own We the

statements. at method of our Park Great the the equity flows the the consolidated operations investment Venture are of investment Park the the our company's is results under after to Great Great Although quarter. and of Venture, for basis no adjusting assets, with segment equity of Park a full is reports the results reported liabilities, the debt therefore venture not and a of $XXX accounting of difference cash financial million balance cash quarter. $X.X for within Venture million Great The Park million from self-funding the $XX.X had is earnings and operation The end and of

our and the $XXX,XXX the from a income management the provided $X of the the Gateway to million XX% had operation had for balance by and of own management the and Gateway Commercial services a segment, from our $XXX,XXX end This company. We Venture self-funding company. of The we venture quarter. quarter. a is cash Commercial Commercial a loss Moving net included $XXX,XXX of loss Venture of the of XXX% operations the in at

of liabilities for consolidated in statements. in the the the investment the the of the flows equity and venture operations are equity reported of Point's Our Venture is therefore cash under quarter venture financial assets, Five method accounting loss Gateway from not was results and and our Commercial $XXX,XXX.

for With that, I'll turn it over to the questions. operator

Ratner first [Operator Alan Please Instructions] question Associates. with & proceed. Our line comes Zelman the from of

for you, Hi, the kind the you. guys. information. flow How all buildup Good hear afternoon. Thanks for to helpful, of Very are XXXX. cash especially Dan? Good

it's that's think in know I for you've I more information hopefully past. the helpful than provided people.

you obviously fourth the I kind maybe had you of get before guess just sales I drill Clearly, the would quarter land. that. handful flow a better But over of kick move here season. little uptick seems of and starting quarter rates news the weeks. the the improving, to is seasonal in Builder here bit is selling it a into appreciate for that, lot residential details signaled last some environment in the of terms So didn't lower, in of we on normal and to sentiment challenging some happen. continuing think getting quarter appetite builder pretty the was of last the ahead kind like that

builders the the the any wait-and-see selling you curious had market if sidelines the do unfolds? I'm out into since conversations season like maybe back mode year the that you've the builders last to Has of still of land any to figure moving kind there half dabble looking recent back of more with Year? how indication trying been in are after So in feel New kind into they're or

sharpening Alan, still is that's them actually again. of this them were underwriting in in to we it's we pencils last trying are already wrap were that good of conversations year actively and final negotiations actually a kind all call that prior that answer We real number still that that over South, sale of DX pieces builders actually we're that. month. up have we starting and this of year question. the we've is kicked A engaged And one the the had process, with

out XX if will But in numbers, Great jump these doesn't had end. the by think particular. sales inventory what It Great last Park be was year especially out - Park. at about sold Park. at all of Solis that's isn't We Great you the in week left The available

to the early you are not that. as in all we're working a builders talking So it's on all having their available And too start about know, to thinking XXXX. product XXXX

we So, actively but re-underwriting long now. five have question, right answer builders to four or your

there. And so do well we to expect

Great, ahead really - quite didn't helpful. -- go and that's I sorry, I mean,

Alan, I just early and I wait-and-see early we're would more, I'd mean, signs very signs the tell you say so positive. quarter positive. to obviously, positive. are the say, are But signs but next going hopefully

I check quick questions, hopefully in balance I give I'll have in cash past? Great number just you Number through at have end? Great. Did housekeeping might you've we I the the a that's can them. think quickly, number it. ask Park couple do of one, provided the year missed

in the You mean in Great venture? Park the partnership

Yes, is distributions, much after remaining? the how

million. $XXX

Yes, Alan. $XXX million

more the of years? sale. of maybe think the back year distributions after And in of I like the the of cadence the land kind lot about it's last should we half a few or been think

that another think have a half we similarly sale in about this should back of you the if should with year distribution? that land So in XXXX coincide

tied decision as year all at they this made to certainly is sorts have we year hold and on a see conservative I the we is of end But very conscious how the to additional cash land additional partnership anticipate to the sales, yes mean, the that - to out. would I have necessarily Alan year-end don't it as distributions. because

tied I bit like a is - clarity So tied we little as to much moving sales everyone land think were the we're of how necessarily as else, market not are forward. just on

Got it, that makes sense.

to mentioned Francisco here looking question with for San forward Candlestick sounds there. plan so like Another you the move

some cash you And the your to expenses they get flow, forward I'm there's that contemplated that in? we you need through obviously if thinking you get do Is approved with once occur to kick expenses Just have or any look before what once cash guys to be any move going expenses it, assuming book plan to XXXX that flow all like at on there? not, do begin to expectation revenue. to for expect those development development

part your question, And we'll not Well, kick it's any you kind know clarity going have the we first used are expecting those the time, of that and what lot obviously, the XXX we off in expenses first a point closer an Candlesticks to XXX, - getting to you because as to take commercial of it XXXX. but to get off pad the there. more to get to go ballpark, could people that active of relationship be if remember, of in

It's you the the don't just very right bit mislead I to early, from actually that all. at be want to real try estimate but first this to pad projects It's - moment, Freeway. is lot money. be what accessible XXX not little of a that compared would a extraordinary. But to I

that is distribution any on give the just million expect land little it, that those the guidance break that door bit? sales, final $XX That's to about residential cash million And you the that? to of kind can that - Got you question, Is first are additional apartment helpful. coming in half a sales, you okay. you think buildup Can in up said year. I then $XX it of in commercial

- really of market. the distribution it's mean, on actually finished. bottom, Yes, based view we I we an half first at the and I'll in the year are start the expecting a our interim combination of

distributions sales So then working just it's are that combination I mentioned. recoveries, currently it's really a of revenue, operating combination, on obviously reimbursements CFT and and the we

how million of - basket that about you see finally we're it year kind the we basket basket opportunities, that of good within in to feeling tell in so But $XX out, very $XXX settles right visibility this I can't that and first we of And have second. half kind of of the million opportunities.

right. my for I best the all time here. appreciate you with all of Well, luck questions taking thank everything. Perfect, and

Thanks Alan.

of proceed. Please [Ben next comes from Intact line Johnson Our question Management]. with Asset the

Hi today. taking thanks for my questions

Sure. Hi, Ben.

Can you hear me?

you. Thank can. we Ben Yes,

bit more wondering bit could was besides I Great, change little side? there's the what that? can agreement changes management if material added control you Thanks. the there And little why talk about you a talk to and just economic about a

really monthly reimbursement kind last the changed the year, So side extension year the when set from of cost did it from we fee. of we of economic economics a it, is of a to just kind standpoint one kind of management

exactly with there's the return as And And exactly part so our no to earning and is. just years basically it that that. has remained change in That's same. we been two rollover connection preferred added

really and have On that like the that - team it's in really working my a about time. in big senior them partners working actually spent relationship adding the they really that So obviously and really on with very those - and place and just year folks change change spent the we today. that management in the year I've our was control, one the are your actually adding question

things into the an want be that of going working very today is, that of Mike today really they've to together. you we kind hey, to said and Stewart if because engaged speak is opportunity one aren't so how operating sure a or And Dan relationship or we that we've everything we got have good like that -

them. for So really able past of been the we've question. is of to achieve to kind kind what a continuity - keyman They it's of going also the - And because control in continuity really change more also it's and that's want that around year. issue

move kind little freezes slowdown all color. if of up talk and for extra sense. a lot liquidity longer? rates little you of don't maybe and access bit And if bit a to appreciate makes a can that building That more guys a prolonged really Really you about have

line the zero have drawn on that has million we obviously, it. $XXX Well,

we into If market where later going, believe of some the to certainly, doesn't Right As additional be And is wasn't be for now, needs we're really got we opportunity recover revenue year project costs that spent. of about generate liquidity all kind don't XXXX, needed. have although the thoughts we've help we revenue, will be this there materially. that, market reducing the we're we capital communities will out if we and stop there liquidity. very that being an would capital, careful to which clearly it would

Very good. Thank my you very all much for answering questions.

welcome. Thanks You're Ben.

our And Robert Instructions] with from Capital. of line [Operator Heimowitz proceed. the next question comes Concise Please

just wanted Hi. have by really start my and this learned in class much I Lennar at career it, in through I saying working there and you the to so treasury teams. I world started accounting and hardest IR

expect -- with can guest that you to a would homes was through a your build did emphasize that you fee you it to very And on will. now Dan, program. working might don't it. that builders guys build we are they scarce there program guys that This when So prioritize, resources more successful guys you if

we comment? not followed. help on Robert, you what prioritize they are your quite is thinking what last me If there? I'm will, don't

guest were again do you go you you. the program guys where on profits build that don't land good so ahead your if you fee recognize able to purchase and had from Like and a guys builders guys could

have use of fee different take I Thank a extensively And off table. right. career, is nothing I 'XX. All 'XX, it at I my builder to It in a life Okay. good the come you. done That's out certainly, understand. question.

extremely it's model so with. familiar And a I'm

on we We where that familiar haven't move with quite need that's something market seen the certainly with right now something to really we're the could and I'm conversations easily builders, it's based the but us. that having it's moves definitely

great. Okay,

the here? calculations. Next speak potential party you question S&P debt Can in this liability. to tax related on including overhang any is their

I'm to Tax referring are TRA, the the Receivable I think sorry, you Agreement?

Yes.

Yes.

make that I'm sorry, you the have we question -- repeat sure that think question address but the [indiscernible] we to want can answer I to it time, think can yes, I probably by correctly?

it. recognize know treating now their they S&P have as they're associated if calculations, is the this savings still with Yes. don't you'll debt liability you'll saying and tax a on

So just like how should about this. we think

with it. had the the based that is that would obligation clarified we've those Robert, our projected the a our And is after agencies actually conversations TRA ability bonds rating payments to Yes expire. that use on about occur expectation today and

and want we So collect I only bonds ability if saving reiterate the to and our pay benefit the it doesn't - to arises taxes. from affect obligation the

So the to-date, the we paid, we the partners, have would otherwise benefited. way made, the taxes but been prior haven't of is partners paying yet calculation that have because

So you? that help just that - if did

talk be of were got can just seems of stages It to one I own? sites to is Absolutely, more, they year, which this sold. we you about close slated the like lot should ready that all various of home completion the to a them close be or completion

many to have kind of many work banks were or go being we like how they should had builders whether we completely dropped out. were spec liquidity of the the how builders finished, know could or close in finished if process, could to land So lots custom

last Thank my question? you. that's So

moving talk along being all black top once right [stopped that the So South year and sales again got DX We and the last me Robert, first Park. Great and weren't when wet prudent we've had down dry]. let the we've about sand got materializing, we

can lots we quite those complete easily. So

you good there but liquidity lot got we very do - move on open do good of it's place substantial Great about in - in Park kind very everyone to a we're what be all it's in, through and to in that's say, a place but additional partnership. we to community those, forward as we we're And remind good capital just next of we've that it of shape kind the actually to next in that and will in need is So - shape. self-funded the

other actually are Valencia. first Valencia I back storm we have put but in Village, to then ready is - of that and that pay some cut. call kind mass streets what of we drains of in in really everything them They're dries. the more go have that and to of sites get kind you actually structures all the going grading are and Mission still to in out we we early stubbed. then And of And is area which wets when grading] areas sites them are need call we're them back They're [mass go that them the in to and need some there. The go. to parts infill were

at. drains we're we kind But gutted. streets the are we're that's areas next there, are once Storm into where in. The - again, of mass go let's say, grading,

shape but So forward. it little we're also, a in move pretty capital will there we there as good take more

Okay. Thank you.

this you. concludes Thank I'd gentlemen, Hedigan and question-and-answer session. for the the remarks. back to call to turn Dan closing like Ladies

On you. for you look we us joining to we next forward you our of everyone. on call speaking and with management Thank team, quarter. today's Thanks thank behalf

This concludes today's conference.

your disconnect may your for you participation. this You lines at Thank time.