Five Point Holdings, LLC Reports Fourth Quarter and Year-End 2020 Results
03/16/2021 - 05:20 PM
Five Point Holdings, LLC (“Five Point” or the “Company”) (NYSE:FPH), an owner and developer of large mixed-use, master-planned communities in California, today reported its fourth quarter 2020 results. Emile Haddad, Chairman and CEO, said, “We are very grateful to end a very unusual year with the results we are presenting today. Our focus shifted a year ago to strengthening our balance sheet, preserving the value of our irreplaceable assets, protecting the well being of our associates, and helping our communities. We are proud that we accomplished our goals. We have already kicked off the new year with a lot of momentum driven by the strength of the housing market and the migration of homebuyers to the type of communities we build.”
Fourth Quarter 2020 Consolidated Results
Liquidity and Capital Resources
As of December 31, 2020, total liquidity of $422.8 million was comprised of cash and cash equivalents totaling $298.1 million and borrowing availability of $124.7 million under our $125.0 million unsecured revolving credit facility. Total capital was $1.9 billion , reflecting $3.0 billion in assets and $1.1 billion in liabilities and redeemable noncontrolling interests.
Results of Operations for the Three Months Ended December 31, 2020
Revenues. Revenues of $111.7 million for the three months ended December 31, 2020 primarily consisted of $105.5 million in revenue recognized from land sales at our Valencia segment.
Equity in loss from unconsolidated entities. Equity in loss from unconsolidated entities was $3.1 million for the three months ended December 31, 2020, comprised of a $1.3 million loss from our 37.5% percentage interest in the Great Park Venture, loss of $0.2 million from our 75% interest in the Gateway Commercial Venture and $1.6 million loss from our 10% interest in the Valencia Landbank Venture as a result of intra-entity profit elimination due to the Valencia Landbank Venture purchasing homesites at Valencia.
Selling, general, and administrative. Selling, general, and administrative expenses were $24.9 million for the three months ended December 31, 2020.
Net income. Consolidated net income for the quarter was $3.7 million . Income before income tax provision was $5.4 million with income attributable to noncontrolling interests totaling $2.9 million . Net income attributable to the Company was $0.8 million after recognition of an income tax provision of $1.7 million . Net income attributable to noncontrolling interests represents the portion of income allocated to related party partners and members that hold units of the operating company and the San Francisco Venture. Holders of units of the operating company and the San Francisco Venture can redeem their interests for our Class A common shares on a one-for-one basis or, at our election, cash. In connection with any redemption or exchange, our ownership of our operating subsidiaries will increase and reduce the amount of income allocated to noncontrolling interests.
Segment Results
Valencia Segment (formerly Newhall). Total segment revenues were $106.0 million for the fourth quarter of 2020. Revenues were mainly attributable to the sale of land entitled for 442 homesites on approximately 45 acres in Valencia. Initial gross proceeds from the sale were $102.2 million , representing the base purchase price. Cost of land sales was $73.9 million , or 70.0% of total land sales and land sales-related party revenues for the fourth quarter. In the fourth quarter, 210 of the homesites sold were purchased by the Valencia Landbank Venture, in which we own a 10% equity interest. Revenues associated with these closings are reported as land sales-related party. When we sell land to the Valencia Landbank Venture, we eliminate our pro-rata share of the intra-entity profits generated from the sale through earnings (loss) from unconsolidated entities until the land is sold by the Valencia Landbank Venture to third party homebuilders. Selling, general, and administrative expenses were $2.4 million for the three months ended December 31, 2020.
San Francisco Segment. Selling, general, and administrative expenses were $3.1 million for the three months ended December 31, 2020.
Great Park Segment. The Great Park segment’s net income for the quarter was $0.4 million , which included net income of $1.6 million from management services and a net loss of $1.2 million attributed to the Great Park Venture. We do not include the Great Park Venture as a consolidated subsidiary in our consolidated financial statements but rather account for it as an equity method investee. After adjusting to account for a difference in investment basis, the Company’s equity in loss from the Great Park Venture was $1.3 million for the three months ended December 31, 2020.
Commercial Segment. Segment net loss was approximately $0.1 million , which included net income of $0.1 million from management services and a net loss of $0.2 million attributed to the Gateway Commercial Venture. We do not include the Gateway Commercial Venture as a consolidated subsidiary in our consolidated financial statements but rather account for it as an equity method investee. Our share of equity in loss from the Gateway Commercial Venture totaled $0.2 million for the three months ended December 31, 2020.
Conference Call Information
In conjunction with this release, Five Point will host a conference call on Wednesday, March 17, 2021 at 2:00 pm Eastern Time. Emile Haddad, President and Chief Executive Officer, and Erik Higgins, Vice President and Chief Financial Officer, will host the call. Interested investors and other parties can listen to a live Internet audio webcast of the conference call that will be available on the Five Point website at ir.fivepoint.com. The conference call can also be accessed by dialing (800) 430-8332 (domestic) or (720) 452-9102 (international). A telephonic replay will be available starting approximately two hours after the end of the call by dialing (844) 512-2921, or for international callers, (412) 317-6671. The passcode for the live call and the replay is 1398225. The telephonic replay will be available until 11:59 p.m. Eastern Time on March 31, 2021.
About Five Point
Five Point, headquartered in Irvine, California, designs and develops large mixed-use, master-planned communities in Orange County, Los Angeles County, and San Francisco County that combine residential, commercial, retail, educational, and recreational elements with public amenities, including civic areas for parks and open space. Five Point’s communities include the Great Park Neighborhoods® in Irvine, Valencia® (formerly known as Newhall Ranch® ) in Los Angeles County, and Candlestick® and The San Francisco Shipyard® in the City of San Francisco. These communities are designed to include approximately 40,000 residential homes and approximately 23 million square feet of commercial space.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “would,” “result” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. This press release may contain forward-looking statements regarding: our expectations of our future revenues, costs and financial performance; future demographics and market conditions in the areas where our communities are located; the outcome of pending litigation and its effect on our operations; the timing of our development activities; and the timing of future real estate purchases or sales. We caution you that any forward-looking statements included in this press release are based on our current views and information currently available to us. Forward-looking statements are subject to risks, trends, uncertainties and factors that are beyond our control. Some of these risks and uncertainties are described in more detail in our filings with the SEC, including our Annual Report on Form 10-K, under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you therefore against relying on any of these forward-looking statements. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. They are based on estimates and assumptions only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law.
FIVE POINT HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
REVENUES:
Land sales
$
52,322
$
139,946
$
69,398
$
140,020
Land sales—related party
53,205
228
53,219
923
Management services—related party
5,575
5,891
28,132
39,580
Operating properties
613
841
2,870
3,857
Total revenues
111,715
146,906
153,619
184,380
COSTS AND EXPENSES:
Land sales
73,892
97,113
85,753
97,113
Management services
3,899
5,698
20,486
28,492
Operating properties
719
1,077
5,127
5,565
Selling, general, and administrative
24,910
25,957
83,504
103,586
Total costs and expenses
103,420
129,845
194,870
234,756
OTHER INCOME:
Interest income
66
1,350
1,369
7,844
Gain on settlement of contingent consideration—related party
—
—
—
64,870
Miscellaneous
89
22
356
48
Total other income
155
1,372
1,725
72,762
EQUITY IN (LOSS) EARNINGS FROM UNCONSOLIDATED ENTITIES
(3,053
)
(2,136
)
42,364
2,327
INCOME BEFORE INCOME TAX PROVISION
5,397
16,297
2,838
24,713
INCOME TAX PROVISION
(1,744
)
(1,179
)
(1,744
)
(2,445
)
NET INCOME
3,653
15,118
1,094
22,268
LESS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
2,871
8,718
1,522
13,235
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
$
782
$
6,400
$
(428
)
$
9,033
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY PER CLASS A SHARE
Basic
$
0.01
$
0.09
$
(0.01
)
$
0.13
Diluted
$
0.01
$
0.09
$
(0.01
)
$
0.13
WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING
Basic
66,760,897
66,302,138
66,722,187
66,261,968
Diluted
142,881,077
145,596,608
69,000,096
145,491,898
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY PER CLASS B SHARE
Basic and diluted
$
0.00
$
0.00
$
(0.00
)
$
0.00
WEIGHTED AVERAGE CLASS B SHARES OUTSTANDING
Basic and diluted
79,233,544
79,269,524
79,233,544
79,221,176
FIVE POINT HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
(Unaudited)
December 31, 2020
December 31, 2019
ASSETS
INVENTORIES
$
1,990,859
$
1,889,761
INVESTMENT IN UNCONSOLIDATED ENTITIES
442,850
533,239
PROPERTIES AND EQUIPMENT, NET
32,769
32,312
INTANGIBLE ASSET, NET—RELATED PARTY
71,747
80,350
CASH AND CASH EQUIVALENTS
298,144
346,833
RESTRICTED CASH AND CERTIFICATES OF DEPOSIT
1,330
1,741
RELATED PARTY ASSETS
103,681
97,561
OTHER ASSETS
20,605
22,903
TOTAL
$
2,961,985
$
3,004,700
LIABILITIES AND CAPITAL
LIABILITIES:
Notes payable, net
$
617,581
$
616,046
Accounts payable and other liabilities
135,331
167,711
Related party liabilities
113,149
127,882
Deferred income tax liability, net
12,578
11,628
Payable pursuant to tax receivable agreement
173,248
172,633
Total liabilities
1,051,887
1,095,900
REDEEMABLE NONCONTROLLING INTEREST
25,000
25,000
CAPITAL:
Class A common shares; No par value; Issued and outstanding: 2020—69,051,284 shares; 2019—68,788,257 shares
Class B common shares; No par value; Issued and outstanding: 2020—79,233,544 shares; 2019—79,233,544 shares
Contributed capital
578,278
571,532
Retained earnings
42,221
42,844
Accumulated other comprehensive loss
(2,833
)
(2,682
)
Total members’ capital
617,666
611,694
Noncontrolling interests
1,267,432
1,272,106
Total capital
1,885,098
1,883,800
TOTAL
$
2,961,985
$
3,004,700
FIVE POINT HOLDINGS, LLC
SUPPLEMENTAL DATA
(In thousands)
(Unaudited)
Liquidity
December 31, 2020
Cash and cash equivalents
$
298,144
Borrowing capacity (1)
124,651
Total liquidity
$
422,795
(1)
As of December 31, 2020, no amounts were drawn on the Company’s $125.0 million revolving credit facility; however, letters of credit of approximately $0.3 million were issued and outstanding under the revolving credit facility, thus reducing the available capacity by the outstanding letters of credit amount.
Debt to Total Capitalization and Net Debt to Total Capitalization
December 31, 2020
Debt (1)
$
625,000
Total capital
1,885,098
Total capitalization
$
2,510,098
Debt to total capitalization
24.9
%
Debt (1)
$
625,000
Less: Cash and cash equivalents
298,144
Net debt
326,856
Total capital
1,885,098
Total net capitalization
$
2,211,954
Net debt to total capitalization (2)
14.8
%
(1)
For purposes of this calculation, debt is the amount due on the Company’s notes payable before offsetting for capitalized deferred financing costs.
(2)
Net debt to total capitalization is a non-GAAP financial measure defined as net debt (debt less cash and cash equivalents) divided by total net capitalization (net debt plus total capital). The Company believes the ratio of net debt to total capitalization is a relevant and a useful financial measure to investors in understanding the leverage employed in the Company’s operations. However, because net debt to total capitalization is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement the Company's GAAP results.
Segment Results
The following tables reconcile the results of operations of our segments to our consolidated results for the three and twelve months ended December 31, 2020 (in thousands):
Three Months Ended December 31, 2020
Valencia
San Francisco
Great Park
Commercial
Total reportable
segments
Corporate and
unallocated
Total under
management
Removal of
unconsolidated
entities
Total
consolidated
REVENUES:
Land sales
$
52,322
$
—
$
203
$
—
$
52,525
$
—
$
52,525
$
(203
)
$
52,322
Land sales—related party
53,205
—
1,570
—
54,775
—
54,775
(1,570
)
53,205
Management services—related party
—
—
5,476
99
5,575
—
5,575
—
5,575
Operating properties
468
145
—
2,100
2,713
—
2,713
(2,100
)
613
Total revenues
105,995
145
7,249
2,199
115,588
—
115,588
(3,873
)
111,715
COSTS AND EXPENSES:
Land sales
73,892
—
—
—
73,892
—
73,892
—
73,892
Management services
—
—
3,899
—
3,899
—
3,899
—
3,899
Operating properties
719
—
—
817
1,536
—
1,536
(817
)
719
Selling, general, and administrative
2,385
3,113
6,251
1,213
12,962
19,412
32,374
(7,464
)
24,910
Management fees—related party
—
—
(3,255
)
—
(3,255
)
—
(3,255
)
3,255
—
Total costs and expenses
76,996
3,113
6,895
2,030
89,034
19,412
108,446
(5,026
)
103,420
OTHER INCOME (EXPENSE):
Interest income
22
—
62
—
84
44
128
(62
)
66
Interest expense
—
—
—
(310
)
(310
)
—
(310
)
310
—
Miscellaneous
89
—
—
—
89
—
89
—
89
Total other income (expense)
111
—
62
(310
)
(137
)
44
(93
)
248
155
EQUITY IN LOSS FROM UNCONSOLIDATED ENTITIES
(1,569
)
—
—
—
(1,569
)
—
(1,569
)
(1,484
)
(3,053
)
SEGMENT PROFIT (LOSS)/INCOME (LOSS) BEFORE INCOME TAX PROVISION
27,541
(2,968
)
416
(141
)
24,848
(19,368
)
5,480
(83
)
5,397
INCOME TAX PROVISION
—
—
—
—
—
(1,744
)
(1,744
)
—
(1,744
)
SEGMENT PROFIT (LOSS)/NET INCOME (LOSS)
$
27,541
$
(2,968
)
$
416
$
(141
)
$
24,848
$
(21,112
)
$
3,736
$
(83
)
$
3,653
Twelve Months Ended December 31, 2020
Valencia
San Francisco
Great Park
Commercial
Total reportable
segments
Corporate and
unallocated
Total under
management
Removal of
unconsolidated
entities
Total
consolidated
REVENUES:
Land sales
$
69,398
$
—
$
22,165
$
—
$
91,563
$
—
$
91,563
$
(22,165
)
$
69,398
Land sales—related party
53,219
—
2,662
—
55,881
—
55,881
(2,662
)
53,219
Management services—related party
—
835
26,900
397
28,132
—
28,132
—
28,132
Operating properties
2,275
595
—
24,241
27,111
—
27,111
(24,241
)
2,870
Total revenues
124,892
1,430
51,727
24,638
202,687
—
202,687
(49,068
)
153,619
COSTS AND EXPENSES:
Land sales
85,753
—
15,304
—
101,057
—
101,057
(15,304
)
85,753
Management services
—
488
19,998
—
20,486
—
20,486
—
20,486
Operating properties
5,127
—
—
5,347
10,474
—
10,474
(5,347
)
5,127
Selling, general, and administrative
11,629
11,297
35,823
9,978
68,727
60,578
129,305
(45,801
)
83,504
Management fees—related party
—
—
4,378
—
4,378
—
4,378
(4,378
)
—
Total costs and expenses
102,509
11,785
75,503
15,325
205,122
60,578
265,700
(70,830
)
194,870
OTHER INCOME (EXPENSE):
Interest income
23
—
1,272
—
1,295
1,346
2,641
(1,272
)
1,369
Interest expense
—
—
—
(8,857
)
(8,857
)
—
(8,857
)
8,857
—
Loss on extinguishment of debt
—
—
—
(474
)
(474
)
—
(474
)
474
—
Gain on asset sales, net
—
—
—
112,260
112,260
—
112,260
(112,260
)
—
Miscellaneous
356
—
—
—
356
—
356
—
356
Total other income (expense)
379
—
1,272
102,929
104,580
1,346
105,926
(104,201
)
1,725
EQUITY IN (LOSS) EARNINGS FROM UNCONSOLIDATED ENTITIES
(1,569
)
—
—
—
(1,569
)
—
(1,569
)
43,933
42,364
SEGMENT PROFIT (LOSS)/INCOME (LOSS) BEFORE INCOME TAX PROVISION
21,193
(10,355
)
(22,504
)
112,242
100,576
(59,232
)
41,344
(38,506
)
2,838
INCOME TAX PROVISION
—
—
—
—
—
(1,744
)
(1,744
)
—
(1,744
)
SEGMENT PROFIT (LOSS)/NET INCOME (LOSS)
$
21,193
$
(10,355
)
$
(22,504
)
$
112,242
$
100,576
$
(60,976
)
$
39,600
$
(38,506
)
$
1,094
The table below reconciles the Great Park segment results to the equity in loss from our investment in the Great Park Venture that is reflected in the consolidated statements of operations for the three and twelve months ended December 31, 2020:
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2020
(in thousands)
Segment profit (loss) from operations
$
416
$
(22,504
)
Less net income of management company attributed to the Great Park segment
1,577
6,902
Net loss of the Great Park Venture
(1,161
)
(29,406
)
The Company’s share of net loss of the Great Park Venture
(435
)
(11,027
)
Basis difference amortization
(869
)
(2,073
)
Other-than-temporary investment impairment
—
(26,851
)
Equity in loss from the Great Park Venture
$
(1,304
)
$
(39,951
)
The table below reconciles the Commercial segment results to the equity in (loss) earnings from our investment in the Gateway Commercial Venture that is reflected in the consolidated statements of operations for the three and twelve months ended December 31, 2020:
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2020
(in thousands)
Segment (loss) profit from operations
$
(141
)
$
112,242
Less net income of management company attributed to the Commercial segment
99
397
Net (loss) income of the Gateway Commercial Venture
(240
)
111,845
Equity in (loss) earnings from the Gateway Commercial Venture
$
(180
)
$
83,884
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