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Five Point Holdings, LLC Reports First Quarter 2020 Results

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 first quarter 2020 results. Emile Haddad, Chairman and CEO, said, “In these unprecedented times, we are thankful that all of our associates are healthy, comforted by the strength of our balance sheet and liquidity, encouraged by the performance of our guest builders, grateful to those who continue investing in our vision, and proud of our team.”

First Quarter 2020 Consolidated Results

Liquidity and Capital Resources

As of March 31, 2020, total liquidity of $372.4 million was comprised of cash and cash equivalents totaling $247.8 million and borrowing availability of $124.7 million under our $125.0 million unsecured revolving credit facility. Total capital was $1.8 billion, reflecting $2.9 billion in assets and $1.1 billion in liabilities and redeemable noncontrolling interests.

Results of Operations for the Three Months Ended March 31, 2020

Revenues. Revenues of $9.2 million for the three months ended March 31, 2020 were primarily generated from management services.

Equity in loss from unconsolidated entities. Equity in loss from unconsolidated entities was $30.9 million for the three months ended March 31, 2020 comprised of a $3.5 million loss from our 37.5% percentage interest in the Great Park Venture and a $0.6 million loss from our 75% interest in the Gateway Commercial Venture. Equity in loss from unconsolidated entities also included the recognition of an other-than-temporary impairment of $26.9 million attributed to our investment in the Great Park Venture.

Selling, general, and administrative. Selling, general, and administrative expenses were $24.6 million for the three months ended March 31, 2020.

Net loss. Consolidated net loss for the quarter was $53.2 million. The net loss attributable to noncontrolling interests totaled $28.4 million, resulting in net loss attributable to the Company of $24.8 million.

Segment Results

Valencia Segment (formerly Newhall). Total segment revenues were $0.8 million for the first quarter of 2020 and were derived from agricultural land leasing and the sale of citrus crops. Selling, general, and administrative expenses were $3.7 million for the three months ended March 31, 2020.

San Francisco Segment. Total segment revenues were $1.0 million for the first quarter of 2020. Revenues during the quarter were mostly attributable to fees generated from management agreements. Selling, general, and administrative expenses were $3.6 million for the three months ended March 31, 2020.

Great Park Segment. Total segment revenues were $29.5 million for the first quarter of 2020. Revenues were mainly attributable to the sale of land entitled for 35 homesites on approximately four acres at the Great Park Neighborhoods. Initial gross proceeds from the sale were $20.3 million representing the base purchase price. The Great Park segment’s net loss for the quarter was $2.5 million, which included net income of $1.8 million from management services and a net loss of $4.3 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 $3.5 million for the three months ended March 31, 2020. During the first quarter of 2020, the Company’s equity in loss from the Great Park Venture also included the recognition of an other-than-temporary impairment of $26.9 million attributed to our investment in the Great Park Venture. The impairment was primarily a result of expected delays in both the timing of land sales to builders and distributions to us causing a decline in the fair value of our investment in the Great Park Venture.

Commercial Segment. Total segment revenues were $8.6 million from tenant leases at the Five Point Gateway Campus and property management services provided by us to the Gateway Commercial Venture during the first quarter of 2020. Segment expenses were mostly comprised of depreciation, amortization and interest expense totaling $7.5 million. Segment net loss was approximately $0.6 million, which included net income of $0.1 million from management services and a net loss of $0.7 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 $0.6 million for the three months ended March 31, 2020.

Conference Call Information

In conjunction with this release, Five Point will host a conference call today, Thursday, May 21, 2020 at 5:00 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) 458-4121 (domestic) or (720) 543-0206 (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 3425685. The telephonic replay will be available until 11:59 p.m. Eastern Time on June 4, 2020.

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 and our Quarterly Reports on Form 10-Q, 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended
March 31,

2020

2019

REVENUES:

Land sales

$

6

$

55

Land sales—related party

10

230

Management services—related party

8,244

11,063

Operating properties

960

1,725

Total revenues

9,220

13,073

COSTS AND EXPENSES:

Land sales

Management services

6,051

7,616

Operating properties

1,945

1,901

Selling, general, and administrative

24,626

25,773

Total costs and expenses

32,622

35,290

OTHER INCOME:

Interest income

1,006

2,454

Gain on settlement of contingent consideration—related party

64,870

Miscellaneous

88

10

Total other income

1,094

67,334

EQUITY IN (LOSS) EARNINGS FROM UNCONSOLIDATED ENTITIES

(30,911

)

8,882

(LOSS) INCOME BEFORE INCOME TAX (PROVISION) BENEFIT

(53,219

)

53,999

INCOME TAX (PROVISION) BENEFIT

(1,266

)

NET (LOSS) INCOME

(53,219

)

52,733

LESS NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(28,413

)

28,925

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY

$

(24,806

)

$

23,808

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY PER CLASS A SHARE

Basic

$

(0.36

)

$

0.35

Diluted

$

(0.37

)

$

0.35

WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING

Basic

66,649,866

66,210,916

Diluted

68,792,585

145,296,469

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY PER CLASS B SHARE

Basic and diluted

$

(0.00

)

$

0.00

WEIGHTED AVERAGE CLASS B SHARES OUTSTANDING

Basic

79,233,544

79,061,835

Diluted

79,233,544

79,275,234

FIVE POINT HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

(Unaudited)

March 31, 2020

December 31, 2019

ASSETS

INVENTORIES

$

1,958,901

$

1,889,761

INVESTMENT IN UNCONSOLIDATED ENTITIES

501,909

533,239

PROPERTIES AND EQUIPMENT, NET

33,071

32,312

INTANGIBLE ASSET, NET—RELATED PARTY

77,990

80,350

CASH AND CASH EQUIVALENTS

247,754

346,833

RESTRICTED CASH AND CERTIFICATES OF DEPOSIT

1,742

1,741

RELATED PARTY ASSETS

95,148

97,561

OTHER ASSETS

20,908

22,903

TOTAL

$

2,937,423

$

3,004,700

LIABILITIES AND CAPITAL

LIABILITIES:

Notes payable, net

$

616,430

$

616,046

Accounts payable and other liabilities

161,665

167,711

Related party liabilities

126,958

127,882

Deferred income tax liability, net

11,628

11,628

Payable pursuant to tax receivable agreement

173,248

172,633

Total liabilities

1,089,929

1,095,900

REDEEMABLE NONCONTROLLING INTEREST

25,000

25,000

CAPITAL:

Class A common shares; No par value; Issued and outstanding: 2020—69,061,898 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

569,772

571,532

Retained earnings

17,843

42,844

Accumulated other comprehensive loss

(2,671

)

(2,682

)

Total members’ capital

584,944

611,694

Noncontrolling interests

1,237,550

1,272,106

Total capital

1,822,494

1,883,800

TOTAL

$

2,937,423

$

3,004,700

FIVE POINT HOLDINGS, LLC

SUPPLEMENTAL DATA

(In thousands)

(Unaudited)

Liquidity

March 31, 2020

Cash and cash equivalents

$

247,754

Borrowing capacity (1)

124,651

Total liquidity

$

372,405

(1)

As of March 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 are issued and outstanding under the revolving credit facility, thus reducing the available capacity by the outstanding letters of credit amount.

Debt to Total Capitalization

March 31, 2020

Debt (1)

$

625,000

Total capital

1,822,494

Total capitalization

$

2,447,494

Debt to total capitalization

25.5

%

(1)

For purposes of this calculation, debt is not the same as the calculation of “Consolidated Funded Indebtedness” under the Company’s revolving credit facility and Senior Notes indenture, which would include a $101.8 million related party contractual reimbursement obligation. Prior to the second quarter of 2019, the Company presented this calculation inclusive of the reimbursement obligation.

Segment Results

Valencia (formerly Newhall)

The following table summarizes the results of operations of our Valencia segment for the three months ended March 31, 2020 and 2019.

Three Months Ended
March 31,

2020

2019

(in thousands)

Statement of Operations Data

Revenues

Land sales

$

6

$

55

Land sales—related party

10

9

Operating properties

780

1,551

Total revenues

796

1,615

Costs and expenses

Land sales

Operating properties

1,945

1,901

Selling, general, and administrative

3,733

3,809

Total costs and expenses

5,678

5,710

Other income

88

11

Segment loss

$

(4,794

)

$

(4,084

)

San Francisco

The following table summarizes the results of operations of our San Francisco segment for the three months ended March 31, 2020 and 2019.

Three Months Ended
March 31,

2020

2019

(in thousands)

Statement of Operations Data

Revenues

Land sales—related party

$

$

221

Operating property

180

174

Management services—related party

795

698

Total revenues

975

1,093

Costs and expenses

Land sales

Management services

475

377

Selling, general, and administrative

3,592

4,512

Total costs and expenses

4,067

4,889

Other income—gain on settlement of contingent consideration, related party

64,870

Segment (loss) income

$

(3,092

)

$

61,074

Great Park

The following table summarizes the results of operations of our Great Park segment for the three months ended March 31, 2020 and 2019.

Three Months Ended
March 31,

2020

2019

(in thousands)

Statement of Operations Data

Revenues

Land sales

$

21,475

$

31,466

Land sales—related party

701

127,697

Management services—related party

7,352

10,396

Total revenues

29,528

169,559

Costs and expenses

Land sales

15,304

107,819

Management services

5,576

7,239

Selling, general, and administrative

11,948

6,575

Management fees—related party

153

8,217

Total costs and expenses

32,981

129,850

Interest income

911

559

Segment (loss) income

$

(2,542

)

$

40,268

The table below reconciles the Great Park segment results to the equity in (loss) earnings from our investment in the Great Park Venture that is reflected in the condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019.

Three Months Ended
March 31,

2020

2019

(in thousands)

Segment net (loss) income from operations

$

(2,542

)

$

40,268

Less net income of management company attributed to the Great Park segment

1,776

3,157

Net (loss) income of Great Park Venture

(4,318

)

37,111

The Company’s share of net (loss) income of the Great Park Venture

(1,619

)

13,917

Basis difference amortization

(1,890

)

(4,473

)

Other-than-temporary investment impairment

(26,851

)

Equity in (loss) earnings from the Great Park Venture

$

(30,360

)

$

9,444

Commercial

The following table summarizes the results of operations of our Commercial segment for the three months ended March 31, 2020 and 2019.

Three Months Ended
March 31,

2020

2019

(in thousands)

Statement of Operations Data

Revenues

Rental and related income

$

6,415

$

6,391

Rental and related income—related party

2,061

1,989

Property management services—related party

97

(31

)

Total revenues

8,573

8,349

Costs and expenses

Rental operating expenses

1,636

1,564

Interest

3,711

4,331

Depreciation

2,743

2,177

Amortization

1,038

1,029

Other expenses

83

29

Total costs and expenses

9,211

9,130

Segment loss

$

(638

)

$

(781

)

The table below reconciles the Commercial segment results to the equity in loss from our investment in the Gateway Commercial Venture that is reflected in the condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019.

Three Months Ended
March 31,

2020

2019

(in thousands)

Segment net loss from operations

$

(638

)

$

(781

)

Less net income (loss) of management company attributed to the Commercial segment

97

(31

)

Net loss of Gateway Commercial Venture

(735

)

(750

)

Equity in loss from the Gateway Commercial Venture

$

(551

)

$

(562

)

Contacts:

Investor Relations:
Bob Wetenhall, 949-349-1087
bob.wetenhall@fivepoint.com
or
Media:
Steve Churm, 949-349-1034
steve.churm@fivepoint.com

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