Business Wire | Nov 10, 2020 04:15PM EST

Five Point Holdings, LLC Reports Third Quarter 2020 Results

Nov. 10, 2020

IRVINE, Calif.--(BUSINESS WIRE)--Nov. 10, 2020--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 third quarter 2020 results. Emile Haddad, Chairman and CEO, said, "We are pleased to present our third quarter results where we improved our cash position by $55 million and generated consolidated net income of $36.4 million. We are seeing continued strength in our markets evidenced by the rate of sales at our Great Park Neighborhoods community, the interest from homebuilders in Valencia and the reported home price appreciation in both the Los Angeles County and Orange County markets."

Third Quarter 2020 Consolidated Results

Liquidity and Capital Resources

As of September 30, 2020, total liquidity of $395.2 million was comprised of cash and cash equivalents totaling $270.6 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 September 30, 2020

Revenues. Revenues of $8.4 million for the three months ended September 30, 2020 were primarily generated from management services.

Equity in earnings from unconsolidated entities. Equity in earnings from unconsolidated entities was $52.4 million for the three months ended September 30, 2020, comprised of a $4.2 million loss from our 37.5% percentage interest in the Great Park Venture and earnings of $56.6 million from our 75% interest in the Gateway Commercial Venture.

Selling, general, and administrative. Selling, general, and administrative expenses were $17.7 million for the three months ended September 30, 2020.

Net income. Consolidated net income for the quarter was $36.4 million. The net income attributable to noncontrolling interests totaled $19.5 million, resulting in net income attributable to the Company of $17.0 million.

Segment Results

Valencia Segment (formerly Newhall). Selling, general, and administrative expenses were $2.8 million for the three months ended September 30, 2020.

San Francisco Segment. Selling, general, and administrative expenses were $2.0 million for the three months ended September 30, 2020.

Great Park Segment. The Great Park segment's net loss for the quarter was $10.2 million, which included net income of $1.8 million from management services and a net loss of $12.0 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 $4.2 million for the three months ended September 30, 2020.

Commercial Segment. In August 2020, the Gateway Commercial Venture closed on the sale of two buildings, comprising a total of approximately 660,000 square feet of research and development space currently leased to a subsidiary of Broadcom Inc. for a purchase price of $355.0 million. The sale of the buildings, which had a carrying value of approximately $278.0 million, resulted in a gain of approximately $74.8 million, net of transaction costs. Concurrently, the Gateway Commercial Venture made a debt payment of $245.0 million to its lender and made total distributions to its members of approximately $107.0 million, of which approximately $80.3 million was distributed to us. Segment net income was approximately $75.6 million, which included net income of $0.1 million from management services and net income of $75.5 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 earnings from the Gateway Commercial Venture totaled $56.6 million for the three months ended September 30, 2020.

Conference Call Information

In conjunction with this release, Five Point will host a conference call today, Tuesday, November 10, 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 (866) 248-8441 (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 2148805 The telephonic replay will be available until 11:59 p.m. Eastern Time on November 24, 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(r) in Irvine, Valencia(r) (formerly known as Newhall Ranch(r)) in Los Angeles County, and Candlestick(r) and The San Francisco Shipyard(r) 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 Nine Months Ended September 30, September 30,

2020 2019 2020 2019

REVENUES:

Land sales $ 42 $ 9 $ 17,076 $ 74

Land sales-related 2 229 14 695 party

Managementservices-related 7,999 11,458 22,557 33,689 party

Operating properties 334 318 2,257 3,016

Total revenues 8,377 12,014 41,904 37,474

COSTS AND EXPENSES:

Land sales - - 11,861 -

Management services 6,120 7,699 16,587 22,794

Operating properties 764 1,388 4,408 4,488

Selling, general, and 17,656 25,863 58,594 77,629 administrative

Total costs and 24,540 34,950 91,450 104,911 expenses

OTHER INCOME:

Interest income 71 1,724 1,303 6,494

Gain on settlement ofcontingent - - - 64,870 consideration-relatedparty

Miscellaneous 91 7 267 26

Total other income 162 1,731 1,570 71,390

EQUITY IN EARNINGS(LOSS) FROM 52,423 (1,750 ) 45,417 4,463 UNCONSOLIDATEDENTITIES

INCOME (LOSS) BEFOREINCOME TAX 36,422 (22,955 ) (2,559 ) 8,416 (PROVISION) BENEFIT

INCOME TAX - - - (1,266 ) (PROVISION) BENEFIT

NET INCOME (LOSS) 36,422 (22,955 ) (2,559 ) 7,150

LESS NET INCOME(LOSS) ATTRIBUTABLE 19,458 (12,292 ) (1,349 ) 4,517 TO NONCONTROLLINGINTERESTS

NET INCOME (LOSS)ATTRIBUTABLE TO THE $ 16,964 $ (10,663 ) $ (1,210 ) $ 2,633 COMPANY



NET INCOME (LOSS)ATTRIBUTABLE TO THE COMPANY PER CLASS ASHARE

Basic $ 0.25 $ (0.16 ) $ (0.02 ) $ 0.04

Diluted $ 0.25 $ (0.16 ) $ (0.02 ) $ 0.04

WEIGHTED AVERAGECLASS A SHARES OUTSTANDING

Basic 66,746,065 66,276,694 66,709,190 66,248,431

Diluted 142,866,245 66,276,694 68,848,283 145,456,670

NET INCOME (LOSS)ATTRIBUTABLE TO THE COMPANY PER CLASS BSHARE

Basic and diluted $ 0.00 $ (0.00 ) $ (0.00 ) $ 0.00

WEIGHTED AVERAGECLASS B SHARES OUTSTANDING

Basic 79,233,544 79,275,234 79,233,544 79,204,883

Diluted 79,233,544 79,275,234 79,233,544 79,276,016

FIVE POINT HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

(Unaudited)

September 30, 2020

December 31, 2019

ASSETS

INVENTORIES

$

2,021,155

$

1,889,761

INVESTMENT IN UNCONSOLIDATED ENTITIES

441,737

533,239

PROPERTIES AND EQUIPMENT, NET

33,018

32,312

INTANGIBLE ASSET, NET-RELATED PARTY

73,269

80,350

CASH AND CASH EQUIVALENTS

270,580

346,833

RESTRICTED CASH AND CERTIFICATES OF DEPOSIT

1,330

1,741

RELATED PARTY ASSETS

100,478

97,561

OTHER ASSETS

21,357

22,903

TOTAL

$

2,962,924

$

3,004,700

LIABILITIES AND CAPITAL

LIABILITIES:

Notes payable, net

$

617,198

$

616,046

Accounts payable and other liabilities

138,066

167,711

Related party liabilities

118,897

127,882

Deferred income tax liability, net

11,628

11,628

Payable pursuant to tax receivable agreement

173,248

172,633

Total liabilities

1,059,037

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

575,412

571,532

Retained earnings

41,439

42,844

Accumulated other comprehensive loss

(2,640

)

(2,682

)

Total members' capital

614,211

611,694

Noncontrolling interests

1,264,676

1,272,106

Total capital

1,878,887

1,883,800

TOTAL

$

2,962,924

$

3,004,700

FIVE POINT HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

(Unaudited)

September 30, December 31, 2020 2019

ASSETS

INVENTORIES $ 2,021,155 $ 1,889,761

INVESTMENT IN UNCONSOLIDATED ENTITIES 441,737 533,239

PROPERTIES AND EQUIPMENT, NET 33,018 32,312

INTANGIBLE ASSET, NET-RELATED PARTY 73,269 80,350

CASH AND CASH EQUIVALENTS 270,580 346,833

RESTRICTED CASH AND CERTIFICATES OF DEPOSIT 1,330 1,741

RELATED PARTY ASSETS 100,478 97,561

OTHER ASSETS 21,357 22,903

TOTAL $ 2,962,924 $ 3,004,700



LIABILITIES AND CAPITAL

LIABILITIES:

Notes payable, net $ 617,198 $ 616,046

Accounts payable and other liabilities 138,066 167,711

Related party liabilities 118,897 127,882

Deferred income tax liability, net 11,628 11,628

Payable pursuant to tax receivable agreement 173,248 172,633

Total liabilities 1,059,037 1,095,900



REDEEMABLE NONCONTROLLING INTEREST 25,000 25,000

CAPITAL:

Class A common shares; No par value; Issuedand outstanding: 2020-69,051,284 shares; 2019-68,788,257 shares

Class B common shares; No par value; Issuedand outstanding: 2020-79,233,544 shares; 2019-79,233,544 shares

Contributed capital 575,412 571,532

Retained earnings 41,439 42,844

Accumulated other comprehensive loss (2,640 ) (2,682 )

Total members' capital 614,211 611,694

Noncontrolling interests 1,264,676 1,272,106

Total capital 1,878,887 1,883,800

TOTAL $ 2,962,924 $ 3,004,700

FIVE POINT HOLDINGS, LLC

SUPPLEMENTAL DATA

(In thousands)

(Unaudited)

Liquidity

September 30, 2020

Cash and cash equivalents

$

270,580

Borrowing capacity (1)

124,651

Total liquidity

$

395,231

FIVE POINT HOLDINGS, LLC

SUPPLEMENTAL DATA

(In thousands)

(Unaudited)

Liquidity

September 30, 2020

Cash and cash equivalents $ 270,580

Borrowing capacity (1) 124,651

Total liquidity $ 395,231

(1) As of September 30, 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.

(1) As of September 30, 2020, no amounts were drawn on the Company's $125.0million 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 creditamount.

Debt to Total Capitalization

September 30, 2020

Debt (1)

$

625,000

Total capital

1,878,887

Total capitalization

$

2,503,887

Debt to total capitalization

25.0

%

Debt to Total Capitalization

September 30, 2020

Debt (1) $ 625,000

Total capital 1,878,887

Total capitalization $ 2,503,887

Debt to total capitalization 25.0 %

(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 $94.4 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 and nine months ended September 30, 2020 and 2019.

(1) For purposes of this calculation, debt is not the same as the calculationof "Consolidated Funded Indebtedness" under the Company's revolving creditfacility and Senior Notes indenture, which would include a $94.4 millionrelated party contractual reimbursement obligation. Prior to the second quarterof 2019, the Company presented this calculation inclusive of the reimbursementobligation.

Segment Results

Valencia (formerly Newhall)

The following table summarizes the results of operations of our Valencia segment for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Land sales $ 42 $ 9 $ 17,076 $ 74

Land sales-related party 2 8 14 31

Operating properties 196 134 1,807 2,481

Total revenues 240 151 18,897 2,586

Costs and expenses

Land sales - - 11,861 -

Operating properties 764 1,388 4,408 4,488

Selling, general, and 2,798 3,663 9,244 11,364 administrative

Total costs and expenses 3,562 5,051 25,513 15,852

Other income 91 8 268 29

Segment loss $ (3,231 ) $ (4,892 ) $ (6,348 ) $ (13,237 )

San Francisco

The following table summarizes the results of operations of our San Francisco segment for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Land sales-related $ - $ 221 $ - $ 664 party

Operating property 138 184 450 535

Management - 545 835 1,816 services-related party

Total revenues 138 950 1,285 3,015

Costs and expenses

Management services - 226 488 855

Selling, general, and 1,967 4,386 8,184 14,083 administrative

Total costs and 1,967 4,612 8,672 14,938 expenses

Other income-gain onsettlement ofcontingent - - - 64,870 consideration, relatedparty

Segment (loss) income $ (1,829 ) $ (3,662 ) $ (7,387 ) $ 52,947

Great Park

The following table summarizes the results of operations of our Great Park segment for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Land sales $ 141 $ 36,198 $ 21,962 $ 98,743

Land sales-related party 87 2,438 1,092 132,473

Management services-related 7,895 10,814 21,424 31,647 party

Total revenues 8,123 49,450 44,478 262,863

Costs and expenses

Land sales - 24,518 15,304 153,486

Management services 6,120 7,473 16,099 21,939

Selling, general, and 8,840 9,680 29,572 26,751 administrative

Management fees-related party 3,440 7,825 7,633 24,445

Total costs and expenses 18,400 49,496 68,608 226,621

Interest income 84 1,016 1,210 2,671

Segment (loss) income $ (10,193 ) $ 970 $ (22,920 ) $ 38,913

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 and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands)

Segment net (loss)income from $ (10,193 ) $ 970 $ (22,920 ) $ 38,913 operations

Less net income ofmanagement company 1,775 3,340 5,325 9,708 attributed to theGreat Park segment

Net (loss) income ofthe Great Park (11,968 ) (2,370 ) (28,245 ) 29,205 Venture

The Company's shareof net (loss) income (4,488 ) (889 ) (10,592 ) 10,952 of the Great ParkVenture

Basis differenceaccretion 293 199 (1,204 ) (3,694 ) (amortization)

Other-than-temporary - - (26,851 ) - investment impairment

Equity in (loss)earnings from the $ (4,195 ) $ (690 ) $ (38,647 ) $ 7,258 Great Park Venture

Commercial

The following table summarizes the results of operations of our Commercial segment for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Rental and related income $ 2,935 $ 6,388 $ 15,797 $ 19,492

Rental and related 2,224 2,186 6,344 6,216 income-related party

Property management 104 99 298 226 services-related party

Total revenues 5,263 8,673 22,439 25,934

Costs and expenses

Rental operating expenses 1,275 1,946 4,530 5,094

Interest 1,605 4,249 8,547 12,938

Depreciation 972 2,745 6,327 8,229

Amortization 23 1,032 2,100 3,090

Other expenses 640 14 812 83

Total costs and expenses 4,515 9,986 22,316 29,434

Other income-gain on asset 74,847 - 112,260 - sales, net

Segment income (loss) $ 75,595 $ (1,313 ) $ 112,383 $ (3,500 )

The table below reconciles the Commercial segment results to the equity in earnings (loss) from our investment in the Gateway Commercial Venture that is reflected in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands)

Segment net income $ 75,595 $ (1,313 ) $ 112,383 $ (3,500 ) (loss) from operations

Less net income ofmanagement company 104 99 298 226 attributed to theCommercial segment

Net income (loss) of theGateway Commercial 75,491 (1,412 ) 112,085 (3,726 ) Venture

Equity in earnings(loss) from the Gateway $ 56,618 $ (1,060 ) $ 84,064 $ (2,795 ) Commercial Venture

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