Business Wire | Aug 13, 2020 04:15PM EDT

Five Point Holdings, LLC Reports Second Quarter 2020 Results

Aug. 13, 2020

IRVINE, Calif.--(BUSINESS WIRE)--Aug. 13, 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 second quarter 2020 results. Emile Haddad, Chairman and CEO, said, "While we remain cautious about current market conditions, our strong balance sheet and liquidity position give us confidence, and we are encouraged by the positive sentiment of homebuilders and the consistent pace of home sales at our Great Park Neighborhoods community. The recent commercial sales at the Five Point Gateway Campus are strong evidence of the value we are creating within our communities."

Second Quarter 2020 Consolidated Results

Liquidity and Capital Resources

As of June 30, 2020, total liquidity of $339.7 million was comprised of cash and cash equivalents totaling $215.1 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 June 30, 2020

Revenues. Revenues of $24.3 million for the three months ended June 30, 2020 were primarily generated from land sales at our Valencia segment.

Equity in earnings from unconsolidated entities. Equity in earnings from unconsolidated entities was $23.9 million for the three months ended June 30, 2020, comprised of a $4.1 million loss from our 37.5% percentage interest in the Great Park Venture and earnings of $28.0 million from our 75% interest in the Gateway Commercial Venture.

Selling, general, and administrative. Selling, general, and administrative expenses were $16.3 million for the three months ended June 30, 2020.

Net income. Consolidated net income for the quarter was $14.2 million. The net income attributable to noncontrolling interests totaled $7.6 million, resulting in net income attributable to the Company of $6.6 million.

Segment Results

Valencia Segment (formerly Newhall). Total segment revenues were $17.9 million for the second quarter of 2020. Revenues were mainly attributable to the sale of land entitled for 70 homesites on approximately seven acres in Valencia. The base purchase price was $16.6 million and the gross margin was approximately 30%. Selling, general, and administrative expenses were $2.7 million for the three months ended June 30, 2020.

San Francisco Segment. Selling, general, and administrative expenses were $2.6 million for the three months ended June 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 $4.1 million for the three months ended June 30, 2020.

Commercial Segment. In May 2020, the Gateway Commercial Venture closed on the sale of approximately 11 acres of land and an approximately 189,000 square foot building to City of Hope for a purchase price of $108.0 million. The sale of this land and building, which had a carrying value of approximately $67.5 million, resulted in a gain of approximately $37.4 million, net of transaction costs. Concurrently, the Gateway Commercial Venture made a debt payment of $30.0 million to its lender and made total distributions to its members of approximately $75.0 million, of which approximately $56.3 million was distributed to us. Segment net income was approximately $37.4 million, which included net income of $0.1 million from management services and net income of $37.3 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 $28.0 million for the three months ended June 30, 2020.

Conference Call Information

In conjunction with this release, Five Point will host a conference call today, Thursday, August 13, 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) 437-2398 (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 6656122. The telephonic replay will be available until 11:59 p.m. Eastern Time on August 27, 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 Six Months Ended June 30, June 30,

2020 2019 2020 2019

REVENUES:

Land sales $ 17,028 $ 10 $ 17,034 $ 65

Land sales-related 2 236 12 466 party

Managementservices-related 6,314 11,168 14,558 22,231 party

Operating properties 963 973 1,923 2,698

Total revenues 24,307 12,387 33,527 25,460

COSTS AND EXPENSES:

Land sales 11,861 - 11,861 -

Management services 4,416 7,479 10,467 15,095

Operating properties 1,699 1,199 3,644 3,100

Selling, general, and 16,312 25,993 40,938 51,766 administrative

Total costs and 34,288 34,671 66,910 69,961 expenses

OTHER INCOME:

Interest income 226 2,316 1,232 4,770

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

Miscellaneous 88 9 176 19

Total other income 314 2,325 1,408 69,659

EQUITY IN EARNINGS(LOSS) FROM 23,905 (2,669 ) (7,006 ) 6,213 UNCONSOLIDATEDENTITIES

INCOME (LOSS) BEFOREINCOME TAX 14,238 (22,628 ) (38,981 ) 31,371 (PROVISION) BENEFIT

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

NET INCOME (LOSS) 14,238 (22,628 ) (38,981 ) 30,105

LESS NET INCOME(LOSS) ATTRIBUTABLE 7,606 (12,116 ) (20,807 ) 16,809 TO NONCONTROLLINGINTERESTS

NET INCOME (LOSS)ATTRIBUTABLE TO THE $ 6,632 $ (10,512 ) $ (18,174 ) $ 13,296 COMPANY



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

Basic $ 0.10 $ (0.16 ) $ (0.27 ) $ 0.19

Diluted $ 0.10 $ (0.16 ) $ (0.27 ) $ 0.18

WEIGHTED AVERAGECLASS A SHARES OUTSTANDING

Basic 66,731,233 66,256,961 66,690,550 66,234,066

Diluted 142,851,412 66,256,961 68,854,356 145,403,189

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 79,169,124

Diluted 79,233,544 79,275,234 79,233,544 79,275,824

FIVE POINT HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

(Unaudited)

June 30, 2020 December 31, 2019

ASSETS

INVENTORIES $ 1,978,879 $ 1,889,761

INVESTMENT IN UNCONSOLIDATED ENTITIES 469,564 533,239

PROPERTIES AND EQUIPMENT, NET 33,274 32,312

INTANGIBLE ASSET, NET-RELATED PARTY 75,629 80,350

CASH AND CASH EQUIVALENTS 215,085 346,833

RESTRICTED CASH AND CERTIFICATES OF DEPOSIT 1,742 1,741

RELATED PARTY ASSETS 97,373 97,561

OTHER ASSETS 36,757 22,903

TOTAL $ 2,908,303 $ 3,004,700



LIABILITIES AND CAPITAL

LIABILITIES:

Notes payable, net $ 616,814 $ 616,046

Accounts payable and other liabilities 122,262 167,711

Related party liabilities 119,759 127,882

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

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

Total liabilities 1,043,711 1,095,900



REDEEMABLE NONCONTROLLING INTEREST 25,000 25,000

CAPITAL:

Class A common shares; No par value; Issued andoutstanding: 2020-69,056,591 shares; 2019-68,788,257 shares

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

Contributed capital 572,587 571,532

Retained earnings 24,475 42,844

Accumulated other comprehensive loss (2,656 ) (2,682 )

Total members' capital 594,406 611,694

Noncontrolling interests 1,245,186 1,272,106

Total capital 1,839,592 1,883,800

TOTAL $ 2,908,303 $ 3,004,700

FIVE POINT HOLDINGS, LLC

SUPPLEMENTAL DATA

(In thousands)

(Unaudited)

Liquidity

June 30, 2020

Cash and cash equivalents $ 215,085

Borrowing capacity (1) 124,651

Total liquidity $ 339,736

As of June 30, 2020, no amounts were drawn on the Company's $125.0 million revolving credit facility; however, letters of credit of approximately $0.3(1) 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

June 30, 2020

Debt (1) $ 625,000

Total capital 1,839,592

Total capitalization $ 2,464,592

Debt to total capitalization 25.4 %

For purposes of this calculation, debt is not the same as the calculation of "Consolidated Funded Indebtedness" under the Company's revolving credit(1) facility and Senior Notes indenture, which would include a $95.0 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 six months ended June 30, 2020 and 2019.

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Land sales $ 17,028 $ 10 $ 17,034 $ 65

Land sales-related party 2 14 12 23

Operating properties 831 796 1,611 2,347

Total revenues 17,861 820 18,657 2,435

Costs and expenses

Land sales 11,861 - 11,861 -

Operating properties 1,699 1,199 3,644 3,100

Selling, general, and 2,713 3,892 6,446 7,701 administrative

Total costs and expenses 16,273 5,091 21,951 10,801

Other income 89 10 177 21

Segment income (loss) $ 1,677 $ (4,261 ) $ (3,117 ) $ (8,345 )

San Francisco

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

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Land sales-related party $ - $ 222 $ - $ 443

Operating property 132 177 312 351

Management services-related 40 573 835 1,271party

Total revenues 172 972 1,147 2,065

Costs and expenses

Management services 13 252 488 629

Selling, general, and 2,625 5,185 6,217 9,697administrative

Total costs and expenses 2,638 5,437 6,705 10,326

Other income-gain on settlementof contingent consideration, - - - 64,870related party

Segment (loss) income $ (2,466 ) $ (4,465 ) $ (5,558 ) $ 56,609

Great Park

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

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Land sales $ 346 $ 31,079 $ 21,821 $ 62,545

Land sales-related party 304 2,338 1,005 130,035

Management services-related 6,177 10,437 13,529 20,833party

Total revenues 6,827 43,854 36,355 213,413

Costs and expenses

Land sales - 21,149 15,304 128,968

Management services 4,403 7,227 9,979 14,466

Selling, general, and 8,784 10,496 20,732 17,071administrative

Management fees-related party 4,040 8,403 4,193 16,620

Total costs and expenses 17,227 47,275 50,208 177,125

Interest income 215 1,096 1,126 1,655

Segment (loss) income $ (10,185 ) $ (2,325 ) $ (12,727 ) $ 37,943

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 six months ended June 30, 2020 and 2019.

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(in thousands)

Segment net (loss) income $ (10,185 ) $ (2,325 ) $ (12,727 ) $ 37,943 from operations

Less net income ofmanagement company 1,774 3,211 3,550 6,368 attributed to the GreatPark segment

Net (loss) income of Great (11,959 ) (5,536 ) (16,277 ) 31,575 Park Venture

The Company's share of net(loss) income of the Great (4,485 ) (2,076 ) (6,104 ) 11,841 Park Venture

Basis difference accretion 393 580 (1,497 ) (3,893 )(amortization)

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

Equity in (loss) earnings $ (4,092 ) $ (1,496 ) $ (34,452 ) $ 7,948 from the Great Park Venture

Commercial

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

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(in thousands)

Statement of Operations Data

Revenues

Rental and related income $ 6,447 $ 6,713 $ 12,862 $ 13,104

Rental and related income-related 2,059 2,041 4,120 4,030 party

Property management 97 158 194 127 services-related party

Total revenues 8,603 8,912 17,176 17,261

Costs and expenses

Rental operating expenses 1,619 1,584 3,255 3,148

Interest 3,231 4,358 6,942 8,689

Depreciation 2,612 3,307 5,355 5,484

Amortization 1,038 1,029 2,077 2,058

Other expenses 90 40 172 69

Total costs and expenses 8,590 10,318 17,801 19,448

Other income-gain on asset sale, 37,413 - 37,413 - net

Segment income (loss) $ 37,426 $ (1,406 ) $ 36,788 $ (2,187 )

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 six months ended June 30, 2020 and 2019.

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(in thousands)

Segment net income (loss) from $ 37,426 $ (1,406 ) $ 36,788 $ (2,187 )operations

Less net income of managementcompany attributed to the 97 158 194 127 Commercial segment

Net income (loss) of Gateway 37,329 (1,564 ) 36,594 (2,314 )Commercial Venture

Equity in earnings (loss) from $ 27,997 $ (1,173 ) $ 27,446 $ (1,735 )the Gateway 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