FPH Five Point Holdings LLC

Third Quarter 2018 and Recent Highlights

• Continued land development activity at Newhall in Los Angeles County, Candlestick Point in San Francisco, and the Great Park Neighborhoods in Orange County.
• Consistent home buyer demand at the Great Park Neighborhoods.
• Company maintains strong credit profile, including total liquidity of $718.9 million and debt to total capitalization of 24.4% at September 30, 2018.

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 financial results for the third quarter of 2018. Emile Haddad, Chairman and CEO, said, “Consistent job growth during the past six years and limited new residential construction activity in San Francisco, Los Angeles, and Orange County have resulted in pent-up demand in California’s primary housing markets. We think the persistence of this dynamic will benefit our communities in contrast with choppier demand trends in the national housing market. Operationally, our ongoing efforts to develop Newhall in Los Angeles County remain on track, and we continue to believe that we are positioned to generate revenue in that community sometime toward the end of 2019. In San Francisco, we are continuing to build infrastructure at Candlestick Point, consistent with our prior comments that this will be our main area of focus while the Navy continues retesting at Hunters Point. In the Great Park Neighborhoods, home buyer activity remains consistent with prior trends. From our perspective, a pronounced imbalance between levels of supply and demand across our markets is likely to persist into next year.”

Third Quarter 2018 Consolidated Results

Liquidity and Capital Resources

As of September 30, 2018, total liquidity of $718.9 million was comprised of cash and cash equivalents totaling $594.9 million and borrowing availability of $124.0 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.

Results of Operations for the Three Months Ended September 30, 2018

Revenues. Revenues of $13.0 million for the three months ended September 30, 2018 were primarily generated from management services. Our adoption of new revenue accounting guidance on January 1, 2018 has resulted in accelerated recognition of revenue from variable incentive compensation in our development management agreement with the Great Park Venture.

Equity in loss from unconsolidated entities. Equity in loss from unconsolidated entities was $4.0 million for the three months ended September 30, 2018. The loss was primarily due to our proportionate share of the Great Park Venture’s net loss during the quarter of $10.0 million. After adjusting for amortization and accretion of the basis difference, our equity in loss from our 37.5% percentage interest in the Great Park Venture was $3.5 million. Equity in loss from our 75% interest in the Gateway Commercial Venture was $0.5 million for the three months ended September 30, 2018.

Selling, general, and administrative. Selling, general, and administrative expenses were $26.2 million for the three months ended September 30, 2018.

Net loss. Consolidated net loss for the quarter was $21.9 million. The net loss attributable to noncontrolling interests totaled $11.9 million, resulting in a net loss attributable to the Company of $10.0 million.

Segment Results

Newhall Segment. Total segment revenues were $1.4 million for the third quarter of 2018 and were derived from agricultural leasing and the sale of citrus crops. Selling, general, and administrative expenses were $3.6 million for the three months ended September 30, 2018.

San Francisco Segment. Total segment revenues were $1.1 million for the third quarter of 2018. Revenues during the quarter were mostly attributable to fees generated from management agreements. Selling, general, and administrative expenses were $5.3 million for the three months ended September 30, 2018.

Great Park Segment. Total segment revenues were $11.3 million for the third quarter of 2018. Revenues were mainly attributable to management services we provide to the Great Park Venture. The Great Park segment’s net loss for the quarter was $6.7 million, which included net loss of $10.0 million attributed to the Great Park Venture that is not consolidated in our financial statements. 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 September 30, 2018.

Commercial Segment. For the three months ended September 30, 2018, the Commercial segment recognized $6.9 million in revenues from rental income at the Five Point Gateway Campus and property management services provided by us at the Five Point Gateway Campus. Segment expenses were mostly comprised of depreciation, amortization and interest expense totaling $5.8 million. Segment net loss was approximately $46,000. Our share of equity in loss from the Gateway Commercial Venture totaled $0.5 million for the three months ended September 30, 2018.

Conference Call Information

In conjunction with this release, Five Point will host a conference call today, Tuesday, November 13, 2018 at 5:00 p.m. 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 (877) 425-9470 (domestic) or (201) 389-0878 (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 13684857. The telephonic replay will be available until 11:59 p.m. Eastern Time on November 27, 2018.

About Five Point

Five Point, headquartered in Aliso Viejo, 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 Orange County, Newhall Ranch® in Los Angeles County, and Candlestick Point 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

  Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018   2017 2018   2017 REVENUES: Land sales $ 70 $ 2,655 $ 122 $ 7,859 Land sales—related party 225 693 667 85,551 Management services—related party 11,159 5,466 34,366 16,417 Operating properties 1,534   2,805   5,890   7,341   Total revenues 12,988   11,619   41,045   117,168   COSTS AND EXPENSES: Land sales 90 1,641 180 83,755 Management services 6,684 2,572 20,536 7,878 Operating properties 1,027 3,115 4,524 8,307 Selling, general, and administrative 26,220   37,450   83,831   92,605   Total costs and expenses 34,021   44,778   109,071   192,545   OTHER INCOME: Adjustment to payable pursuant to tax receivable agreement — — 1,928 — Interest income 3,062 — 8,719 — Miscellaneous 60   23   8,472   69   Total other income 3,122   23   19,119   69   EQUITY IN (LOSS) EARNINGS FROM UNCONSOLIDATED ENTITIES (4,028 ) 22,825   1,368   17,584   LOSS BEFORE INCOME TAX BENEFIT (21,939 ) (10,311 ) (47,539 ) (57,724 ) INCOME TAX BENEFIT —   —   —   —   NET LOSS (21,939 ) (10,311 ) (47,539 ) (57,724 ) LESS NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (11,920 ) (5,844 ) (27,128 ) (35,632 ) NET LOSS ATTRIBUTABLE TO THE COMPANY $ (10,019 ) $ (4,467 ) $ (20,411 ) $ (22,092 )   NET LOSS ATTRIBUTABLE TO THE COMPANY PER CLASS A SHARE Basic $ (0.15 ) $ (0.07 ) $ (0.31 ) $ (0.45 ) Diluted $ (0.15 ) $ (0.07 ) $ (0.33 ) $ (0.45 ) WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING Basic 65,740,931 62,946,348 64,736,942 51,024,766 Diluted 65,740,931 62,946,348 144,872,638 51,024,766 NET 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 79,145,487 81,463,433 80,111,663 77,944,525      

FIVE POINT HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

(Unaudited)

  September 30, 2018 December 31, 2017 ASSETS INVENTORIES $ 1,628,113 $ 1,425,892 INVESTMENT IN UNCONSOLIDATED ENTITIES 542,880 530,007 PROPERTIES AND EQUIPMENT, NET 29,869 29,656 ASSETS HELD FOR SALE, NET — 4,519 INTANGIBLE ASSET, NET—RELATED PARTY 97,212 127,593 CASH AND CASH EQUIVALENTS 594,908 848,478 RESTRICTED CASH AND CERTIFICATES OF DEPOSIT 1,403 1,467 RELATED PARTY ASSETS 55,049 3,158 OTHER ASSETS 9,433   7,585   TOTAL $ 2,958,867   $ 2,978,355   LIABILITIES AND CAPITAL LIABILITIES: Notes payable, net $ 556,707 $ 560,618 Accounts payable and other liabilities 186,488 167,620 Liabilities related to assets held for sale — 5,363 Related party liabilities 178,675 186,670 Payable pursuant to tax receivable agreement 168,027   152,475   Total liabilities 1,089,897   1,072,746   CAPITAL: Class A common shares; No par value; Issued and outstanding: 2018—66,504,137 shares; 2017—62,314,850 shares Class B common shares; No par value; Issued and outstanding: 2018—79,145,487 shares; 2017—81,463,433 shares Contributed capital 551,905 530,015 Retained earnings 48,114 57,841 Accumulated other comprehensive loss (2,530 ) (2,455 ) Total members’ capital 597,489 585,401 Noncontrolling interests 1,271,481   1,320,208   Total capital 1,868,970   1,905,609   TOTAL $ 2,958,867   $ 2,978,355                

    FIVE POINT HOLDINGS, LLC

     SUPPLEMENTAL DATA

     (In thousands)

     (Unaudited)

 

Liquidity

September 30, 2018 Cash and cash equivalents $ 594,908 Borrowing capacity (1) 124,000   Total liquidity $ 718,908    

(1)

As of September 30, 2018, no funds have been drawn on the Company’s $125.0 million revolving credit facility; however, letters of credit of $1.0 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

September 30, 2018 Debt (1) $ 602,692   Total capital 1,868,970   Total capitalization $ 2,471,662   Debt to total capitalization 24.4 %  

(1)

For purposes of this calculation, debt consists of (i) the outstanding principal on the Company’s 7.875% senior notes due 2025 of $500.0 million, and (ii) the Company’s related party EB-5 reimbursement obligation of $102.7 million.

 

Segment Results

Newhall

The following table summarizes the results of operations of our Newhall segment for the three months and nine months ended September 30, 2018 and 2017.

    Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018   2017 2018   2017 (in thousands) Statement of Operations Data Revenues Land sales $ 70 $ 2,655 $ 122 $ 7,859 Land sales—related party 4 109 4 962 Operating properties 1,354   2,501   5,342   6,983   Total revenues 1,428   5,265   5,468   15,804   Costs and expenses Land sales 14 1,197 104 3,166 Operating properties 1,027 3,115 4,524 8,307 Selling, general, and administrative 3,615   7,045   12,131   23,604   Total costs and expenses 4,656   11,357   16,759   35,077   Other income 60   23   6,922   69   Segment loss $ (3,168 ) $ (6,069 ) $ (4,369 ) $ (19,204 )  

San Francisco

The following table summarizes the results of operations of our San Francisco segment for the three months and nine months ended September 30, 2018 and 2017.

    Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018   2017 2018   2017 (in thousands) Statement of Operations Data Revenues Land sales—related party $ 221 $ 584 $ 663 $ 84,589 Operating property 180 304 548 358 Management services—related party 689   1,467   3,741   4,352   Total revenues 1,090   2,355   4,952   89,299   Costs and expenses Land sales 76 444 76 80,589 Management services 219 183 830 503 Selling, general, and administrative 5,281   7,266   18,211   20,772   Total costs and expenses 5,576   7,893   19,117   101,864   Segment loss $ (4,486 ) $ (5,538 ) $ (14,165 ) $ (12,565 )  

Great Park

The following table summarizes the results of operations of our Great Park segment for the three months and nine months ended September 30, 2018 and 2017.

    Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018   2017 2018   2017 (in thousands) Statement of Operations Data Revenues Land sales $ 485 $ 457,516 $ 171,061 $ 461,710 Land sales—related party 936 720 1,373 3,706 Management services—related party 9,833   3,929   29,808   11,995 Total revenues 11,254   462,165   202,242   477,411 Costs and expenses Land sales — 325,678 118,113 328,871 Management services 6,465 2,389 19,706 7,375 Selling, general, and administrative 9,365 6,364 26,157 18,444 Management fees—related party 2,594   1,539   17,858   4,618 Total costs and expenses 18,424   335,970   181,834   359,308 Interest income 505   —   2,392   — Segment (loss) income $ (6,665 ) $ 126,195   $ 22,800   $ 118,103  

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 and nine months ended September 30, 2018 and 2017.

    Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018   2017 2018   2017 (in thousands) Segment net (loss) income from operations $ (6,665 ) $ 126,195 $ 22,800 $ 118,103 Less net income of management company attributed to the Great Park segment 3,368   1,574   10,102   4,618   Net (loss) income of Great Park Venture (10,033 ) 124,621   12,698   113,485   The Company’s share of net (loss) income of the Great Park Venture (3,762 ) 46,733 4,762 42,557 Basis difference accretion (amortization) 246   (23,770 ) (3,406 ) (24,835 ) Equity in (loss) earnings from the Great Park Venture $ (3,516 ) $ 22,963   $ 1,356   $ 17,722    

Commercial

The following table summarizes the results of operations of our Commercial segment for the three months and nine months ended September 30, 2018.

    Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018 2018 (in thousands) Statement of Operations Data Revenues Rental and related income $ 6,299 $ 19,245 Property management fees 637   817 Total revenues 6,936   20,062 Costs and expenses Rental operating expenses 1,106 2,773 Other expenses 5,876   16,456 Total costs and expenses 6,982   19,229 Segment (loss) income $ (46 ) $ 833  

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 condensed consolidated statements of operations for the three and nine months ended September 30, 2018.

    Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2018 2018 (in thousands) Segment net (loss) income from operations $ (46 ) $ 833 Less net income of management company attributed to the Commercial segment 637   817 Net (loss) income of Gateway Commercial Venture (683 ) 16 Equity in (loss) earnings from the Gateway Commercial Venture $ (512 ) $ 12

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Five Point Holdings, LLCInvestor Relations:Bob Wetenhall, 949-349-1087bob.wetenhall@fivepoint.comorMedia:Steve Churm, 949-349-1034steve.churm@fivepoint.com