FPH Five Point Holdings LLC

Second Quarter 2019 and Recent Highlights

• Continued land development activity at Valencia (formerly Newhall Ranch) in Los Angeles County positions the Company to deliver homesites and generate revenue at this community in the fourth quarter of 2019.
• City of Hope, a world-renowned independent research and treatment center for cancer, announced plans to invest more than $1.0 billion to develop and operate a new comprehensive cancer center and micro hospital at the Five Point Gateway Campus in Orange County, the nation’s sixth most populous county.
• In July, the Company (through two of its subsidiaries) issued an additional $125.0 million aggregate principal amount of 7.875% Senior Notes due 2025.
• The Company maintains ample liquidity of $416.7 million at June 30, 2019. As adjusted for the $125.0 million Senior Notes offering, total liquidity would have been approximately $540 million at June 30, 2019.

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 results for 2019. Emile Haddad, Chairman and CEO, said, “This has been an exciting quarter for us. City of Hope, a world-renowned independent research and treatment center for cancer, announced that it will be investing more than $1.0 billion to develop and operate a new comprehensive cancer center at Five Point Gateway. We also successfully issued an additional $125.0 million of Senior Notes. Operationally, at Valencia in Los Angeles County we remain on schedule to deliver our first homesites in the fourth quarter of this year. At the Great Park in Irvine, we continue to see steady performance by our guest builders, and hundreds of thousands of people are enjoying the sports and entertainment amenities built at the community.”

Second Quarter 2019 Consolidated Results

Liquidity and Capital Resources

As of June 30, 2019, total liquidity of $416.7 million was comprised of cash and cash equivalents totaling $292.7 million and borrowing availability of $124.0 million under our $125.0 million unsecured revolving credit facility. Total capital was $1.9 billion, reflecting $2.9 billion in assets and $1.0 billion in liabilities and redeemable noncontrolling interests.

Results of Operations for the Three Months Ended June 30, 2019

Revenues. Revenues of $12.4 million for the three months ended June 30, 2019 were primarily generated from management services.

Equity in loss from unconsolidated entities. Equity in loss from unconsolidated entities was $2.7 million for the three months ended June 30, 2019. The loss was primarily due to our proportionate share of the Great Park Venture’s net loss during the quarter of $5.5 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 $1.5 million. Equity in loss from our 75% interest in the Gateway Commercial Venture was $1.2 million for the three months ended June 30, 2019.

Selling, general, and administrative. Selling, general, and administrative expenses were $26.0 million for the three months ended June 30, 2019.

Net loss. Consolidated net loss for the quarter was $22.6 million. The net loss attributable to noncontrolling interests totaled $12.1 million, resulting in net loss attributable to the Company of $10.5 million.

Segment Results

Valencia Segment (formerly Newhall). Total segment revenues were $0.8 million for the second quarter of 2019 and were derived from agricultural land leasing and the sale of citrus crops. Selling, general, and administrative expenses were $3.9 million for the three months ended June 30, 2019.

San Francisco Segment. Total segment revenues were $1.0 million for the second quarter of 2019. Revenues during the quarter were mostly attributable to fees generated from management agreements. Selling, general, and administrative expenses were $5.2 million for the three months ended June 30, 2019.

Great Park Segment. Total segment revenues were $43.9 million for the second quarter of 2019. Revenues were mainly attributable to the sale of land entitled for 60 homesites on approximately six acres at the Great Park Neighborhoods. Initial gross proceeds from the sale were $30.3 million representing the base purchase price. The Great Park segment’s net loss for the quarter was $2.3 million, which included net loss of $5.5 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 $1.5 million for the three months ended June 30, 2019.

Commercial Segment. Total segment revenues were $8.9 million from tenant leases at the Five Point Gateway Campus and property management services provided by us to the Gateway Commercial Venture during the second quarter of 2019. Segment expenses were mostly comprised of depreciation, amortization and interest expense totaling $8.7 million. Segment net loss was approximately $1.4 million. Our share of equity in loss from the Gateway Commercial Venture totaled $1.2 million for the three months ended June 30, 2019.

Conference Call Information

In conjunction with this release, Five Point will host a conference call today, Thursday, August 8, 2019 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 (888) 208-1711 (domestic) or (720) 543-0214 (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 6521828. The telephonic replay will be available until 11:59 p.m. Eastern Time on August 22, 2019.

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

REVENUES:

 

 

 

 

 

 

 

Land sales

$

10

 

 

$

3

 

 

$

65

 

 

$

52

 

Land sales—related party

 

236

 

 

 

221

 

 

 

466

 

 

 

442

 

Management services—related party

 

11,168

 

 

 

11,440

 

 

 

22,231

 

 

 

23,207

 

Operating properties

 

973

 

 

 

1,426

 

 

 

2,698

 

 

 

4,356

 

Total revenues

 

12,387

 

 

 

13,090

 

 

 

25,460

 

 

 

28,057

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

Land sales

—

 

 

 

52

 

 

—

 

 

 

90

 

Management services

 

7,479

 

 

 

6,763

 

 

 

15,095

 

 

 

13,852

 

Operating properties

 

1,199

 

 

 

1,107

 

 

 

3,100

 

 

 

3,497

 

Selling, general, and administrative

 

25,993

 

 

 

29,015

 

 

 

51,766

 

 

 

57,611

 

Total costs and expenses

 

34,671

 

 

 

36,937

 

 

 

69,961

 

 

 

75,050

 

OTHER INCOME:

 

 

 

 

 

 

 

Adjustment to payable pursuant to tax receivable agreement

—

 

 

—

 

 

—

 

 

 

1,928

 

Interest income

 

2,316

 

 

 

2,910

 

 

 

4,770

 

 

 

5,657

 

Gain on settlement of contingent consideration—related party

—

 

 

—

 

 

 

64,870

 

 

—

 

Miscellaneous

 

9

 

 

 

631

 

 

 

19

 

 

 

8,412

 

Total other income

 

2,325

 

 

 

3,541

 

 

 

69,659

 

 

 

15,997

 

EQUITY IN (LOSS) EARNINGS FROM UNCONSOLIDATED ENTITIES

 

(2,669

)

 

 

9,003

 

 

 

6,213

 

 

 

5,396

 

(LOSS) INCOME BEFORE INCOME TAX (PROVISION) BENEFIT

 

(22,628

)

 

 

(11,303

)

 

 

31,371

 

 

 

(25,600

)

INCOME TAX (PROVISION) BENEFIT

—

 

 

—

 

 

 

(1,266

)

 

—

 

NET (LOSS) INCOME

 

(22,628

)

 

 

(11,303

)

 

 

30,105

 

 

 

(25,600

)

LESS NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

(12,116

)

 

 

(6,143

)

 

 

16,809

 

 

 

(15,208

)

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY

$

(10,512

)

 

$

(5,160

)

 

$

13,296

 

 

$

(10,392

)

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Basic

$

(0.16

)

 

$

(0.08

)

 

$

0.19

 

 

$

(0.16

)

Diluted

$

(0.16

)

 

$

(0.08

)

 

$

0.18

 

 

$

(0.18

)

WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING

 

 

 

 

 

 

 

Basic

 

66,256,961

 

 

 

65,076,395

 

 

 

66,234,066

 

 

 

64,226,628

 

Diluted

 

66,256,961

 

 

 

65,076,395

 

 

 

145,403,189

 

 

 

144,853,566

 

NET (LOSS) INCOME 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

 

79,275,234

 

 

 

79,794,047

 

 

 

79,169,124

 

 

 

80,602,759

 

Diluted

 

79,275,234

 

 

 

79,794,047

 

 

 

79,275,824

 

 

 

80,602,759

 

FIVE POINT HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

(Unaudited)

 

 

June 30, 2019

 

December 31, 2018

ASSETS

 

 

 

INVENTORIES

$

1,810,697

 

 

$

1,696,084

 

INVESTMENT IN UNCONSOLIDATED ENTITIES

537,125

 

 

532,899

 

PROPERTIES AND EQUIPMENT, NET

32,265

 

 

31,677

 

INTANGIBLE ASSET, NET—RELATED PARTY

87,107

 

 

95,917

 

CASH AND CASH EQUIVALENTS

292,661

 

 

495,694

 

RESTRICTED CASH AND CERTIFICATES OF DEPOSIT

1,739

 

 

1,403

 

RELATED PARTY ASSETS

90,832

 

 

61,039

 

OTHER ASSETS

24,619

 

 

9,179

 

TOTAL

$

2,877,045

 

 

$

2,923,892

 

 

 

 

 

LIABILITIES AND CAPITAL

 

 

 

LIABILITIES:

 

 

 

Notes payable, net

$

492,469

 

 

$

557,004

 

Accounts payable and other liabilities

163,870

 

 

161,139

 

Related party liabilities

128,850

 

 

178,540

 

Deferred income tax liability, net

10,449

 

 

9,183

 

Payable pursuant to tax receivable agreement

172,633

 

 

169,509

 

Total liabilities

968,271

 

 

1,075,375

 

 

 

 

 

REDEEMABLE NONCONTROLLING INTEREST

25,000

 

 

—

 

CAPITAL:

 

 

 

Class A common shares; No par value; Issued and outstanding: 2019—68,746,555 shares; 2018—66,810,980 shares

 

 

 

Class B common shares; No par value; Issued and outstanding: 2019—79,275,234 shares; 2018—78,838,736 shares

 

 

 

Contributed capital

564,199

 

 

556,521

 

Retained earnings

47,107

 

 

33,811

 

Accumulated other comprehensive loss

(3,298

)

 

(3,306

)

Total members’ capital

608,008

 

 

587,026

 

Noncontrolling interests

1,275,766

 

 

1,261,491

 

Total capital

1,883,774

 

 

1,848,517

 

TOTAL

$

2,877,045

 

 

$

2,923,892

 

FIVE POINT HOLDINGS, LLC SUPPLEMENTAL DATA (In thousands) (Unaudited)

Liquidity

 

June 30, 2019

Cash and cash equivalents

$

292,661

 

Borrowing capacity (1)

124,000

 

Total liquidity

$

416,661

 

(1)

As of June 30, 2019, no amounts were 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

 

June 30, 2019

Debt (1)

$

500,000

 

Total capital

1,883,774

 

Total capitalization

$

2,383,774

 

Debt to total capitalization

21.0

%

(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 $102.7 million related party contractual reimbursement obligation. The Company previously presented this calculation inclusive of the reimbursement obligation but intends to present this calculation going forward in the manner set forth above.

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, 2019 and 2018.

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Statement of Operations Data

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Land sales

$

10

 

 

$

3

 

 

$

65

 

 

$

52

 

Land sales—related party

14

 

 

—

 

 

23

 

 

—

 

Operating properties

796

 

 

1,239

 

 

2,347

 

 

3,988

 

Total revenues

820

 

 

1,242

 

 

2,435

 

 

4,040

 

Costs and expenses

 

 

 

 

 

 

 

Land sales

—

 

 

52

 

 

—

 

 

90

 

Operating properties

1,199

 

 

1,107

 

 

3,100

 

 

3,497

 

Selling, general, and administrative

3,892

 

 

4,428

 

 

7,701

 

 

8,516

 

Total costs and expenses

5,091

 

 

5,587

 

 

10,801

 

 

12,103

 

Other income

10

 

 

81

 

 

21

 

 

6,862

 

Segment loss

$

(4,261

)

 

$

(4,264

)

 

$

(8,345

)

 

$

(1,201

)

San Francisco

The following table summarizes the results of operations of our San Francisco segment for the three and six months ended June 30, 2019 and 2018.

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Statement of Operations Data

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Land sales—related party

$

222

 

 

$

221

 

 

$

443

 

 

$

442

 

Operating property

177

 

 

187

 

 

351

 

 

368

 

Management services—related party

573

 

 

1,432

 

 

1,271

 

 

3,052

 

Total revenues

972

 

 

1,840

 

 

2,065

 

 

3,862

 

Costs and expenses

 

 

 

 

 

 

 

Management services

252

 

 

212

 

 

629

 

 

611

 

Selling, general, and administrative

5,185

 

 

6,544

 

 

9,697

 

 

12,930

 

Total costs and expenses

5,437

 

 

6,756

 

 

10,326

 

 

13,541

 

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

—

 

 

—

 

 

64,870

 

 

—

 

Segment (loss) income

$

(4,465

)

 

$

(4,916

)

 

$

56,609

 

 

$

(9,679

)

Great Park

The following table summarizes the results of operations of our Great Park segment for the three and six months ended June 30, 2019 and 2018.

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Statement of Operations Data

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Land sales

$

31,079

 

 

$

170,320

 

 

$

62,545

 

 

$

170,576

 

Land sales—related party

2,338

 

 

286

 

 

130,035

 

 

437

 

Management services—related party

10,437

 

 

9,918

 

 

20,833

 

 

19,975

 

Total revenues

43,854

 

 

180,524

 

 

213,413

 

 

190,988

 

Costs and expenses

 

 

 

 

 

 

 

Land sales

21,149

 

 

118,113

 

 

128,968

 

 

118,113

 

Management services

7,227

 

 

6,551

 

 

14,466

 

 

13,241

 

Selling, general, and administrative

10,496

 

 

8,305

 

 

17,071

 

 

16,792

 

Management fees—related party

8,403

 

 

7,632

 

 

16,620

 

 

15,264

 

Total costs and expenses

47,275

 

 

140,601

 

 

177,125

 

 

163,410

 

Interest income

1,096

 

 

908

 

 

1,655

 

 

1,887

 

Segment (loss) income

$

(2,325

)

 

$

40,831

 

 

$

37,943

 

 

$

29,465

 

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, 2019 and 2018.

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Segment net (loss) income from operations

$

(2,325

)

 

$

40,831

 

 

$

37,943

 

 

$

29,465

 

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

3,211

 

 

3,367

 

 

6,368

 

 

6,734

 

Net (loss) income of Great Park Venture

(5,536

)

 

37,464

 

 

31,575

 

 

22,731

 

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

(2,076

)

 

14,049

 

 

11,841

 

 

8,524

 

Basis difference accretion (amortization)

580

 

 

(5,123

)

 

(3,893

)

 

(3,652

)

Equity in (loss) earnings from the Great Park Venture

$

(1,496

)

 

$

8,926

 

 

$

7,948

 

 

$

4,872

 

Commercial

The following table summarizes the results of operations of our Commercial segment for the three and six months ended June 30, 2019 and 2018.

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Statement of Operations Data

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Rental and related income

$

6,713

 

 

$

6,241

 

 

$

13,104

 

 

$

12,946

 

Rental and related income—related party

2,041

 

 

—

 

 

4,030

 

 

—

 

Property management services—related party

158

 

 

90

 

 

127

 

 

180

 

Total revenues

8,912

 

 

6,331

 

 

17,261

 

 

13,126

 

Costs and expenses

 

 

 

 

 

 

 

Rental operating expenses

1,584

 

 

828

 

 

3,148

 

 

1,667

 

Interest

4,358

 

 

2,428

 

 

8,689

 

 

4,710

 

Depreciation

3,307

 

 

1,784

 

 

5,484

 

 

3,611

 

Amortization

1,029

 

 

1,017

 

 

2,058

 

 

2,058

 

Other expenses

40

 

 

81

 

 

69

 

 

201

 

Total costs and expenses

10,318

 

 

6,138

 

 

19,448

 

 

12,247

 

Segment (loss) income

$

(1,406

)

 

$

193

 

 

$

(2,187

)

 

$

879

 

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 six months ended June 30, 2019 and 2018.

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Segment net (loss) income from operations

$

(1,406

)

 

$

193

 

 

$

(2,187

)

 

$

879

 

Less net income of management company attributed to the Commercial segment

158

 

 

90

 

 

127

 

 

180

 

Net (loss) income of Gateway Commercial Venture

(1,564

)

 

103

 

 

(2,314

)

 

699

 

Equity in (loss) earnings from the Gateway Commercial Venture

$

(1,173

)

 

$

77

 

 

$

(1,735

)

 

$

524

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190808005833/en/

Investor Relations: Bob Wetenhall, 949-349-1087 bob.wetenhall@fivepoint.com

or

Media: Steve Churm, 949-349-1034 steve.churm@fivepoint.com