Second Quarter 2017 and Recent
Highlights
- In May, completed a concurrent IPO and
private placement generating $420 million in net cash proceeds
(before offering expenses).
- Cash and cash equivalents of $514
million at June 30, 2017.
- In April, secured a $50 million
unsecured revolving line of credit, all of which was available at
June 30, 2017.
- In July, the California Department of
Fish and Wildlife re-approved the Resource and Conservation Plans
and the Los Angeles County Board of Supervisors re-approved
Landmark Village and Mission Village at Newhall Ranch.
- In August, acquired a 75% equity
interest for $107 million in a venture that acquired the Broadcom
campus at Great Park Neighborhoods.
Five Point Holdings, LLC (“Five Point”) (NYSE:FPH), an owner and
developer of mixed-use master-planned communities in coastal
California, today reported second quarter 2017 financial
results.
“We are pleased to release our first earnings report as a public
company,” said Emile Haddad, Five Point’s Chairman and Chief
Executive Officer. “We are in the early stages of realizing the
full potential of our unique properties in San Francisco, Los
Angeles and Orange Counties. We remain focused on the continued
execution of our strategy to generate significant cash flow from
our assets following many years of planning, approvals of our
entitlements and capital investment. The completion of our IPO in
May was an important step and provided us with additional capital
to help us fund ongoing land development activities as we pursue
our growth plans. We look forward to our relationship with our new
shareholders.”
Second Quarter 2017 Consolidated
Results
Liquidity and Capital Resources
As of June 30, 2017, we had $514.4 million of cash and cash
equivalents, compared to $62.3 million at December 31, 2016. The
increase was primarily due to the closing in May 2017 of an initial
public offering of 24,150,000 of our Class A common shares and a
private placement of 7,142,857 Class A common units in our
operating company, Five Point Operating Company, LLC (the
“Operating Company”), generating $419.7 million in cash proceeds
after paying underwriting discounts and commissions. In addition,
in the first quarter of 2017, the Company collected the final $30
million installment of the $120 million capital contribution from
the prior owners of our subsidiary (the “San Francisco Venture”)
that is developing The San Francisco Shipyard and Candlestick Point
community, affiliates of Lennar Corporation and Castlelake,
L.P.
In April 2017, the Operating Company entered into a $50 million
senior unsecured revolving credit facility that provides for
borrowings and issuances of letters of credit. The facility has an
accordion feature that will allow the Operating Company to increase
the maximum aggregate amount to $100 million, subject to certain
conditions, including the receipt of commitments from additional
lenders. The facility has an initial term of two years with two
options to extend the maturity date, in each case, by an additional
year, subject to satisfaction of certain conditions including the
approval of the administrative agent and lenders. Borrowings under
the facility bear interest at LIBOR plus a margin ranging from
1.75% to 2.00% based on the Operating Company’s leverage ratio. No
funds have been drawn on the facility to date.
Total capital of Five Point was $1.9 billion as of June 30,
2017, reflecting $2.4 billion in assets and $569 million in
liabilities.
Three Months Ended June 30, 2017 and 2016
Revenues. Revenues increased by $6.0 million, or 83.5%,
to $13.2 million for the three months ended June 30, 2017,
from $7.2 million for the three months ended June 30,
2016. The increase in revenue was primarily due to recognition of
profit participation payments, marketing fees and other builder
fees attributed to prior period land sales. No significant land
sales closed escrow in the second quarters of 2017 or 2016.
Additionally, the increase was also driven in part by revenues from
development management services provided to certain related parties
being reflected in operations for the full quarter in 2017 compared
to a portion of the quarter in 2016 (from the acquisition date of
May 2, 2016 to June 30, 2016). Prior to the acquisition
transactions completed on May 2, 2016 (the “Formation
Transactions”), we did not provide development management
services.
Selling, general, and administrative. Selling, general,
and administrative expenses decreased by $29.6 million, or 51.5%,
to $27.9 million for the three months ended June 30, 2017,
from $57.5 million for the three months ended June 30, 2016.
This decrease was primarily due to higher compensation expense in
2016 as a result of $12.0 million in bonus payments and share based
compensation expense of $20.5 million incurred in connection with
the Formation Transactions.
Equity in loss from unconsolidated entity. We acquired a
37.5% percentage interest in Heritage Fields LLC, which is
developing Great Park Neighborhoods (the “Great Park Venture”), in
connection with the Formation Transactions. For the three months
ended June 30, 2017, we recognized $2.4 million in equity
losses from our investment in the Great Park Venture.
Net Loss. The consolidated net loss for the quarter was
$24.3 million. $14.5 million, or just under 60% of the loss, was
allocated to the Company’s noncontrolling interests, resulting in a
$9.8 million loss attributable to the Company.
Six Months Ended June 30, 2017 and 2016
Revenues. Revenues increased by $93.8 million, or 800.8%,
to $105.5 million for the six months ended June 30, 2017, from
$11.7 million for the six months ended June 30, 2016. The
increase in revenue was primarily due to a land sale, to a related
party, of 3.6 acres in The San Francisco Shipyard and Candlestick
Point community that closed escrow in January 2017. The increase
was also driven in part by revenues from development management
services provided to certain related parties. Prior to the
Formation Transactions, we did not provide development management
services.
Selling, general, and administrative. Selling, general,
and administrative expenses decreased by $14.3 million, or 20.6%,
to $55.1 million for the six months ended June 30, 2017, from
$69.4 million for the six months ended June 30, 2016. This
decrease was primarily due to higher compensation expense in 2016
as a result of $12.0 million in bonus payments and share based
compensation expense of $20.5 million incurred in connection with
the Formation Transactions. Offsetting these higher 2016 expenses
was an increase of approximately $13.5 million in general and
administrative expenses, including payroll expenses (excluding
share-based compensation), incurred for the six months ended
June 30, 2017 that is attributable to the acquired business
operations of the San Francisco Venture and the corporate overhead
of the two entities (together, the “Management Company”) that have
historically managed the development of the Great Park
Neighborhoods and Newhall Ranch communities primarily because the
2017 results include six months of operations for the San Francisco
Venture and the Management Company compared to just two months of
operations in 2016 (from the acquisition date on May 2, 2016 to
June 30, 2016).
Management fees. For the six months ended June 30,
2016, we incurred management fees of $1.7 million related to the
engagement of the Management Company as the development manager of
Newhall Ranch. As a result of our acquisition of the Management
Company in the Formation Transactions, the development management
agreement for Newhall Ranch was terminated.
Equity in loss from unconsolidated entity. For the six
months ended June 30, 2017, we recognized $5.2 million in
equity losses from our investment in the Great Park Venture.
Net Loss. The consolidated net loss for the six months
ended June 30, 2017 was $47.4 million. $29.8 million was allocated
to the Company’s non-controlling interests, resulting in a $17.6
million loss attributable to the Company.
Segment Results
Newhall Segment - On June 14, 2017, the California
Department of Fish and Wildlife re-approved our resource management
and development plan and conservation plan and certified that our
Net Zero emission plan will offset 100% of the projects’ greenhouse
gas emissions. On July 18, 2017, the county of Los Angeles held a
public hearing and re-approved the maps for our first two villages,
which add up to approximately 5,500 home sites and 2.5 million
square feet of commercial space. We anticipate that these approvals
put us on track for what we anticipate to be the start of
development by the fall of next year.
Total revenues were $7.5 million for the second quarter and
$10.5 million for the six months ended June 30, 2017. Land sale
revenues in both periods represent recognition of deferred revenue,
profit participation payments and collection of various builder
fees related to prior period land sales. Selling, general, and
administrative expenses were $9.1 million for the second quarter
and $16.5 million for the six months ended June 30, 2017.
San Francisco Segment – In January 2017, we closed the
sale of 3.6 acres of land for $91.4 million and the re-conveyance
of 90,000 square feet of retail space. On June 13, 2017, the San
Francisco County Board of Supervisors unanimously approved amending
the redevelopment plans for Shipyard/Candlestick to exempt the
office development from the restrictions imposed by Measure M,
which imposes a limit on the amount of office space that can be
developed each year within the city limits. This approval gives us
a meaningful advantage over other office projects in the city which
compete for the annual allocation of office construction. In
addition, we have started the process of amending the disposition
and development agreement with the City of San Francisco to
increase the total amount of commercial use by over 2 million
square feet, most of which we anticipate will be for office
use.
Total revenues were $1.7 million for the second quarter 2017 and
$86.9 million for the six months ended June 30, 2017. Land sale
revenue for the six months primarily consists of a sale of 3.6
acres in Candlestick Point for gross proceeds of $91.4 million. The
San Francisco Venture is required to complete certain
infrastructure elements under the terms of the purchase and sale
agreement and as of June 30, 2017, we have deferred $10.3 million
in revenue related to the sale that will be recognized as the
development obligations are completed. Selling, general, and
administrative expenses were $13.5 million for the six months ended
June 30, 2017.
Great Park Segment – We currently have two neighborhoods
with sales activity. Beacon Park, with a total of 1,029 homes is
96% sold out and Parasol Park, which opened earlier this year, has
727 homes and is 46% sold out. By the first quarter of 2018, we
anticipate that Parasol will be substantially sold out. We are
currently finalizing our builder selection and completing our
agreements for the sale of our next neighborhood with approximately
1,000 homes across 14 products. We expect sales to builders will
close in the third quarter of 2017 and the grand opening of the
models will occur in spring of 2018.
Total revenues were $6.5 million for the second quarter 2017 and
$15.2 million for the six months ended June 30, 2017. Land sale
revenues of $7.2 million for the six months ended June 30, 2017
represent deferred revenue, collection of marketing fees and profit
participation payments from prior period land sales. There were no
land sales closed during the first half of 2017. Collection of $8.1
million in management fees by the Management Company, pursuant to
the development management agreement, is included in segment
revenue for the six months ended June 30, 2017. Included within
management services costs and expenses are $5.0 million in general
and administrative costs and expenses incurred directly by the
Management Company’s project team that is managing the development
of the Great Park Neighborhoods. Selling, general, and
administrative expenses were $12.1 million for the six months ended
June 30, 2017 and represent marketing related costs and project
team and other administrative costs that are reimbursed to the
Management Company per the terms of the development management
agreement. Management fees of $3.1 million for the six month period
represent the base management fee paid pursuant to the development
management agreement. Excluding net income of the Management
Company, the Great Park Venture recognized a net loss of $11.1
million for the six months ended June 30, 2017. After taking into
account the basis adjustment, the Company’s investment in Great
Park Venture was reduced by $5.2 million for the six month period
ended June 30, 2017.
Recent Developments
Broadcom Campus Acquisition. On August 4, 2017, we
formed, through a wholly owned subsidiary, a joint venture with two
other members. We contributed $106.5 million to the joint venture
in exchange for a 75% ownership interest. On August 10, 2017,
the new joint venture purchased, from a subsidiary of Broadcom
Limited (“Broadcom”), approximately 73 acres of commercial land
(the “Broadcom Campus”) in the Great Park Neighborhoods for
approximately $443 million. On the Broadcom Campus, two buildings
have been completed, and two more are nearing completion, for a
total of approximately 1,039,000 square feet.
The joint venture funded the purchase price (and the cost of
future tenant improvements and capital expenditures) with capital
contributions and approximately $339 million in borrowings, which
are non-recourse other than for customary “bad act” recourse
exceptions. Two of the buildings on the property (approximately
660,000 aggregate square feet) will be leased back to Broadcom
under a 20-year triple net lease. A subsidiary of Lennar
Corporation and one of our subsidiaries will lease an aggregate
total of approximately 135,000 square feet of office space in one
of the buildings under ten-year full service gross leases.
We expect the annual stabilized net operating income from the
campus to be approximately $27 million.
Conference Call Information
In conjunction with this release, Five Point will host a
conference call today, Thursday, August 10, 2017, at 5:00 pm
Eastern Time. Emile Haddad, Chairman, President and Chief Executive
Officer and Erik Higgins, Chief Financial Officer and Vice
President will host the call. Interested investors and other
parties can listen to a webcast of the live conference call by
logging onto the Investor Relations section of the Company's
website at ir.fivepoint.com. The online replay will be available on
the same website immediately following the call. The conference
call can also be accessed by dialing (877) 425-9740 (domestic) or
(201) 389-0878 (international). A telephonic replay will be
available approximately two hours after the call by dialing (844)
512-2921, or for international callers, (412) 317-6671. The
passcode for the live call and the replay is 13667513. The replay
will be available until 11:59 p.m. Eastern Time on August 24,
2017.
About Five Point
Five Point, headquartered in Aliso Viejo, California, designs
and develops mixed-use, master-planned communities in coastal
California. Five Point is developing vibrant and sustainable
communities in Orange County, Los Angeles County, and San Francisco
County that will offer homes, commercial, retail, educational, and
recreational elements as well as civic areas, parks, and open
spaces. Five Point’s three communities are: Great Park
Neighborhoods® in Irvine, Newhall Ranch® near Valencia, and The San
Francisco Shipyard/Candlestick Point in the City of San Francisco.
The communities are planned to include approximately 40,000
residential homes and approximately 21 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 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,
LLCCONDENSED CONSOLIDATED BALANCE SHEETS(In
thousands, except shares)(Unaudited)
June 30, 2017 December 31,
2016 ASSETS INVENTORIES $ 1,322,614 $ 1,360,451
INVESTMENT IN UNCONSOLIDATED ENTITY 412,491 417,732 PROPERTIES AND
EQUIPMENT—NET 33,866 34,409 INTANGIBLE ASSET—RELATED PARTY 127,593
127,593 CASH AND CASH EQUIVALENTS 514,411 62,304 RESTRICTED CASH
AND CERTIFICATES OF DEPOSIT 2,298 2,343 MARKETABLE SECURITIES—HELD
TO MATURITY 10,082 20,577 RELATED PARTY ASSETS 7,502 82,411 OTHER
ASSETS 18,150 6,762 TOTAL $ 2,449,007 $ 2,114,582
LIABILITIES AND CAPITAL LIABILITIES: Notes payable $
69,652 $ 69,387 Accounts payable and other liabilities 97,271
114,080 Related party liabilities 200,306 221,157 Payable pursuant
to tax receivable agreement 201,845 201,845 Total
liabilities 569,074 606,469 CAPITAL: Class A
common shares; No par value; Issued and outstanding:
2017—62,257,706 shares; 2016—37,426,008 shares Class B common
shares; No par value; Issued and outstanding: 2017—81,463,433
shares; 2016—74,320,576 shares Contributed capital 576,340 260,779
Accumulated deficit (33,019 ) (15,394) Accumulated other
comprehensive loss (2,845 ) (2,469) Total members’ capital 540,476
242,916 Noncontrolling interests 1,339,457 1,265,197 Total
capital 1,879,933 1,508,113 TOTAL $ 2,449,007 $
2,114,582
FIVE POINT HOLDINGS,
LLCCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In
thousands)(Unaudited)
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017 2016
REVENUES: Land sales $ 4,739 $ 687 $ 5,204 $ 2,662 Land
sales—related party 587 790 84,858 1,149 Management
services—related party 5,481 3,391 10,951 3,391 Operating
properties 2,439 2,351 4,536 4,515
Total revenues 13,246 7,219 105,549 11,717
COSTS AND EXPENSES: Land sales 1,667 (249 ) 82,114 (249 )
Management services 2,657 1,403 5,306 1,403 Operating properties
2,912 2,408 5,192 5,207 Selling, general, and administrative 27,934
57,540 55,109 69,417 Management fees—related party — 429
— 1,716 Total costs and expenses 35,170
61,531 147,721 77,494 EQUITY IN LOSS FROM
UNCONSOLIDATED ENTITY (2,365 ) (182 ) (5,241 ) (182 ) LOSS BEFORE
INCOME TAX BENEFIT (24,289 ) (54,494 ) (47,413 ) (65,959 ) INCOME
TAX BENEFIT — 1,083 — 4,456 NET LOSS
(24,289 ) (53,411 ) (47,413 ) (61,503 ) LESS NET LOSS ATTRIBUTABLE
TO NONCONTROLLING INTERESTS (14,506 ) (34,750 ) (29,788 ) (37,718 )
NET LOSS ATTRIBUTABLE TO THE COMPANY $ (9,783 ) $ (18,661 ) $
(17,625 ) $ (23,785 )
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For Five Point Holdings, LLCFive Point
Investors:investor.relations@fivepoint.comorMedia:Steve Churm,
949-349-1034steve.churm@fivepoint.com
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