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Five Point Holdings, LLC Announces Second Quarter 2018 Results

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Second Quarter 2018 and Recent Highlights

  • Continued land development activity at Newhall Ranch in Los Angeles
    County.
  • Entitlements approved by the San Francisco Board of Supervisors for
    additional commercial development at Candlestick Point and The San
    Francisco Shipyard.
  • Consistent home buyer demand at the Great Park Neighborhoods in Orange
    County.
  • Company maintains strong credit profile, including total liquidity of
    $803 million and debt to total capitalization of 24.2% at June 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 second quarter of
2018. Emile Haddad, Chairman and CEO, commented that "We are seeing
strength in each of our markets driven by a robust labor market and
limited housing supply. We continue our development efforts in Newhall
Ranch in Los Angeles County and remain on track to deliver developed
homesites to builders sometime toward the end of 2019. In San Francisco,
we received unanimous approval from the Board of Supervisors to develop
an additional two million square feet of commercial space. We view this
as another vote of confidence by the city in the strength of our
public-private partnership and its commitment to transforming
Candlestick Point and The San Francisco Shipyard into world-class
mixed-use communities. At the Great Park Neighborhoods in Orange County,
home buyer activity remains brisk. From our perspective, we still see a
continued imbalance between levels of supply and demand across all of
our markets that should support incremental home price appreciation in
our communities."

Second Quarter 2018 Consolidated Results

Liquidity and Capital Resources

As of June 30, 2018, total liquidity of $802.6 million was comprised of
cash and cash equivalents totaling $678.6 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 June 30, 2018

Revenues. Revenues of $13.1 million for the three months ended
June 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 that reflects the impact
of variable incentive compensation in our development management
agreement with the Great Park Venture.

Equity in earnings from unconsolidated entities. Equity in
earnings from unconsolidated entities was $9.0 million for the three
months ended June 30, 2018. The earnings were primarily due to our
proportionate share of the Great Park Venture's net income during the
quarter of $37.5 million, which resulted from the sale of land entitled
for an aggregate of 536 homesites on approximately 33 acres at the Great
Park Neighborhoods. After adjusting for amortization and accretion of
the basis difference, our equity in earnings from our 37.5% percentage
interest in the Great Park Venture was $8.9 million. Equity in earnings
from our 75% interest in the Gateway Commercial Venture was $0.1 million
for the three months ended June 30, 2018.

Selling, general, and administrative. Selling, general, and
administrative expenses were $29.0 million for the three months ended
June 30, 2018.

Net loss. Consolidated net loss for the quarter was $11.3
million. The net loss attributable to noncontrolling interests totaled
$6.1 million, resulting in a net loss attributable to the Company of
$5.2 million.

Segment Results

Newhall Segment. Total segment revenues were $1.2 million for the
second quarter of 2018 and were derived from agricultural leasing and
the sale of citrus crops. Selling, general, and administrative expenses
were $4.4 million for the three months ended June 30, 2018.

San Francisco Segment. Total segment revenues were $1.8 million
for the second quarter of 2018. Revenues during the quarter were mostly
attributable to fees generated from management agreements. Selling,
general, and administrative expenses were $6.5 million for the second
quarter.

Great Park Segment. Total segment revenues were $180.5 million
for the second quarter of 2018. Revenues were mainly attributable to the
sale of land entitled for 536 homesites on 33 acres at the Great Park
Neighborhoods. Initial gross proceeds from the sale were $166.0 million
representing the base purchase price. The Great Park segment's net
income for the quarter was $40.8 million, which included net income of
$37.5 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 earnings from
the Great Park Venture was $8.9 million for the three months ended
June 30, 2018.

Commercial Segment. For the three months ended June 30, 2018, the
Commercial segment recognized $6.3 million in revenues from a triple net
lease with Broadcom and property management services provided by us.
Segment expenses were mostly comprised of depreciation, amortization and
interest expense totaling $5.2 million. Segment net income was $0.2
million. Our share of equity in earnings from the Gateway Commercial
Venture totaled $0.1 million for the three months ended June 30, 2018.

Conference Call Information

In conjunction with this release, Five Point will host a conference call
today, Monday, August 13, 2018 at 5:00 pm Eastern Time. Emile Haddad,
Chairman 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 13681963. The telephonic replay will be available
until 11:59 p.m. Eastern Time on August 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 Ended   Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
REVENUES:
Land sales $ 3 $ 4,739 $ 52 $ 5,204
Land sales—related party 221 587 442 84,858
Management services—related party 11,440 5,481 23,207 10,951
Operating properties   1,426     2,439     4,356     4,536  
Total revenues   13,090     13,246     28,057     105,549  
COSTS AND EXPENSES:
Land sales 52 1,667 90 82,114
Management services 6,763 2,657 13,852 5,306
Operating properties 1,107 2,912 3,497 5,192
Selling, general, and administrative   29,015     27,957     57,611     55,155  
Total costs and expenses   36,937     35,193     75,050     147,767  
OTHER INCOME:
Adjustment to payable pursuant to tax receivable agreement 1,928
Interest income 2,910 5,657
Miscellaneous   631     23     8,412     46  
Total other income   3,541     23     15,997     46  
EQUITY IN EARNINGS (LOSS) FROM UNCONSOLIDATED ENTITIES   9,003     (2,365 )   5,396     (5,241 )
LOSS BEFORE INCOME TAX BENEFIT (11,303 ) (24,289 ) (25,600 ) (47,413 )
INCOME TAX BENEFIT                
NET LOSS (11,303 ) (24,289 ) (25,600 ) (47,413 )
LESS NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (6,143 )   (14,506 )   (15,208 )   (29,788 )
NET LOSS ATTRIBUTABLE TO THE COMPANY $ (5,160 ) $ (9,783 ) $ (10,392 ) $ (17,625 )
 
FIVE POINT HOLDINGS, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
(Unaudited)
 
  June 30, 2018   December 31, 2017
ASSETS
INVENTORIES $ 1,546,683 $ 1,425,892
INVESTMENT IN UNCONSOLIDATED ENTITIES 538,470 530,007
PROPERTIES AND EQUIPMENT, NET 29,449 29,656
ASSETS HELD FOR SALE, NET 4,519
INTANGIBLE ASSET, NET—RELATED PARTY 100,932 127,593
CASH AND CASH EQUIVALENTS 678,637 848,478
RESTRICTED CASH AND CERTIFICATES OF DEPOSIT 1,403 1,467
RELATED PARTY ASSETS 53,416 3,158
OTHER ASSETS   9,292     7,585  
TOTAL $ 2,958,282   $ 2,978,355  
LIABILITIES AND CAPITAL
LIABILITIES:
Notes payable, net $ 556,409 $ 560,618
Accounts payable and other liabilities 168,128 167,620
Liabilities related to assets held for sale 5,363
Related party liabilities 177,491 186,670
Payable pursuant to tax receivable agreement   168,027     152,475  
Total liabilities   1,070,055     1,072,746  
CAPITAL:
Class A common shares; No par value; Issued and outstanding:
2018—66,537,852 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 549,403 530,015
Retained earnings 58,133 57,841
Accumulated other comprehensive loss   (2,550 )   (2,455 )
Total members' capital 604,986 585,401
Noncontrolling interests   1,283,241     1,320,208  
Total capital   1,888,227     1,905,609  
TOTAL $ 2,958,282   $ 2,978,355  
 
FIVE POINT HOLDINGS, LLC
SUPPLEMENTAL DATA
(In thousands)
(Unaudited)
 
    June 30, 2018
Cash and cash equivalents $ 678,637
Borrowing capacity (1)   124,000  
Total liquidity $ 802,637  
 

(1)

As of June 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.

 
June 30, 2018
Debt (1) $ 602,692  
Total capital   1,888,227  
Total capitalization $ 2,490,919  
Debt to total capitalization   24.2 %
 

(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.

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