Five Point Holdings, LLC — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Five Point develops mixed-use, master-planned communities in California, including Valencia, Candlestick and The San Francisco Shipyard, and Great Park Neighborhoods.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $13.2 million | $9.2 million; up 43.0%, mainly from higher Great Park management-services revenue |
| Costs and expenses | $31.9 million | $32.6 million |
| Net loss | $21.0 million | $53.2 million |
| Net loss attributable to Five Point | $9.8 million; $0.14 per Class A share | $24.8 million; $0.36 basic loss per Class A share |
| Operating cash flow | $(52.5) million | $(89.4) million |
| Cash and cash equivalents | $229.7 million at March 31 | $298.1 million at December 31, 2020 |
| Notes payable, net | $617.8 million | $617.6 million at December 31, 2020 |
Cash, cash equivalents and restricted cash totaled $231.0 million at quarter-end. The company had no revolver borrowings and $124.7 million of available capacity after letters of credit. Its $625 million senior notes bear interest at 7.875% and mature in 2025; consolidated debt was fixed-rate. Total assets were $2.94 billion, including $2.04 billion of inventories, and total liabilities were $1.05 billion. No income tax benefit was recorded on the quarterly pretax loss.
Cash used in investing activities was $0.05 million; cash used in financing activities was $15.9 million, including an $11.0 million payment toward a related-party reimbursement obligation. Consolidated operating cash use remained substantial, in part reflecting ongoing community development.
Material changes and business developments
- Revenue rose despite lower Great Park segment revenue overall: Q1 2020 included a substantial Great Park land sale, while no comparable land sale occurred in Q1 2021. The 2021 increase in consolidated revenue was principally management-services revenue.
- Equity in losses from unconsolidated entities improved to $3.6 million from $30.9 million. The prior-year period included a $26.9 million other-than-temporary impairment of the Great Park Venture investment, related to delayed expected land sales and distributions amid COVID-19 uncertainty.
- Selling, general and administrative expense declined 20.7% to $19.5 million, mainly reflecting lower employee-related costs and share-based compensation. Management-services costs rose to $10.8 million, largely due to higher amortization of the Great Park incentive-compensation intangible asset.
- Great Park management-services revenue included changes in estimates of variable incentive compensation. The company reported $91.5 million of contract assets at quarter-end, $85.1 million related party, reflecting revenue recognized ahead of contractual payment timing.
- Commercial segment revenue fell following the Gateway Commercial Venture’s 2020 sale of three campus buildings and land. Five Point reported 75% ownership of that venture, accounted for under the equity method.
Outlook, risks and contingencies
- Management said Great Park home sales through April 2021 were approximately twice the level in the same period of 2020. At Valencia, five homebuilders were preparing model homes and public sales; model openings were expected in summer 2021. These are management statements, not formal financial guidance.
- The company expected to meet cash needs for at least the next 12 months using available cash, Valencia land-sale proceeds, distributions from unconsolidated entities and Great Park management fees. It expected significant Valencia horizontal-development spending in 2021 and said it anticipated capital to fund planned horizontal development for several years. These expectations depend on sales, distributions, costs and approvals.
- In April 2021, after quarter-end, the company amended its $125 million unsecured revolving credit facility, extending maturity from April 2022 to April 2024, with a conditional one-year extension option.
- Risks include California real estate and regulatory conditions, development and construction costs, interest rates, financing availability, COVID-19 effects, and timing of land sales and public reimbursements. The company cautioned that operating results vary with land-sale timing and that quarterly results are not necessarily indicative of full-year results.
- San Francisco Shipyard land transfers remain subject to the Navy’s environmental review and resampling process, which has delayed transfers and could further delay or impede development. Related lawsuits allege contamination and inadequate disclosure; the company said it believes it has meritorious defenses but cannot predict outcomes.
- At March 31, outstanding performance bonds were $229.4 million; San Francisco Venture guarantees for specified infrastructure and park obligations had maximum aggregate obligations of $198.3 million. The company also disclosed $20.4 million of other contractual payment guarantees.
Important facts for investors to verify
- Whether Great Park home sales and management-fee collections support the expected cash needs and development schedule.
- Timing and economics of Valencia land sales, builder openings, and the related investment and infrastructure spending.
- Updates on Navy resampling, remaining Shipyard land transfers, environmental claims and related litigation.
- Great Park incentive-compensation estimates, contract assets and the priority distributions still due to Great Park Legacy Interest holders.
- Liquidity and refinancing implications of continued operating cash use, the 2025 senior-note maturity, and the revolver’s terms and availability.
- Exposure under performance bonds, guarantees, related-party obligations and the tax receivable agreement; the filing reported a $172.7 million TRA liability.