Five Point Holdings, LLC — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 11, 2022. Five Point develops mixed-use planned communities in California, with revenue primarily from residential and commercial land sales and development-management services.
Business context
The company’s three communities—Valencia, Candlestick and The San Francisco Shipyard, and Great Park Neighborhoods—are planned for approximately 40,000 homesites and 23 million square feet of commercial space. Five Point owns 37.5% of the Great Park Venture and 75% of the Gateway Commercial Venture; both are accounted for using the equity method, so their full operating results are not included in consolidated revenue.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Consolidated revenue | $224.4 million | $153.6 million |
| Income before tax | $13.0 million | $2.8 million |
| Net income | $13.3 million | $1.1 million |
| Net income (loss) attributable to Five Point | $6.6 million | ($0.4 million) |
| Basic and diluted Class A EPS | $0.09 | ($0.01) |
| Cash and cash equivalents at year-end | $265.5 million | $298.1 million |
| Net cash used in operating activities | $81.4 million | $78.5 million |
| Net cash provided by investing activities | $75.3 million | $52.9 million |
| Net cash used in financing activities | $26.6 million | $23.5 million |
| Notes payable, net | $619.1 million | $617.6 million |
Land sales were $139.5 million and related-party land sales were $43.3 million. Total costs and expenses were $221.4 million. Consolidated inventory was $2.10 billion; investments in unconsolidated entities were $374.6 million. The company reported $625 million principal amount of 7.875% senior notes due 2025 and an undrawn $125 million revolving facility, with $124.7 million available after letters of credit. No consolidated EBITDA or operating-margin measure is presented in the supplied filing text.
Changes versus 2020
- Revenue rose $70.8 million, primarily as Valencia land sales increased. Valencia sold 643 homesites in 2021 versus 512 in 2020.
- Great Park Venture land sales increased sharply: 887 homesites sold in 2021 versus 35 in 2020. Five Point reported $6.2 million of equity earnings from unconsolidated entities, down from $42.4 million, reflecting the absence of 2020 gains on Gateway Commercial Venture building sales and the prior-year Great Park impairment.
- Net income attributable to Five Point improved from a $0.4 million loss to $6.6 million income. 2021 results included a $10 million payment on a commercial land sale from 2011 and a $10.6 million reversal of accrued development obligations in land-sale costs.
- Cash declined by $32.7 million. Operating cash use remained substantial, reflecting development spending and corporate costs; investing cash inflows included a $76.6 million Great Park Venture distribution.
Outlook, risks and unusual items
- Management expected cash on hand, Valencia land-sale proceeds, distributions from unconsolidated ventures, and Great Park management fees to cover cash needs for at least the next 12 months. It also expected funding for planned horizontal development over several years, while noting financing availability and timing risks.
- 2022 obligations include approximately $49.2 million of senior-note interest and $56.3 million of expected principal payments under a related-party reimbursement obligation; payments may be deferred if related EB-5 loan maturities are extended.
- The Great Park development-management agreement expired at the end of 2021 and was extended through April 30, 2022 while renewal discussions continued. Management expected renewal but gave no assurance on completion or terms.
- Transfer of approximately 408 acres at The San Francisco Shipyard remains delayed by Navy retesting and the FOST environmental-transfer process following allegations of misrepresented sampling by Navy contractors. Related lawsuits seek damages and, in one case, an injunction against development; outcomes are uncertain.
- Other key exposures include California concentration, entitlements and environmental remediation, litigation, construction-cost inflation, natural disasters and climate risks, dependence on homebuilders, and substantial debt. Management reported approximately $279.6 million of performance bonds and San Francisco Venture guarantees with maximum obligations of $198.3 million.
- Five Point’s TRA requires payments to certain investors equal to 85% of realized tax savings; the recorded liability was $174.1 million. The filing estimated a $128.2 million TRA termination payment as of year-end under specified assumptions. No shareholder distributions have been declared, and the company stated it does not expect to pay them in the foreseeable future.
- Leadership transitions included Daniel Hedigan’s appointment as CEO in February 2022 and the planned resignation of CFO Erik Higgins after filing; Leo Kij was designated interim CFO. Deloitte issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Progress, cost, and timing of Shipyard retesting, Navy land transfers, environmental work, and related litigation.
- Renewal terms and continuity of the Great Park management agreement, and the resulting effect on management fees and cash flow.
- Actual Valencia and Great Park homesite closings, customer concentration, land-bank transactions, and realization of variable marketing or profit-participation revenue.
- Liquidity and funding for development, including related-party reimbursement payments, the 2025 note refinancing plan, and access to the revolving facility or other capital.
- Great Park distributions and the remaining $82.7 million of participating legacy-interest distributions, which affect cash available to percentage-interest holders.
- Assumptions behind land-cost estimates, management incentive compensation, investment valuations, and the $174.1 million TRA liability.