FPH - Earnings call transcript Q2 2019 | Five Point Holdings, LLC

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Operator

Greetings and welcome to the Five Point Holdings Second Quarter 2019 Conference Call. [Operator instructions] As a reminder, this conference call is being recorded.

Today’s conference call may include forward-looking statements regarding Five Point business, financial condition, operations, cash flows, strategy and prospects.

Forward-looking statements represent only Five Point’s estimate on the date of this conference call and are not intended to give any assurances as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.

statements. future results may the to results in affect actual Five activities could anticipated or activities differ forward-looking factors results cause and Point’s and Many materially from press These with release including factors the in factors annual SEC. most risk of the described Form report include in included those and Point’s in SEC those Five filings, the recent section today’s XX-K filed any Five Point assumes forward-looking update statements. that to note Please obligations no

EVP Hall, Capital I’d to to Mr. go now sir. Markets. turn over ahead, Watson like Please call the Bob of

Bob Wetenhall

Thanks, the of Jochim. Manish. Alvarado, Emile Mike our Good will Emile developments. with I’m for afternoon Higgins, and thank an Officer, Lynn will Erik Afterwards, CEO, you time joined and financial now provide so our much review Hadad, our recent us. Erik quarterly Legal taking our co-COOs, CFO, to overview performance. Kofi join Chief and today Bonner

Emile Haddad

Thanks, Bob joining for and us. good all afternoon you thank and

we comments do several few of from have execution the past feedback the level do just that the not the over on strategy company justice to and be our when months, communities. Now, touring of received seen the our earnings can that investors call

to decided we such, different of my approach take a the presentation. As part slightly to

like the in years. have fourth of of the are with quarter update. still start yards at in first soil of and broken our over XXXX the that we year. anticipating but cubic Let moved we a is seasons in fourth of that acres me we the have are we of record, of one and in XX have quarter. Since this the XXXX more developed statement the the here operational been QX end XXX we than matter will reporting the deliveries And in homesites sounds million might rainiest consistently deliveries Valencia fact This of

consistency hope we investor, the is of message an the As reassuring.

schedule and delays, resulting the sports material Irvine, our our trades continue with market the feedback with the entertainment the our us ability of industry has and cost by quality against amenities. size the labor protections relationships in positive afforded in to itself Park from increases challenged As strategic and challenges. receive us in At finds aligning high shortages the create we and interests builders providing these regarding Great to

we are Strategically, recently about just with leading Hope, ranked cancer was relationship very hospital as the excited according U.S., City the our in U.S. which to of

started Hope by cancer investment which evolved specialized as a News research the comprehensive Gateway to to a center of micro foot at and will include has square & operate XX,XXX it the center, City $X make What center. cancer made a Campus, and hospital Five announcement Point an World Report. build billion build proposal a into to

acts for future our Hope healthcare into the vision City of understood and Once by our services. new as vision brand is of campus that is other a that Great best Park. the relationship the communities, of understood communities relationship but not the of leadership City for and the their This providers committed healthcare Five Point larger considered vision breeds, include we with validates to at expanded of vision healthcare delivery Hope the the nucleus incorporating of of the importance an only to a in

within eye eye growth how mitigating opportunities on our are one communities. on These management keeps new examples risks just of creating two team another downside our and

it discuss to financial let Erik me our over turn quarterly Now, performance. to

Erik Higgins

this release A issued included in of earlier the our results earnings Thanks, Emile. financial afternoon. was summary

fees. in Our collection financial our reflects the the quarter performance Valencia management continued investment in horizontal second and at development of

to closed take XX quarter. on company senior in million on landfill Subsequent to end, notes. Great the homesites, Additionally, down add-on representing a second quarter closed first announced the XXXX the of that its a the Park $XXX Venture was

I’ll start four and position. comments results, and our I’ll address with some then liquidity balance I’ll our about our with of today segments conclude sheet consolidated each

company’s revenues revenues The the from consolidated and million of generated recognition for service management second $XX.X primarily reflect quarter totaled

general from our the loss $X.X for million Ventures’ We adjusting the was due for loss and million and after quarter. expenses were quarter, Park share $X.X for amortization basic proportionate $XX Equity $X.X million difference. the administrative million the the the Selling, recognized entities accretion the of our two to and in Great unconsolidated net loss for quarter. of of

share for was $XX.X interests, Gateway quarter $XX.X to $X.X which million Commercial was to million the million non-controlling Venture’s approximately of of was $X.X allocated $XX.X million the attributable company. million, loss quarter. our the the Further, the for loss Net leaving

related Now moving homebuilders later this energy purposes. to Significant year. Valencia continued expenditures for sales we the segment The prepare to first the accounting land phase the second development operations. land quarter $XXX,XXX, and community for of to were primarily is consolidated the Valencia on agriculture as for segment segment the in results. Revenues

expenses Valencia million totaled the administrative segment quarter. and general loss $X.X The $X.X was quarter the for Selling, for million.

net is on million quarter $XXX,XXX purposes. related for the Francisco $X.X were quarter. the San administrative Moving and Francisco. the Francisco Revenues consolidated primarily San Selling, for sales. general was for and to expenses million. services prior management were for loss land The recognized The marketing San also to fees period segment segment’s and accounting $X.X from were segment

segment Great The company services Great management operations Park management Great Great by provided as Venture, Venture. the the Park of which is the as the to Neighborhoods, the at includes well Park Park owner

reminder, a the XX.X% Park percentage own Great the XXX% the company. of of we and As interest non-legacy of management Venture

accounting. accounted entity the venture Venture Park equity the of unconsolidated our with Great method under for is in investment The an

of with reporting, Venture results Park The at a Venture’s we basis include the self-funding full historical accounting. Great the Park is the no For Venture Great of segment debt. operation

were related Great quarter. which the million of Park the was XX in million $XX.X closed homesites The Great Park segment Great second Venture. the Park during revenues $XX.X to quarter, The Venture

million, the $XX.X representing were base sale purchase the from proceeds gross price. Initial

approximately base from consideration estimated variable Venture it In marketing Great purchase in expects $XXX,XXX to receive. fees to be the entitled addition price, to recognized Park the

$X.X for offset XX.X%. million Great Park managing the The to the income for segment services the for a $X.X the of margin related from $X.X Great by loss Venture’s company the was the gross to comprised Park Great Park land net it totaled million Venture, approximately this operations. quarter, for partnership for of sale provides Net approximately million loss

We Our management Gateway of by the Commercial management of Commercial includes Commercial XX% the of the company. provided Venture own Gateway the and company and operations Commercial services segment Gateway the Venture. Venture XXX% to management

method unconsolidated in investment entity The our Gateway venture under of accounted is accounting. Commercial the for with an the Venture equity

full of the Commercial accounting. of Venture the include we venture’s historical at Gateway the reporting, results segment For basis

were loss and the Commercial segment $X.X Operating $X.X the million. revenues Venture $XX.X Gateway loss Commercial of quarter. $X.X segment operations. expenses, million comprised million, million interest, $XXX,XXX totaled was the management for quarter The for in fees, Commercial for by depreciation the offset amortization

I’ll related a few wrap it up to with sheet balance our comments position. and liquidity

of approximately was was and and June cash $XXX As million, of liquidity cash our $XXX million totaling $XXX total XXth, million. borrowing equivalents comprised revolver under which of capacity

up additional that the commitments. date receipt subject an extend to During credit for terms accordion and of would our feature an April allow the maturity $XX capacity to we revolving of certain of million, to to provide increasing second XXXX the conditions, facility an to quarter, amended including

billion $X.X capital reflecting non-controlling assets and $X.X redeemable and interests. in $X billion in liabilities billion, was Total

XX% end In add-on was the notes, company debt-to-capitalization to liquidity. our quarter. Our the on our closed senior ratio at $XXX the of July, XXXX million increasing

$XXX would approximately increased million and On additional ratio the our liquidity debt-to-capitalization basis as to to debt adjusted an have of from XX% June XXth, our XX.X%.

communities have being our We’re investing enough able deliver and homesites plan well Valencia positioned year. implement at continue this our capital later our to in to first to of

will it the up for back me now, operator over Let questions. open turn who it to

Operator

Thank our first of you. from take RBC go Capital [Operator sir. Instructions] Please Mike We’ll question Eisen ahead, Markets. now

Mike Eisen

the Good afternoon. for Thanks taking questions.

on you the out Can Just guys of commentary financial wanted the some space that the should model? into benefits what any office around currently to that going have, help Hope they you you coming of of is to start announced. when to partnership a take plan anticipate kind of in of we City the additional sort there, provide and building development are start the

Emile Haddad

it’s Emile. Hey, Mike,

what basically our say we them everything for the of perspective, still next to in is expand can because vacant XXX,XXX them, we micro with from vision are about square our And at always stage building be feet. So, about in we they’re finalizing going working not to are going together that the we our help but which is be build a to campus will, area. that contemplated that to that going we’re healthcare say with or the the us. building And them campus, careful buying hospital

with my attract lot it in is as and very for a validates I have opening because an is creates think a other exciting said we the brand this to going I us, alignment providers. that healthcare really So, vision of remarks,

Mike Eisen

Got I with drawn-out taking to the That’s that in is is conjunction facility? in And on that really the should in a next some it. clarifying XX months? anticipate a helpful. and point the going up building, the just moving space guess building move office something process them in it a then of Or we within other

Emile Haddad

in announced I with to CEO the the part first right on are opening. think building for of to equip for now improvements targeting the them assist So the they we’re that their them sometime And tenant needs. completing has in working city XXXX their that

Mike Eisen

and about you campus-like you there taking Awesome. are and the development the you development past progress there Very there apart, talked San me. And open helpful. progress you’re actions of X development in anything into someone different Francisco, of a you of the on talking that potentially then making process? development provide guys two parcels could from can to Is in that last in Thinking splitting come and Candlestick, see in some facility. the one partners Phase that

Emile Haddad

of first still a feet which we it’s have feet city retail the of office reported first about have are on Well, phase, of the square this year all, lifestyle XXX,XXX by as about of X,XXX to before, approval by the end square and think track, complementary. as that’s we homes, reminder, of the Sure. I XXX,XXX

to We talking a lot really investors. are not

project to the a we have but we have of certainty really the careful And have have we I we packaged about has until have around to make everything discussion partners, it users the from want and a sure city that else it. already a this have of or of lot lot people, packaged. investors to had had We and interest approval I timing this get we be from properly because noise potential something to conversation, think with when that’s

approval. away position a with in those months be few just who would we have XXXX, expressed think And we’re interest. discussions much of from that have as I So, better that to those

Operator

you. Thank

Associates. & Zelman go of Ratner Alan ahead. from question Please next our have We

Alan Ratner

afternoon. Hey, Emile, I City to Good guys. you buying Hope I clarify, building said from that the you a heard of thought first just is guys.

if to that that should wanted cash some there the just Just that? point is Or occurs? that did mishear that and so, mean that inflow I does case, whenever at be clarify a transaction

Emile Haddad

will a have Yes, but then to the buying They yes. I’m be building us. will in this is to we amount, hospital you Five is be And a not cash discuss position Gateway the a answer buying next in. a that the heard inflow. the and from And which me XX% is interest there right. building Point Venture, building

Alan Ratner

round Valencia. you then first at what of sounds it’s going we’re three, Thank helpful. That’s Okay. away from be four And lot sales to months like second, that. the for

So a Obviously, year. congrats sticking to on that weather been it’s challenging timeline.

mentioned, to that see as on track. So it’s encouraging certainly you

going us Can with I of first phase? the how imagine would gate us expect plans would give can out many of builders for product about you terms you be you’d you the initially? Any any sell, I’m what conversations to give type having in guidance, color of looking great. color can not specific is for but just, us necessarily you to any insight lots come be give

Emile Haddad

Sure.

the first the senior who We’ve some that the different in executives, to supply excited lot toured surprising LA because not most had is builders we’ve with discussions answer lack some community It’s the part of community about the biggest is population. the good. very which of of the really have builders. is building been of has So feedback County, and had the Valencia a

So a of interest builders. from lot there is

be going In XXX the shooting always said of we we’ve that terms for are more. to number of or homesites,

because we will I number. can’t it exactly segmentation. to I’m it builders be tell about I think above comfortable saying what the that yet going very proper talking to you that is be are now

to And that’s We going we the think are interest have come with something we out developed. product hoping I that market. the that can

Alan Ratner

Great.

you in color on sneak there? seen these in with any buyer noise can mentioned, war from And all but headlines more I the steady. trends recent reliance kind if has helpful. time, trade whatsoever and on that’s you’ve been been just Now provide happening been bit. any any obviously sales Park, it’s one specifically in of have just I Great But in on color China all I you a how just there know that can impact just this more just know it’s real

Emile Haddad

haven’t seen we at it honestly, all. No,

think I a great builders. have seen that performance the we by

participation We have even communities the typically we builders. our been earlier the of profit from collecting the profit in participation phases that see

we If homebuilding their the with recall, participated X% profits, in you margin. an builders above

these types typically to tend participations And see later we the of phases. in come

pressure and increasing in them first in this we know cost haven’t means impact business. which come reason anything but in seen phases, encouraging. the the not market. is, probably the is them I what of the noise big as prices seeing are means very is of on that are That terms any builders trade the that of don’t We our

Operator

Thank question from Instructions] Kim you. now ahead. Please next our And of Stephen take [Operator Evercore. go we’ll

Stephen Kim

in has the for from Wanted and the amenities about around I the of bit very as talk future. anything In you months continually little I if the, and think what communities your kind curious about vision congratulations. the you’ve changed mentioned what to for most last particular, be future? features what of to of impactful to going communities competition the is evolution Thanks three your guys, the much, of evolve kinds you was thinking are tomorrow, separating your in of a

evolved months ago, or more prominent your is in has anything ago That designs. three long-term If calling as there months that’s starting out? not worth to your but was six in heavily now thinking figure

Emile Haddad

is evolution when much. Thank you an day we there in times every the thinking. answer Look, in live is very

actually period We’re thinking in a real in disruptive you’re very evolving And your if you time, history. in are not behind. falling

is of the community the be to our up interested mean, being these generation the try tactical yes prove of future in going I the the the a answer that believe on interest always communities to has them. been side. part that’s integrating elements So strategy by we to to is

why major attracting lot and therefore complex attracting that a the that’s brands validating facility those US The like. And times now So sports complexes the we’ve on first we over go have that proven two-and-a-half Ducks that facility around starts beverage, with names the at on recreation, country. that’s a opened Great people on uses of building big really of food, focused actually to Disneyland. the And ice its we the big lot places hospitality to sports, their largest Water and and the facility was in a at the today have there. is size sports that Park by Polo start

in So piece was the place. first

entertainment. was second The

Nation the additive amphitheater Live with an seat lifestyle. that partnership Our with has to XX,XXX been

and hospitality. and at looking food beverage now we’re So

first how in. why want major you people So a That’s to is create people thing lot markets. to the at be moving do of we place where a were urban looking

healthcare delivery the delivery with is falls wellness partner going in that healthcare. of as proving concepts I think we our you And us going part up to now in I is focus now heard have probably now thinking who focusing evolution really now technology is the the talk, healthcare a people area on and of on and found thinking and disrupting same we the be of our think are healthcare. as issues forward are of right

place the of pieces. it other going are well do. the and think each at us But day, think trying here in Stephen, is of pieces what these way end the with very look a to is in see integrated I that put to you So at we’re I

are provide trying We’re company you economy. the of to a the if place new of CEO the where

to all need actually call I we I’ll places for whereas boxes, other you looking can companies, somewhere, attract example. to of the the you an building allow to that don’t want it you campus talent, boxes tech they can’t. a is give check

you in have Francisco, campus build the public et of still challenges housing, an San recreation, cetera. you office education, If today

our all check all education. of to public part communities, want can recreation on boxes of the you to If for the that from way we be housing, you

communities to about going a become of our economy helps what least lot new the time helps trying So thinking create spend forward. really that we’re do the I is we hubs that explain that hope for thanks what here. of at the And because question me

Stephen Kim

That’s helpful. a your I was you’ve noticed whether perspective, their curious particular in for and in to any lot. builders appetite. near-term that. I’m at it very slightly kept appreciate their appetite as and I about looking thinking more changes I the from

I evolution kind in about I’m thinking curious about more particular, designs. have kind begun was in And option you asking be whether has to single-family about of I in how what think, Alan not surface a sorts you build of today. might was community. may you trends or about He discussed of for as wondering an that. your seen

Emile Haddad

the on start products pricing, we issues to our it has builders little on a around no, go family, to the always therefore, and envelope a building start build become of is we the envelope tend trying last starting the don’t it cap lifestyle of affordability. on on and maintaining in single we to type the the if so have or is is, smaller to pushing that that of you now that see to with And deal build with therefore affordability. product of because haven’t right answer of evolution part, rent we going no, bit you’re we community, been the the seen a push on therefore you out pricing family, the our working single Well, builders market if mainly What range. the

formula pricing in Our range our wide to anything niches markets pick haven’t it. they’re the I price of sold time offering, what balance products terms to think no, we single don’t really ability to market X.X the for build family median That in we comfortable price in the home gives an solve maintains we starting on. medium a builders rent from the our to that what gives us of and our with seen in or to home That’s But we the of spend yet see XX% our the affordability. for tries of market. times going we’re on

Operator

our from Morgan. of We’ll question ahead. next JP take go [indiscernible] Please

Unidentified Analyst

Hi. This is theme think the the of builders about their affect increasing how own wondering but moving for on I hitting on And more have talked you builders Elad their exposure versus trend, California, Continuing potentially, demand current Mike. builder given trend not decreasing was option several so I business? your was to this lots. environment toward at only could

Emile Haddad

very a Well, talk when we one if primary think look, micro is lot a about California, markets. they to tend it’s in market and of I markets. large but it’s are talk people California as about market, it

secondary that comment markets California. can So I we’re in on but that’s markets in and the markets the on honestly California, tertiary I coastal can’t comment or in and dominate, we

seen builders We have anything have of an appetite. that any they that haven’t indicated less from the

absorbed or as the XX of sizes the the and actually risk land meaning we the commitment. develop so the builders we to provide do by not land model upfront. land, an on average these to could the are is the possible. on develop as our months on all side, land a be amenities builder -- the try we the land in in build We we take very long-term all provide develop of develop, from so within that looking We terms What for close are start, our that they’re -- in try markets

have you and you product to design the and have downtime Great the Park, cost. permitting, Today high land the builders, at the plus a be When develop don’t through school some from us, which K-X actually develop going basically consultation products. until built the in of third we buy one all And waiting get the with the we two we the products is but that’s the amenities. you

a to as is about to You being long markets. capital pay help don’t lot balance worry taking them have for that our takedowns as development partner a land land of risk. you and to we close don’t we where sheet our equation. can quasi That’s think upfront take have you to absorb multiple time the going get have the in And builders with on with to of builders we can we done

would and type land is of be us help that of partner think balance I them So not with of possible as to close terms what see forward a as in do to builders with without different structures. try going loading their sheet you

Unidentified Analyst

was All sort recent also Thanks. Emile. if It the have the development, helps. future the the your the And Any mind. Thanks, to of issuance, driver, behind for development near any the Okay. in was that use secondarily, add-on $XXX particular any fair of then sort debt you plans proceeds. points. million of I there and in wondering term

Emile Haddad

for thanks the question. So,

statements made are funded land are have statement we we all, of that still making development. the same previously our and fully First for we

any I we don’t that to raise the statements. are So money, confusion with that why means previous consistent whether we not as want

healthcare of to same look campus at have going the at starting we our the now However, vertical. time, opportunity

are square of X.X the first that commercial phase, our opportunities the could We million around commercial of Valencia, have some we corner. be in built. In feet have

commercial consistent grow much own operating and to also possible net of and our income very we income. has opportunities our And capital either as operate that strategy partners been methods. one on been producing redeploy day operating or That a a is with into as from have and stand-alone consistent our company’s the

you’re That’s of will they go we helping capital to for actually to a and as available go more it us commercial $XXX raise really that on ‘XX going build the the billion open the I put start advantage is main capital. be and sheet, driver going to forward that that to behind mature. raise our balance start the seeing work in think as opportunities we NOI. ‘XX, see And window is what you’re today going took become and of our And to so the

Operator

also Thank today’s This concludes you, call. session, concludes participation. the ladies for you question-and-answer Thank and your gentlemen.

may disconnect. now You

Five Point (FPH) 9 Aug 192019 Q2 Earnings call transcript