Q4 2019 Earnings Call
On.
Please standby we're about to begin.
Greetings and welcome to five point holdings fourth quarter in your in 2019 conference call.
Currently all participants already listen only mode. As a reminder, this conference call is being recorded.
Today's call, which maybe include forward looking statements regarding five points business financial condition operations cash flow strategy and prospects forward looking statements represent only five point estimates on the day event. This conference call or not intended to give any assurance as to actual future results.
Because forward looking statements relate to matters that did not get occurred these statements are inherently subject to risk and uncertainties.
Factors could affect future results and they called Smartpoints actual activities all results to differ materially from their activities and results anticipated in forward looking statements.
Factors include those described in today's press release inside points as you see filings, including those in the risk factor section of the most recent annual report, including in form 10-K filed with the FCC.
Five point assumes no obligation to update any forward looking statements.
And now I'd like to turn the conference over to Mr., Bob What Polsky VP of capital markets. Please go ahead.
Thank you operator, good afternoon, everyone I'm joined today by our CEO near the Dod or C. O then yocum, our CFO, Eric chickens, and our Chief Legal Officer, Mike Alvarado Neely provided agent you ask which Eric.
Do you fourth quarter and full year 2018 financial performance.
Well.
Good afternoon. Thank you all for joining us despite the environment, we are living and especially on the day like today.
We're going to make a comment as deep as possible give you the chance to ask questions and allow you to go back to your priorities as quickly as possible.
If you wish to go have you started its a very good this goal.
Looking forward to setting the stage, what a two day investor meeting.
Our goal was to report the results fourth quarter highlighted the fact that didn't that transition between 2019 and 2020.
Mark an inflection point.
I was jumping.
Oh, it's still that'd be office into conditions, we are living and they'd be short lived and that we would be able to go dog <unk> cat or did you comment agenda.
I love it.
Today, we believe that it is important to have you need the school the peace of mind. The company is positioned well do expand it appeared to have.
Did that then.
That's a share of wallet.
One.
Oh, the balance sheet is outsourced Lima defense.
Before I wouldn't liquidity at yearend, that's affecting approximately 471 million.
Which is comprised of approximately 257 million you guys and we have no outstanding borrowings under the old hundreds of 25 million good Wallace.
Oh senior notes the notes mature for five years, they fight for years and I was debt to capitalization ratio is up 25%.
In addition, even Valencia, nor did they start getting is encumbered the project up.
True.
Over 60% about expenditures part of that even costs all contracts give us today I just didn't spend all didnt.
Work on less than 30 day notice you think that's the other D to slow down or it's needed steps such expenditures conditions deteriorate.
Hey.
Next well inside sales I've met scheduled until the summer.
We are currently in discussions with the this for these sales however.
What is good.
This back he says and he's calibrate the face of land development activities Accordingly.
Did you see the amount of cash spend to finish they've got a bunch of these subjects.
Yes.
Oh land development activities are insulated from supply chain disruptions.
Accordingly, we expect to avoid the type of disruption, but many other companies would be facing in the near future.
Many companies today I'd implementing measures to other this fall.
We have always run the company with protecting the downside stores and D.
Unforeseen conditions.
No no one knows how long it about things my guess.
However, we feel that we ought to get though as we can be.
We will continue to adapt to these they've all been conditions.
It's both you and and its history repeats itself people find companies in their homes.
The games feeling.
Well, the low interest rate environment should bode well for the residential real estate market in the long.
Meanwhile, we will be focusing on the won't be quite associates entities and maintaining the helps the parent company.
Thank you again.
We hope that the next time, we have a couple things would be about that and all of you wouldnt be healthy.
Now, let me turn to the joke.
Thanks to meal.
So many of our quarterly financial results is included in the earnings release issued earlier this afternoon.
10-K was filed last Friday.
Today I'll provide a summary of over some of our results for 2019.
Our revenues for the quarter was 147 million and 184 million for the year.
Net income target quarter was 15.1 million.
And 22.3 million for the full year.
After deducting non controlling interest net income attributable to the company was 6.4 million two to three months and 9 million for the 12 months.
Our financial performance in the fourth quarter highlighted I personally have sales in Valencia.
After almost two years of land development, we closed our first landfills.
Comprised of 711 home sites.
GAAP revenues recognized at the closing for 140 million, which included 135 million from the base purchase price.
Absolutely slightly in non cash marketing see your revenue, we expect to collect and the homes were sold.
The gross margin recognized on these land sales was approximately 31%.
Great part neighborhoods continues to mature and evolve into an amazing place to Peter to live and gather.
Continue to invest and amenities and infrastructure throughout the year and recently completed rice part.
Community Park located within the community <unk> newest neighborhood similarly named Rice.
Also received approvals for an additional 1056 home sites in early 2019, bringing the total approval to 10556 home sites.
<unk> 6161 have been sold to date.
Included in net income for the quarter was a loss of 1.1.
From our 37.5% percentage interest in great part venture.
So all year, our interest contributed to income of 6.2 million.
During the fourth quarter, the Great Park that you're sold 69 home sites. So approximately 38 million, bringing 2009 teams total so 587 home sites sold the gross sales proceeds of 255 million.
In early 2020, the partnership made a distribution of 76 million to the holders of legacy interests.
Since late 2017 the partners. The partnership is made aggregate legacy interest distributions of 431 day.
Do you seem to remaining legacy distributions. Some 210 billion at the end of 2019 to 134 million as of today.
The next 45 million and distributions made by the partnership will go to complete the payment upon what do you distributions to holders of legacy interests.
Thereafter distributions are contractually shared between legacy that percentage interest holders until the remaining legacy announcer been satisfied.
And our five point Gateway campus in Irvine, which is approximately 80% leased we recognized that our 75% interest in the asset a loss of 1.1 day for the quarter and a loss city year of 3.9 busy.
As previously announced they're currently negotiating a sale of one of the four buildings. So you have told that will generate significant Josh you create additional opportunity development opportunities for the campus.
In San Francisco in early 2019, we unwound.
It's still allowing us to consult with personal rethink vision for cannibalistic.
During the fourth quarter.
The modified where plan for cannibalistic was approved by the city of San Francisco, which includes less retail and more office.
Recognized a $65 million noncash gain in early 2019 in connection with the unwinding of the May such transaction.
That's DNA costs were 26 name for the quarter and 100 importantly, instead of 12 months.
Our liquidity position is strong with your own cash balances 347 million and no borrowings against her husband 25 million revolving line of credit and as Neal mentioned, our debt to total capital ratio was stable approximately 25%.
So with that I'll turn it back over to the operator for questions.
Thank you if you'd like to ask a question fixing what pricing so I want to your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to layer signal to reach I clearly once again that is star one if you'd like to ask a question a pause for just a moment to let everyone in opportunity to signal.
We'll take our first question from Paula Kovarsky with Wells Fargo. Please go ahead Sir.
Thank you I guess, if the start off.
Oh.
Oh my cost more variable.
You gave us anymore color on what's your expectations are for 20 Twond.
Environment.
So.
System.
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Yes.
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As I said.
We Oh of course sales.
Our next sales about schedule for summer.
I've been in discussions with builders and has this thing could be moving very quickly we have in real time talking to build to suit.
Oh, that's gonna be lined up for the well the sales.
And if we decide that the market does not.
I'd for deliveries in summary, we kept the stock and as a result, we can be late expenses.
Right now we have not made any decisions to shut down anything most of the home sites that theyre going to be delivered in some other.
Oh substantially complete so we're not gonna be spent a lot of money on them, but that is one thing is meeting every day to monitor and as I said, we have an ability to go along the level at any point in time and.
More than 60% of the vote expenditures wouldn't be able to out to be avoided if the market keeps on moving in the wrong direction.
And then with respect to number one.
Graduations on that on the land sales when when do you expect the builders to you know open for so long.
In opening event.
That's a relatively near term.
Mike pushed out a little bit given the current environment.
Well like I don't.
Happen to no more than anybody else in terms of what's going to happen Tomorrow. This is moving very quickly, but as we sit today.
Scheduled to open by the end of the year sales, we tend to have a wont be called it was they experienced much news that big Grand opening for all the products that probably would not happen until January but this year, but those will probably be able to start selling sometime by the Oh. The last couple of months of the S.
Okay and then.
With respect to a degree or can you give us any kind of color on.
Yes.
So as far as traffic and sales trends.
Yes, sure any you know I expected somebody's last question because that's a good grades of what's happening on the underground versus what we're seeing and the stock market. So I'm going actually to give you from the beginning of the a week by week the number of sales what we've seen in Buffalo you'd be able to.
Page for yourself some it from the beginning of the of course, we had 10 net sales.
Second we had 11.
30.
In line.
16.
The nine.
Nine and then 14.
As we got into the end of February and March which is the period. When we started realizing the impact of the calling the widest we jumped to 25 net sales then 24 net sales and this week, which ended on Sunday, we had nine net sales, which is basically or whatever so interesting enough we haven't seen.
Good luck on home sales.
We have flipped from the builders that the topic is now that's sitting with use but it's basically people who are going to go and look at the models. It seems like the quality of the topic is still good then the cops are very interesting either way.
I appreciate your time thank you.
Sure.
Our next question from Stephen Kim with Evercore ISI.
Hey, guys actually trade on for Steve Thanks for taking my question.
So big picture it.
Logical stopping point or some time, where it might be easier in the build out of Oh, Valencia, two or sense, well timed to push a pause button on development and what are those kind of things that you before like Okay Kids natural stopping point and then how far away all we've essentially from the first of all those.
Yeah.
I'm sorry, you would tell me little bit muffled, so I'm just going to try to see if I understood. Your question. The question was Oh.
When do we start going back and bless you can give you could just because you're getting buddy model.
But let me try to let me try that again.
It's logical stopping point, where it's easier and more sensible depressive pause button on on development and what would be got kind of thing and how far away from that or.
It's more than Valencia, we have actually inventory, we have homesite spending so we have an ability to still sent home sites that we've already spent the money on Oh, we have most of the major infrastructure is already and so what do you have inability to do just simply.
Make a decision that the market is not gonna be that six months or nine months from now installed developments like no model, but the market accordingly so.
That's what I was saying because we're fortunate enough to have an ability to make a decision and within 30 days, we can actually you're going to slow down well set down development, but in Valencia as you know we've sold so maybe you want one sites we still have.
Probably about 200 not that available if the builders have an interest in them and so far we've got an linzess them, but those but.
We don't really need to spend a lot of money and but I'd say I love to feel the market is a liquid that we can keep on selling at the base, that's getting stuck into selling them annual basis.
Okay. Thanks, and then the gross margin importantly on the land sale. It sounds like it was 31% that seems a bit low.
Well to do what we're thinking where there's some additional car in those initial land failed.
Because their first off the line or something like that that would be tracking dragging that down and how do you think about that margin progression going forward.
Well again, if you would have asked me. The question three weeks ago I would have said to you. This is also state is margin and hopefully as we go forward you'll see the margin.
Well, but in light of what we are today I don't think I or anybody else can make any one of the statement.
But if we want to go back to a more normal market.
My expectation is as time goes by you will see the margin starts moving up.
Okay. Thank you very much meal.
Of course.
Thank you take the next question from like a rhythm with JP Morgan.
Hi, This is a lot on for Mike.
First congrats on the Atlanta.
I was wondering if you could talk a bit about the range of products.
Corridor and from the buyer profile.
The.
But that will probably get Paul has not changed we haven't seen I'm I'd be monetizing says report on a wifi bases and the football hasn't changed I know, there's a lot of people who are talking about.
Certain groups that was not buying.
Yeah, we have not eight can eat up selling to investors, even with names of people that come from the greater Asia.
It's not people who are they follow called household formation within the market itself, 40% of the population in the worldwide.
His comes from days of Asia, and its having household formation and culturally people like to help the could buy homes and give them close to them. So I can tell you we haven't seen a slogan we haven't seen any movement in the wrong direction. So far.
And we haven't seen any change in the profile.
In the last I would say probably 18 months, we started seeing increase and buyers who are.
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And move up in a in O'brien local but nothing has changed in the last two weeks and this is one thing that he had monitoring very very closely to see.
There's any shift here as a result of the environment into them.
Great. Thanks, and my second question is are there any if you could provide some more details on their consulting arrangement San Francisco Advisory group.
Well I feel like it's coke or is the best approach.
And you can comment on the payment structure any transfer ownership or any changes operationally that division.
Of course, so you know as I have said on previous calls San Francisco is and has two parts to it the shipyards, which is the old Navy days. The land is still owned by the Navy and we will take the Liberty Hope that's now.
And phase by phase wasn't gets appealing to them all.
Oh agencies.
The other part of San Francisco as the Candlestick Park was the San Francisco Mamas stickiness to beat and that has nothing to do what they maybe all the cleanup.
That's the area that has the state it has been demolished and we started putting emphasis for them.
When we took over that that's a better wasn't deal with Macy's to build an outlet mall and as I've said before we evaluated.
That would make sense and came to conclusion, but that's not the right use for the asset life of the shift in retail world.
That then ended up unwinding realize that excess.
We then went back to the city and revised plan and gutted the food last October so from the timeline point of view. The first thing was to unwind that makes it easier and last October we got the approval.
I'm not what we've done as we basically have taken San Francisco and and I was looking at it as the cannibalistic being within our operation.
Meaning it is operation and then we wouldn't be.
Well pop into the <unk> partners on it and so far we've had an interest.
Several groups on the Kansas excite.
On how this point, we went back to mayor Rahm, who was the main when we started that process and I was at that fine a leading that that's it for them all and we went back and put together, but why is that they put together advisory group and we ended up will be agreement.
Well go fees you had this sale that he is very well with respect to them to cities from a political when viewed as well as they have gone and this baldness Stephen Gate, we believe make up the best team that could help us navigated the waters of the Navy and the agencies. So we couldn't get to resolution quickly and get.
Site to pool, so as a company our focus like when I was going to be on campus stick and over the coming period, notwithstanding the shift in the conditions.
The last few weeks Oh focus is gonna be on cannibalistic and seeking to write business or Cosmos, and then moving forward in Kansas like well, we work with the advisors who gestalt.
Welcome to the government about moving forward with the clean up and investing in everything else. So that's easy. This strategy. This has been a strategy that because being in process and let's see so with this announcement was nothing but the next phase of that strategy.
Thank you.
Yes.
Thank you that does conclude today's question answer session as well as today's conference. Thank you and your participation.
You may now disconnect.
Yes.
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