Q2 2020 Five Point Holdings LLC Earnings Call
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Please.
Good day, everyone welcome to the Fyfourteen.
<unk> 2020 conference call.
Certainly.
Okay.
As a reminder, this conference call is being recorded today's conference May include forward looking statements regarding five points business financial condition.
Free cash flow stretching prospects forward looking statements represent only five point estimates on the data this conference call it or not and shouldn't you get any shirts.
Actual future results because forward looking statements related matters that have not yet occurred. These statements are inherently subject to risks and uncertainties.
Factors could affect future results and may cause <unk> actual results well activities to differ materially from the activities can resolve skill sets.
Any forward looking statements. These factors, including those described in today's press release and five points at Ccs filings, including those in the risk factor section of the most recent report on form 10-K.
Quarterly report on form 10-Q filed with the FCC.
No. That's five point assumes no obligation to update any forward looking statements.
Now I'd like to turn the call such Mr. email with Dod Chairman and CEO five.
Please go ahead Sir.
Thank you very much out there.
Yeah, I hope that.
As we have to school everyone on your side, it's healthy.
Oh, Yeah I'd say.
Well certainly came on May 20, plus we shared with you that the company has been good loved to the public Nike continues to drop.
Which was focused on preserving all strong liquidity position.
But lovers that's we.
So do so one and the ability to shut down to soak up old operationally expenditures on short notice.
It's 50% about employment related she may cause our discussion.
In may.
We showed that that's why it's I'd be uncertainty at that time.
We had shut down all learned development activities, except those needed to support our existing builders.
We did that assuming the economic conditions were going to walk land acquisitions by business.
We also shows that we have started seeing home sales go back to it because it doesnt do love about the great but.
But we didn't have enough data to drill our name your conclusions.
Good news because that today, we can look back and see a very consistent sales pace over the 12 weeks since our last call.
But maybe a number of home sales in the first quarter was 10 cents per week.
In the second quarter.
Well its age sales per week, and so far this quarter, that's been 12 sales.
Hi, I'm sure that most of you have seem to stronger building what sales tend to public builders.
We see as opposed to send them into visitor reflected in the engagement, we have good but still insights into lunch yet.
Well, we also see up into a continuation of construction BYOD existing guest visits.
In addition.
The feedback we are hearing is that mainly on bars as an example, golden monkey.
It makes me the me too long winded answer because you'd use with extensive open space and trails in close proximity to implement a major health care facilities.
It's making opening anybody else right.
And the law School. We also also shared with you the sale of 70 home sites in the nice yet which is expected to another second well the financials.
As soon as well there is a good.
A portion of the purchase price.
Well through seller financing that comes due in December 2020.
Last week.
The chose to build over 90% of the seller financing much or do you tend to do that.
Today, we closed the sale of the to welcome buildings at the pipeline Gateway campus.
We when we announced the sale on June 26, you ought to start he doesn't have jumped German reported.
The best sale why didn't you lie in terms of twice the sports, but that's 510 $37 per square foot, let's just be good size independent hundreds but of course it.
Similar to other transactions when he came to light duty, but just to buildings, if the buys decided to exit pizza.
If you recall, that's how we should be but just the company's from dotcom.
Oh, the vision building, what do you integrated multi generational thing is what will drive sports and entertainment amenities.
As well as excellent public schools has not.
Not only adjusted home buyers.
But no industries and he was a promotion states all the tools.
I don't see the accretion and I do but just created by the synergy of the live work play none and connect <unk>.
Vigorously I mentioned that I mean, I was just so you guys know stops close on business on job because.
I am serving as a coach Oh, that's why not until such a committee and you can tell you that housing has been identified as it applies he has a lack of housing supply markets has not changed and anything. That's all you got the was as good result of covered 19.
This month.
Launched I would mean what size its lifepoint <unk> dot com.
Did you have time at home, we encourage you to explore the side. It does a good deal to understand the company strategy and its approach to community building.
Finally, I hope that you stay healthy and that the positive trends we are seeing continues.
There's a busy lives real good old habits, Canada.
We will keep one system to accelerate.
And one thing under Brett.
Thank you.
[noise]. That's you know this year our 10-Q.
Moving on August seven it's somewhere that's financial results is included in the earnings release issued earlier today.
I'll start with our consolidated results and then address each about four segments interfered with comments about our balance sheet, so liquidity position.
The company's consolidated revenues, so second quarter totaled 24.3 million. That's primarily consisted of the land sale Appalachia generating 17 million.
And recognition has revenue generated from management services [noise].
So that's a nice 23.9 million in earnings from our two joint ventures, including earnings of 28 million somewhere 75% interest in the gateway commercial venture.
Total consolidated cost and expenses were approximately 34.3 million.
Including 11.9 daily cost of sales related.
That's helpful Seattle.
And 16.3 million so in general and administrative expenses for the quarter.
That makes sense for the quarter, it's approximately 14.2 million of which 7.6 million was allocated to the non controlling interests using 6.6 million attributable to the company.
Moving to segments.
But once you said rentals consolidated for training purposes revenues for the watches segment were 72.9 billion.
Related to the closing if somebody's home sites during the quarter, So based purchase price of 16.6 million.
All generated a 30% gross margin and well structured with a 10% chest pain.
And a 14.9 million Darden notes due in December of 2020.
That's it will not change the note was reduced to approximately 13.9 million during the third quarter prior to the maturity date.
The voice your segment income for the quarter was 1.7 billion.
[noise] the San Francisco suddenly, it's also consolidated for accounting purposes.
Also Cisco so yes that was sort of quarter was 2.5 million, which was primarily as teenage census.
If they start setting that includes operations of the great Petsense here the owner of the greatest neighborhoods as well as management services provided by the management company. She did a data center.
As a reminder.
37.5 subsets of the bomb legacy percentage interest so the great part venture.
100% of the knowledge that something.
The great adventure, it's a nice consolidated entity with investing in the venture accounted for under the equity method of accounting.
So separately reporting we acted as sole results did they petsense here at the ventures historical basis of the carry.
Great doesn't venture is a self funding operation with no debt.
The Grey card segment revenues were 6.8 nailing the second quarter, consisting primarily of revenue recognized under the management agreement.
The second quarter net losses, they purchase segment totaled 10.2 million consisting of 1.8 million a matching 10 related to the management company.
Loss of 12 land, so that they put venture operations.
The company recognized a loss of 4.1 million audits investment integrate part venture which includes I shared today Park ventures loss.
Oh commercial segment. They teach operations are the gateway to listen adventure and management services provided by the management company to the gateway commercial venture.
We had 75 cents, but the gateway commercial that you're 100% management type.
The gateway to actually venture is a nice inside a cheap if you're investing in the venture accounted for under the equity method of accounting.
So segment reporting near to the full results of the gateway to actually venture that's adventurous historical basis of accounting.
The commercial segment income was 37.4 million sort of quarter, primarily related to the sale of 11 acres and a 189000 sports a building just city as how.
The real estate was sold for 108 million.
The company recognized approximately 28 million events, Oh, that's indesit in the gateway celestial venture.
The game intellectual ventures made a 75 million dollar cost distribution to its members during the quarter of which five points, 75% share was 56.3 million.
As a meal mentioned today the gateway commercial that sure. So she buildings currently occupied by brought current the 355 million.
We expect adventure to make a casket should distribution.
Actually 100 million in connection with the sale of which 75% will be distributed to fight point.
When combining this sale that the city of excess and title Excel.
Ventures generated approximately 481 million compared to the venture is 443 million acquisition price in 2017.
The venture English meadows public probably be Michelin vessels and the venture still owns one of the four buildings and the campus and development rights to teach expansion.
I'll wrap it up it you can actually chart that helps you know quality position.
At June Thirtyth 2020, total liquidity was approximately 339.7 million.
This is comprised of cash cash equivalents totaling 215 million and borrowing capacity 124.7 million under our unsecured revolving line of credit.
I don't see this solid the debt to total capital ratio of 25.4%.
With that I'll turn it back to the operator, we'll now open it up for questions.
Well. Thank you if you would like to signal with questions. Please press star one you touched on telephone.
Joining me today. They speakerphone. Please make sure you function is turned off to a lot of your signaled to reach our equipment.
Star one if you'd like to ask questions Star one [noise].
Our first question will come from Alan.
<unk> associates.
Hey, guys. Good afternoon, great to hear you guys are all doing well and congrats on all the the progress, especially on the commercial side this quarter.
First a question yeah.
Oh I see a I believe last quarter, you mentioned that you guys kind of work halting the a land development, but still had about 500 lots that were either developed or pretty close to fully developed that you could sell up demand pick back up and it certainly seems like it has so just curious if you can give us an update I'm just development activity back on in Valencia, and do you expect to see.
All those 500 lots by yearend.
Yeah, that's a here because as well and I think you pretty good what's your so let me just make sure that I think you we have numbers that might be mixed up.
We have they are little bit of 8000 on size to be I actually was a thousand 3800 sites in the first phase that we did the land development for I think the 500 you were referencing was what I was.
I didn't in 2019 as it potentially a.
Number one sites if you recall the demand goes higher than we expected them. We ended up actually selling something other than they do you want on sites and that's left US with 200 5700 sites in terms of spending anything.
And I think the last time, when we had the call I talked about the fact that we have had some indias or from the there's nothing outstanding me the situation dived in May and the good news is today, we have multiple does what engage with us.
And what are we talked about potentially selling the two other than the 57 and inventory.
Good day, there's an interest in more than 401 sites, which means that we will probably go beyond what standing inventory and do some more land development.
You need the a they demand so oh, that's all that's where we are it's actually really doing very well and and I am happy to see the builders.
Oh, I'm very excited to be up in Valencia. So they yeah. So that's something that's a lesson as we are going beyond what the we have and standing inventory and we will be moving forward in some more land development Ah. Once we are some of these agreements with others.
Got it those numbers.
Stuff I think I was I was just adding that to 57, I think you'd given roughly another 200 or so that that that you mentioned you can move pretty quickly on so I think where I think we're talking to same thing here, but.
He is just to clarify there so.
If I'd be glad to sort of cash flow perspective things should be ramping back up pretty pretty close to where they were pretty pandemic over the next quarter to.
Yeah, I mean look I mean, okay. So we'll be doing nothing but keeping an eye on CASMED liquidity, So small 16 and and as you can see some opportunities on the cost, but all we would not.
Contemplating such as the closing of the deal today, it's very hard to tell you. One project forward because we are sitting in a very still with market conditions and <unk> as much as we are optimistic and we all the things I've been a state that's one of US thoughtful people out in the company every day everybody.
Yes, It was a mall and really haven't figured on the polls.
In real time, so you know I'm, hoping that we will.
Back to the same up because this is the same got slows and I think it'd be a mistake for me extrapolate today didn't lose you little bit more what's going to happen over the coming to launch, especially as we head into an election.
Season, and we all know that this is gonna be little bit topic servant election.
Understood.
Interesting few months for sure and then just trying to Great Park or maybe you can give us a quick update just on the next phase there I think we saw something about maybe you guys doing some fee building relationships. There. So I believe that's news so what's the what's the update there can you give us one.
Yeah. So we are done and thank you. We so in terms of the sales at home sites, Oh, what we do or the great plug and I think I went through the last time is we measured on the weekly basis. They will also be wholesale.
And in and the but not all each of the bits and draw that line and we then start to dovetail. The next type that sale of home sites to match the timing of when the build out all the southern product that might be similar to something living didn't want that well happens and therefore, we don't create them all.
The lab, which then starts beeping bomb downward pressure on pricing.
So we right now in terms of on site sales, we have not projecting any sales this year.
We're watching the the velocity of sales and as I said, we're seeing there how do you need in number itself and the last few weeks. So if we see that the actually the sales accelerated we haven't ability do very well he brings home sites online earlier than expected.
In terms of they feed though.
Here's what what's happened we go to the builders now and and we have different multiple products and we doesn't with our flights we asking for isn't and in some cases somebody does not have a little bit all they resistance doing something twice I'll take a home sites all of it so the dollar.
Oh, we're not gonna this kind of land that we we've made a better yeah that we're not gonna be.
It's going to lend us based of the men. So if we find ourselves with a product that might not I get the same.
You know type halt appetite some builders, we wasn't both of those cells and since we do not want to be a homebuilder.
Yes, very good relationship with the you own company a that is being dependent knows this market extremely well and.
So he becomes El Ceibillo. He doesn't now you know really there, but did you do a by as much of the public's can buy because its price.
Oh blend that we sell out but it gives them an ability to be in the marketplace and the market the deals and gives us an ability to ultimately a good the price but acre that we expect to go for it but you know something but there's not the as have the same conviction that does.
And you you're probably going to see this continued.
You know you're going to Valencia, because you know when you when you develop them 15 different product lines and we'll see what do you gave us a big the same thing would be consolidation.
It used to be does I used to get to 22 bills and almost every product without somebody who would be willing to beat the price, but as you know we don't have that number of business today in somebody doesn't I'd say I don't like this slice of the high end might be can suddenly knee or.
What I'm one of the system build as Mike does down on me. So we're willing to do that we believe in hone Paul.
I know you asked a bunch of questions, but maybe just I can hang up and that's okay. That's okay. How [laughter] I'm, just curious how that might flow through your financials when that ultimately does come to fruition because or is it just might come in like a homebuilder you know revenue for the home sales or is there should we think about that differently.
No problem to have just yes hopes are sold.
Okay perfect well, thanks, a lot guys good luck with everything.
Thank you stay safe.
<unk>.
Our next question.
Truman Patterson with Wells Fargo.
Yeah. This is actually a possible.
Good question first of all how many locks.
I can give you exact number but I'm going to say would probably about 4000. Its as we speak to limit is gonna look up for the exact numbers.
Please I'm gonna got somewhere in the 4000.
But we can do that number do you have another question by the time, we answer that shoot out that numbers.
And then.
The cash distribution.
So this quarter.
Okay.
<unk>.
Okay. So I mean, I'm a sell that close today, obviously, we still have to go through all timing office and the change actually makes the air reviewed by our Auditor type say based on the purchase price Tonight initial analysis venture will probably recognized a suddenly.
$75 million there.
Yeah.
Okay and then.
75% of walk that social pipeline.
Okay.
And the more theoretical question you know.
Retail entertainment.
Office environment.
Yes.
Several months I guess, how do you I guess looking at your commercial side.
Yes.
Three projects.
Got it changes you might.
Or the timing of bringing some.
Commercial.
<unk>.
Well I mean, we wait before that was 19, we oh, we actually started developing more.
<unk> healthcare related.
It makes it uses them in each of the communities actually and a in the city I hope.
Transaction was all that's a great example of that the money you're gonna see more or does it happen. So if anything I would say healthcare is going to become more in demand.
Locum Tenens, all three times as well as a as research.
In terms of the entertainment.
Obviously things out on hold right now we have some facilities were working with outboard most of the city of what's going on right now on doing to drive then movie theater and working on on activate these some of the food and beverage as they deliver the outdoor so you know being creative as somebody as everybody.
Yes.
Big component of that we've just got it doesn't amenity.
But I can tell you I think that it does.
I said before it would be a mistake for people to extrapolate from this moment and assume that you know the environment all of social interaction.
No.
Food and beverage entertainment is not going to come back as much but I wouldn't about that once people know the divide is behind us there's gonna be such a huge pent up demand for people to socialize. We're seeing gets right now with people taking the does that does anything be disciple entertainment elements that we do they.
And now he was going to become even more of it the man.
In terms of the office.
We don't you know right now we don't have anything on the drawing board for the office, except for health care and.
Nothing, but we'll see what happens in how employers and employees and all that humans adjust their behavior as a result of does and we'll see it but I again.
Neil Young generation has done in that something lumpy they are willing to big the risk.
Because they cannot but socialize and I think that pull that generation. The line is very very between social activities and work.
I think if anything I think that the office spaces become more healthy interactive space.
But again, let's wait and see what the end they love it looks like but what else would not making any changes in live. We don't have anything does we have to really be concerned about.
Oh Im talking about the number of home sites, we have about.
Going back to your first question, we have lots 4500, once I see them.
Okay.
But again that's works I just earlier like <unk>.
Great.
Right.
You know.
You're talking about the median numbers are they gave for sales.
Well yeah. Those are the though so for the great bars, you have not stopped selling palms yet.
<unk>.
Alright. Thank you appreciate it.
Of course.
[laughter], Michael with JP Morgan.
Yes.
I can't go ahead, Sir your line is open for questions.
Oh, Hi, Hi, I can you hear me now.
Oh, yes.
Okay.
Yeah, sorry, hi relied heavily on my so first congratulations on the failed to building the pipeline Gateway Cafe.
I was wondering if you could provide more details on the Perkins purchase there are hanging around the cash distributions and thought around any development plan for the last remaining building.
Yes, I'd be a you're coming into live the buffer, but let me just make sure that I understood. The question. Your question was you wasn't that got the live with more.
That is the onto the said yourself the catches the result of the Broadcom.
Closing and you want that he gets a little bit more of a field for additional development within the pipe on gateways that well that's the question.
Yeah Yeah.
Okay. So you know for the.
This is nothing is going to happen very quickly I know that.
When do you expect the decision to up and probably within the excellent picked up 30 days, yes. So if somebody is going to happen quickly.
And.
You know this obviously is a two hour.
Strong liquidity, which again I mean, I think that every CEO in the country today. That's the number one thing that they're looking for is making sure that the liquidity is is in good position in terms of the teaching what what we have right now a approvals for here you have an ability to build oh, yeah, and you're going to just the uses weekend.
There was about 200000 square feet office or you can build about 100000 square feet of medical.
Now I can tell you the thinking was to build a the medical we have demand right now for all of the medical space, which would be very complementary to what we haven't city a pole and we also can bring back and documents from that project the bigger project or the great Board.
And a and then has gateway as as we started looking ahead. So it does have near future. We are starting to look like now on planning all saw above the 95000 square foot.
So say the view that probably will be an outpatient surgery.
Fine.
The imaging and things like that what we have a.
The demand for that says now we have users who want to be done.
Okay, great and.
My second question I'm, just trying to understand a little bit better you know that that's or development plan.
Sales and but I guess for the second half of the year you mentioned that there is interest from homebuilders. Her another 400 home site you have.
Oh, I get that beat that name and inventory. Another 230, largely completed I'm, just curious like why but the hesitation amazing things and being able to potentially close.
More deals there in the second half the year.
More jet market uncertainty that constraint from and labor or anything else any other <unk>.
Around like yes.
No I, we don't have any constraints, the labor and ER and they think that I think we look out just making sure that but we structured deal that does hits our drives that we would love to see and what's the visiting the listened to be comfortable.
Eggs kids pool and today I mean, you have to those who have more of an interest in a cash acquisition. Some the lives or have a relationship with land banks. All those I was looking for taking down some I'm looking for sometimes a little well induction and the good news for US as we can do any of those and those are the discussions with.
Having right now with a different builders and well take the buildings that we feel optimize the a the value for the comedian and for US. So yeah, we're not under any pressure to do anything by yearend.
And all these discussions will end up being concluded based on what makes sense for us and what makes sense for the business. So in some cases, we will we were big or somebody you might say I'm willing to pay it gets placed in some cases, we'd be very happy today to do more don't they don't talk with the deal.
On even include some outside these acquisitions and some of our relationship with land banks for those who might want to land bank. So.
The asking is.
The second talk what else is every place to go back then that he was for two decades to get here and we're not Gonna go ahead, and do something but this concept land and the subs the pricing structure. So those who have already made a commitment from the builders community to those because we will not be doing any but there's an in service and the good news.
Yes, we have the gas and the liquidity to be able to do that.
Very interesting okay. Thank you.
So.
And once again, if you would like to signal with questions. Please press star one.
Our next question will come from Steve Kim with Evercore ISI.
Yeah. Thanks, guys I appreciate all the color so far couple of Ah I got a few scattered ones here, but.
Just generally to start off at a higher level a meal you talked about the strength of the market I believe being fluid. What's the word you used and you know as a result, you didn't want to extrapolate demand you'd have to confidently into the next few months, which is understandable, but I wanted to clarify have you actually seeing volatility.
And your week to week demand traffic that kind of stuff or is it hasn't been very steady and strong, but you're just overlaying that dose of conservatism.
Well, we have not seen volatility in our markets, what I have seen as a.
Moreover, if the psychological reaction to members of the upcoming got them to virus and people are talking about second wave and third wave and things like that people are talking about <unk>.
<unk> economy. So this is not feedbacks I'm getting from our build those are the buyers. This means looking and saying you're fighting the buyers.
And I keep on hearing from people doesn't he's done is gonna be backlog that we as a second wave.
I might hesitate and you couple that with a good half months away from what appears to be ready penalize collection.
In the market like ours, what a lot of our buyers are especially and they have the ability to wait.
Hi, everybody cautious about saying that because I've seen great five six weeks before that that same might continue into the eye of the store and most of what could be an overlap with the second wave would the election I'm a very close enough doesn't have all these things then I watched and that's that's what's coming policy.
Yeah, Yeah, that's what I figured I'm sort of asymmetric risk when you're a large around all the like you guys are so I get it makes perfect sense I just want to make sure. It was squaring with <unk>, we were saying because we had not seen any kind of volatility. It's just been uproariously strong thus far so I just wanted to clarify that following on can you speak to how price.
<unk> has been progressing.
You know a great park. It have you seen any ability to have an upward inflection and pricing recently.
Yeah, Okay, but I am I in all kinds of I have not follow globally.
Nice movement, the way I will follow in any more stable market it's been more.
Looking at what we've seen from the builders in terms of number of sales the quality all of the buyers and their ability to qualify even close oh, but we haven't heard anything in terms of.
Price decline.
Well I would right I'm going to best at this point you more flattish in the last five six weeks I think they've got more focusing on making decisions rather than try to push supplies three or 4%, though [laughter].
Okay, and then whether it's back to indicate way I think Youre. In addition to the hunton well that's actually talk about 100 square feet a medical space, you say that kinda. Additionally, be develop I'm curious if it's we think about the high valuation you got per square foot for the kind of more recent one I'm curious are there sort of trends.
In the labs or other.
Aspects of the health care demand such that you're going to see a particularly.
Strong premium for new build I'm, just wondering whether or not there's just sort of some emerging.
Trends there on the health care side, such that retrofitting space, it's not really conducive in the same way that moving into a new space like you could offer what would that would be.
Well, Steve I tell you you've heard me say that's many many for many years I think what we're seeing and what we're hearing is that.
People, who are looking at office or not whether its health data or whatever it is R&D.
Not only looking at it building, but looking at what else do tend they comply to attract talent and that's why we have focused there's so many years on building because he's rebuild was today if you're building a medical facility over here you have housing yeah.
Public education, you have open space steels everything else I think it's the synergy as I said of all these elements coming together, so why because opinion and I think that's what we're hearing is that some people are looking that thought office building.
But I'm not looking to be office building, but looking at the community itself and the fact that they live in the community that that has all this access and therefore, they can you talk to tell him to do watch out.
Yeah makes perfect sense or and then lastly, I think you alluded to the fact that there was some remaining acreage and I just wanted to get some clarity around in addition to the hundred square foot of medical space and you could develop.
It is or is there a certain amount of acreage that could also at some point be subject to future development rights.
Sure. So let me just remind you that when we sold the land keep walk down we sold it was in thousand it's up to 2 million square feet and of course spend as well as opposed to say that well welcome bill whether they idea that they're going to build another million square feet and that's when they were thinking this is gonna be their headquarters. So obviously, we have the ability to be.
A 2 million square feet. So far this is only about 10 million still beat so they actually watch them as if we decide to intensify the land that we exist within the bike home Gateway, we can add brought another million square feet over the easy and does that yes, so it's something that.
We have they have anything to do.
Got it okay, that's very helpful.
Great I think that was what I need it okay. Thanks, a lot guys congrats.
But they just seems to healthy.
Thank you that does conclude the question answer session I now turn the conference back over to Mr., a dog for any additional for closing remarks.
Well I want to thank everyone.
For dialing in.
Just want to make sure that we go back one number that we gave on the remaining number of home sites.
Going into that I was right with 4000, and then as long as that 4500. So it's still a thousand on sites just to make sure that at least the records you Oh I hope that we will have another call. When everybody is healthy and again, we are always available for any type of discussions you guys. All my point.
After the because over so appreciate your dialing and she did stay healthy and until the next quarter. Thank you.
Well thank you.
Does conclude today's conference what do you think you for your participation have a wonderful thing.