Q4 2020 Five Point Holdings LLC Earnings Call
Ladies and gentlemen, you're currently on hold for today's.
Five point holdings, LLC fourth quarter, 2020 conference call at this time, we are.
It's still a meeting just for participants and should be on the way and approximately two to three minutes and you appreciate your patience and holdings. Thank you.
[music].
Greetings and welcome to a a five point holdings LLC fourth quarter 2020 conference call and correct me all participants are in a listen only mode. That's.
For a reminder, this call is being recorded.
Today's conference May include forward looking statements regarding <unk> five point, that's that's a financial condition operations cash flow share for.
And for T J and the prospects forward looking statements.
It represents only five point of custom and so on the day of this conference call and are not intended to give any assurance as to actual future results because the forward looking statements relate to matters that have not yet occurred. These statements are inherently subject to risks and uncertainties.
And the factors could affect future results and may cause five point's actual activities and results to differ materially from the activities and results anticipated and forward looking statements. These factors include those described in today's press release and <unk>.
Five point F E C filings, including those and the risk factors section of the most recent annual report included and form 10-K filed with the F E C.
Please note that five point assumes no obligation to update any forward looking statements and.
Now I would like to turn over the call to Mr. A meal of Dodd Chairman and CEO of a five point. Please go ahead Sir.
Thank you Sir.
Welcome to all of the call and happy St Patrick's Day.
A year ago yesterday, we had the over yet and when.
And then Paul on the heels of sending everyone home.
The comply with the Covid stay at home orders.
And to ensure the well being a part of a associates.
And then just a few days, we said that most of them I would imagine the steep.
The shutdown and discretionary spending goodbye.
Preserving cash and protecting all of the balance sheet.
And that time, a great part of a bunch of chose not to sound and the home sites for the balance of 'twenty 'twenty and order to allow all the buildings to sell homes without the pressure of the other than the.
This allows us to continue to optimize the base of all of the landfill and can maintain the value of all of them.
Each of the limited resources and all of these submarkets the.
But we have approximately $180 million and cash on.
And the Great Board.
And so the balance sheet and addition to the cash we have on the company's balance sheet and gave us the flexibility to make these type of a tactical decision as we believe necessary.
We did this and while they have to get all the communities cope with the impact of Novartis, including the amazing that'd be neither the B W.
In short supply and the early months of the pandemic.
Good day, and we look back at the very unusual year.
The problem that we accomplished all of our goals for two and he's right.
And I stated in the earnings release, our balance sheet is well positioned with ample liquidity and load average.
We believe that all of the assets have become more valuable as a result of the strength of the housing market and the migration of homebuyers. So the five so for me to do that we've got a building one that include quality public schools, a bomb the adult the space and the state of the all the sports fields and the amount of fees.
At the same time the bombs among all of them associates have grown stronger and the commitments made by everyone to ensure that the company comes out the sound good.
Has it been more effective than any gene and building program that's all of it.
And we're seeing companies with a strong culture, we're able to function much record and is what you want and boylan from both of the boat.
Excuse me.
That's one of them must be I'm full of it it's turned on the bright spot there and the economy was the housing.
And by lower interest rates and what I have the I'm, referring to as a cocoon factors when people find themselves and the more time on their homes.
According to Corelogic, and 2020 median prices of existing homes and L. A county went up by 18.2% and 12, 6% and Orange County.
What we have seen so far in 2020. One is the strengthening of the housing market and Joe and then the increase when the demand for homes and all of a a movie in particular.
The resulting and the bigger interest from builders for BIOLASE.
And the Great Park, comparing the home sales and cancellations for the period of December 2019 through mid March 2020 versus the same period, and 2020 and 2021 and the number of homes sold increased on the other than the 77 to do 157 and the number of cancellations dropped.
The unfortunate wants a term.
He will bring and almost doubling of the rate of net lease.
We view of the friends and lower cancellations and the leading indicator of homebuyers confidence and.
One of the ability to qualify for the mortgages.
Kind of engage with all of a guess.
The next phase of Homesite sales, which we currently anticipate clothing and Q2 Q3.
Yes, it's a base.
The proceeds from these sales are expected to be sufficient to pay the loss of $45 million of priority of legacy distributions.
Which totals 476 million and provides for the distribution just like for them.
We also recently kicked off a wholesale and all of a pivotal program at the Great Park with the New home company.
The program is off to a great start on March six the.
Eight homes, whether it is for sale and within a few days five of these homes were sold and one more of these are at prices between 1.5 and $1.6 million.
And the lunch yeah with the sale of the addition of 487 home sites and Q4 P. M. D. C price point toll brothers and gave me all the builders are telling to you you've got a building the first model homes or getting ready to do so very shortly.
The first home sales and the sports space, which also includes our fifth the Lamont a scheduled to start of next month.
And good day, the sports space and doing well.
And I wonder and 68 homes.
Later, this year and prospective buyers will be able to visit and approximately 50 separate the metal of homes that would have a very wide range of pricing and what gave them for it.
Broad based upon bars.
The legacy I wouldnt be the biggest provider of a new homes and Los Angeles, probably my fault.
I have been and this business for a 55 years and I've never seen the political involved and I guess it was more favorable focused on new all of them.
There are multiple of block there are multiple pro a housing goes and the pipeline and the Governor has set a target of a building 3.5 million new homes by 2025.
Which is approximately a 500 per cent increase the the current annual pace of home production.
This is all tell me, it's a pass digits and severe a housing shortage in California that has been growing for many years, while keeping a really in all of the markets what the.
The demand for housing and living and supply of land for a new homes the.
The states most recent the housing needs assessment, that's for them from this back on shelves and ease of over 1.3 million housing units and southern California and over the 400000 units and the Bay area.
And as part of the Stakes of assessment, each county and city within these regions get allocated to the share of the housing need which is and then the why non core and the zoning and Jennifer and can meet their housing needs for everyone and the community.
We are having active dialogues with our local public partners to explore opportunities for the intensification of within some of a bulk and communities to provide more housing and the system and mitigation mitigating the shortfall.
We believe the the next few years will provide a good environment for the housing and.
And the largest provider of diversify that had a bunch of opportunities in may and markets in California, we are positioned extremely well to capitalize on these conditions.
Finally, with the vaccination underway and the whole debt by early summer.
We would be able to start having in person meetings. We are currently targeting June has the potential and best of meeting that will be both virtual and in person.
Now, let me turn the over to Alex who will report on all of a 2020 Q4, and yet and its financial and then we'd be happy to take questions. Afterwards.
Yes.
Thanks Neil.
A summary of our financial results is included in the earnings release issued yesterday and I.
The Saint Kate was filed last week.
Our financial results for the fourth quarter were highlighted by the previously announced second round of land sales and Valencia, where we closed on 442 home sites and entered into a contract to sell of additional 45, which will close in 2020 one.
Our cash position improved by $27 6 million, So 298 million and we had no borrowings under a 125 million corporate revolving line of credit.
Debt to total capitalization at the end of the year was stable at 24 point 90 per cent.
Net debt to total capitalization at the end of the year taking into account our cash balance was 14, 8%.
Revenues under management of 115.6 million for the quarter.
After eliminating revenues from the other consolidated entities, a consolidated revenues of 100 and a $11 seven day.
The land sales and the launch of the generated $105 5 million and revenue.
Management fee revenue of $5 6 million was recognized during the quarter, primarily as a result of management services, we provide to the great Park venture.
SG&A for the quarter was $24 9 million.
The company's share of fourth quarter loss and earn consolidated entities, which includes the great Park venture.
Gateway commercial venture and the newly formed Valencia, Atlanta, and venture was $3 1 billion.
Net income was 2.7 million for the quarter.
The company has four reporting segments.
Once a year San Francisco, Great Parks and commercial the segment results for the fourth quarter are as follows.
But once you're a sudden just consolidated for accounting purposes total revenues for the warrants for the segment were 106 million for the fourth quarter, which included the land sales as well as Martin fee revenue, we expect to collect as homes are sold.
We closed on 442 on sites for 102.2 million.
We entered into a sales contract for an additional 45 on sites, which will close in 2020 one.
210 of the 442 home sites closed or sold to the newly formed Valencia land bank venture and what.
It's five point items.
A 10% equity interest.
The one thing for storms to facilitate and the answer is it for once a year. So homebuilders, who are pursuing balance sheet alternatives for land acquisition and Justin current delivery for the home sites.
Revenues associated with these closings a reported as it related party land sales.
And 10 percentage of the gross margins on the landfill is deferred until the landbank solves the land for the third party a homebuilder.
The once your land bank and she is and one consolidated entity and its operations will be accounted for under the equity method of the channel.
Five point contributed $4 2 million sort of a land bank and the fourth quarter and $1.6 million of the gross margin from the sales of the land bank was deferred through equity and loss from a consolidated entities.
The one sort of a segment profit was $27 5 million for the quarter.
The San Francisco, a segment is consolidated for accounting purposes, and recognized a loss of $3 million for the quarter, which was primarily related to SG&A for the segment.
The Great Park segment includes the operations of the Great Park venture.
The owner of the day price neighborhoods.
As well as the management services provided by the management company to the great part of essentially.
As a reminder, we own 37, 5% percentage interest of the great pipe venture and 100 per cent of the management company.
The operations of the great part sensor or a tender for any of the equity method of accounting and therefore, the assets and the liabilities of the Great Park venture are not included in a consolidated financial statements.
The Great Park Centre is a self funding operation with no debt and <unk>.
Had a cash balance of approximately 128 million at the end of the year, which is not included and five points consolidated cash balance.
Ownership interest and a great park venture, our EBIT percentage interest of which five point on 37.5% or legacy interest.
Holders of the legacy interest are entitled to receive priority distributions of available cash and then the amount of up to $565 million.
To date.
The legacy interest of received distributions of 431.3 million, including a $76 3 million legacy distribution, which was made in January of 2020.
For the remaining aggregate distributions payable to the holders of the legacy interest total $134 million.
Of that 134 million the first $45 million will be paid for the holders of the legacy interest prior to the commencement of distributions to the holders of the percentage interest.
And we anticipate the next day had a volume sales of the Great Park later this year to generate enough available cash to fund the 45 million priority distribution for the holders of the legacy interest and to commence distributions to the percentage of interest of which five point of oversea 37, and a half per cent.
For the first quarter of the Great Park segment revenues grew 7.2 million, which were primarily related to a $5 5 million and management fee revenue recognized by the management company for services provided to the Great Park venture.
Net income for the Great Park segment was point 4 million for the fourth quarter, which was comprised of approximately 1.6 million of income on the merits and company and a $1.2 million a loss from the great part of the mature operations.
The company's equity and loss for the great part of the answer after adjusting for a difference of the investment basis was 1.3 million for the quarter.
Our commercial segment includes operations of the gateway commercial venture.
And management services provided by the merits of any company G of the gateway commercial venture.
We own 75 for a sense of the gateway commercial venture and 100 per cent of the management company and the operations of the commercial gateway venture are accounted for under the equity method of accounting and therefore, the assets and the liabilities of the gateway commercial venture are not included.
And our consolidated financial statements.
The commercial segment revenues were 2.2 million for the quarter, which reflects a reduction of rents as a result of the sale of the two office buildings occupied by Broadcom earlier and the year.
The commercial segment loss for the quarter was point 1 million.
The company's equity and loss for the Gateway commercial venture was point of $2 million.
With that I'll turn it over to Sarah the operator for questions.
Thank you if you like the after a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure your mute function is turned off.
Cause I hear a signal to reach our equipment.
Kevin and press Star one to ask a question and a little pause for just a moment hello, everyone and often needs a signal for questions.
Okay.
We'll take our first question for Michael Rehaut J P. Morgan.
Okay.
Yeah.
Hi, This is a lot of home and on for Mike and Thanks again for taking my questions and.
Grant's on the sales at Valencia, I wanted to delve in a little bit into the sales trends and again a great Park.
Appreciating some of the commentary you gave a year on year. He gets out of the more curious kind of sequentially, how things have been shaking out for the builders. So far you know.
This quarter and and last quarter.
Well, what we're seeing and the great part is actually a really strengthening threatened a.
Starting from the beginning of the year, a and a very meaningful way.
All right.
In the past I used to weapons the pre COVID-19, we used to see about a net 90 10 home sales and actually and the beauty of adult.
The March of last year, we have we were selling out of 22 communities today.
Today, we're sending out of 15 communities and we're seeing the current somewhere between 20 and 30, sometimes net but the more important thing is we really see very little of cancellation and last week for instance, we have plenty net.
Seven zero cancellations and that tells you the buyers do not want to walk away because home prices are going up and and they know the business wouldn't be able to sell the homes for Hyatt, but the.
Also present for the building that the buyers out of being able to qualify and the interesting thing that we've been watching and light of the movement and and the tragedy.
Is that all of the buyers and.
And the last phase and the recently had the 22% cash buyers.
And about 78 per cent, a using financing and both of them, putting down 35 per cent bond payment.
So that's.
And that's important because as the market watches a potential uptake and mortgage rates. You know we are not that one of the because all of the buyer has a different profile the buyer.
And you know I feel like it's important for us to highlight that because how mortgage Jason might impact the first time buyers and so of the market.
Not necessarily housing and $5 boxes here.
And as a result of the acceleration in sales by all of the build of we now are talking to the brokers and moving up potentially out of a land.
And then sales the next phase at the right.
Park, a I'm, hoping that we can actually complete all of that.
Sometime in the Q2 Q3 I can tell you that you know we went out where usually we go out to our guests the lives with a.
The request for them to tell us what the interest says and then we start so the readout and as of yesterday afternoon. A every product that we are offering has a suite of from the village community or a more so we're very very encouraged about what the senior the great bug and and I think youre going to see the at the St. James is getting a.
Kitty and the lunch as well.
That's really encouraging I just had a follow up on that I believe you still have about 4000 losses to be developed and sold at Great Park is there any sort of.
A quantification or a cadence of development and sales and that you're expecting to do a great park for dose on sites.
The Q3, Q and for the full year and over the next couple of years, just how to think about the price.
I think it's a question and you know what's the size of all of the offering I think right now and looking at potentially of about 800, and maybe it pushes a 900 on site sale.
L a and the Great Park for the next one.
Again, we pay close attention to the segmentation of the product to make sure that we don't have overlap of thoughts are the suffering pricing structure.
And I think we're looking at about eight to 900 and.
And you know as I said before although we are at this a has a number right now that is a max of 10005 hundred and both of them.
Would the would the state's movements right now towards allocating needs of housing for each of the cities and counties. You know we are trying to see how we can assist and bath and potentially increase the number of home sites at the Great Park since we have the capacity for on the land point of view.
Add more homes, and we're hoping that that could be something that could benefit the public private partnership we have with the city of whereby.
Great and then one and Valencia, and if I could squeeze on more and I'm just curious if you're seeing some changes and I'm a builder land acquisition strategies I, if theres any changes youre seeing in the underwriting criteria and and.
What was kind of the driver to treat the likes of Atlantic Pentair.
Well I haven't seen anything in the underwriting does change the obviously the builders have developed a disciplined in terms of the underwriting does I think as being consistent and for many years, especially the the ones that we we partnered with and all the communities the large publics.
And I think that's what I can tell you is that we're now getting a lot more.
Interest on deposits about buying more land I think the loss of the board of the John Burns issued a there was a consists of a about the sentiment of the brokers and the summary of all of the oil.
And closed from the large brokers is a consistent message about.
The need for a more land.
By the lives and as I said before we've been waiting for this for a long time, because we have been positioning the company to be on the path of that growth.
And we have the largest provider of land and primary markets and the state of California, and and it seems like the market. There's finally, a you know picking up and a big way. So we're very excited and I think youre going to see a lot of good things happen over the coming and keep the three years in terms of a number of.
And what we try to do is we try to be a partner of as much as possible to the both of those.
Just a day if you read what they're trying to do the ease of buying land.
Off balance sheet and they can get on a roll of adoption and that's a that was the logic behind establishing our own land bank. So we can provide that for the service for people, who would not want the big the land on the balance sheet and cause outlandish thinking expenses.
And also if you listen to all of the Ceos. The all are talking about getting land that is ready to go in terms of building homes and trying to stay away from and have any land development and patent and risk.
That's what we do and we've been working on it now for many many years to go for the 1000 and process to go through the land development to build a state of the art schools and amenities and so the builders can actually do what they want to do which is simply a built homes and sell homes and not have to make promises to the other buyers about a potential and amenity come and go to a potential.
The school coming the can actually point to it as the buyers and I'm looking at their homes. So we feel that the strategy. We put the players. Many years is now starting to develop the a very nicely with the strategy of all of the business.
Great. That's very helpful. Thank you.
Sure.
And next we'll take a question from Alan Ratner of Zelman and associates.
Hey, guys. Good afternoon, and congrats on all the progress here first question a the the Great Park land sale line and thank you Eric for the color on the distribution any chance you can give us just a rough estimate assuming you do kind of sell of the eight to 900 lots of Youre expecting what what dollar amount that might come a come back to you and.
Terms of the distribution.
Yeah.
Well, we have not the close it but all of a since you're asking we'll tell you a we a weird.
We are expecting somewhat of a between the hundreds and 20 of $250 million and distribution. This year as a result of that which as you know because it would be exactly this is very meaningful.
Absolutely that's great news.
And thank you for that second question and I apologize if you've commented on this and that in the past and I don't recall, but I'm curious if you've had any conversations with the build to rent operators and any of your communities that you obviously that seems to be the new hot part of the market and all of the public builders are getting into the space or at least a lot of tomorrow and and certainly the a.
Yes, if our operators are as well and it would seem like that would be great opportunity for you to accelerate some of the absorption of your your lots and the communities given that it's a different product type its not competitive with the for sale a guy. So curious if you're a going down that path and if so.
And how does the underwriting differ for those for those buyers in terms of how they're thinking about the value of the land.
Well, we have not engaged any of the for rent both of those but I can tell you that we are looking and got it ourselves.
And as part of our you know the commercial segment, we expect to add apartments, ultimately and potentially a single family for rent as far as a part of portfolio.
And the way it's worked for US is where the land bank being established a week.
And potentially it could put a.
I think the land and the land Bank and then take a dollar from the land bank to a buildup and and rented a that's a process that we're going through as we speak we have of having these discussions with the board as we speak and and so what I think of you shouldn't expect the as the year unfolds and as we have more.
For discussion.
With the with our board.
In terms of our strategy going forward a hopefully.
Hopefully, we'd be able to share with you more and more of a what.
We're thinking of in terms of the for Rems program.
Great sounds exciting and.
And then and it just slipped a bit the paper in front of me because he thought I was being a little of the team.
That's a and the distribution he said a please tell them. It's a 100 million so and once the video for 100 millions of dollars of distributions of iPhone.
I'll I'll I'll bring you down to 90, Eric just to make you sleep better at night.
[laughter], you've known them for a one well a lifetime.
[laughter] understood guys. Good luck. Thanks again.
Thank you.
Thank you and next we'll take a question from Stephen Kim Evercore ISI.
Yeah. Thanks, a lot guys a let's.
Let's see here, Mike I wanted to touch a on.
On the comment you made about the political environment turning towards the prioritization of increasing supply I think you said you were on.
Having conversations about increasing density and some of your communities I guess, the first question just kind of big picture.
I assume you meant Valencia and Great Park.
But is there any potential opportunity for the timeline and San Francisco to accelerate a.
Or do you think the environmental concerns there effectively supersede the desire for you know the housing supply and is that kind of out of the conversation as a result.
For now.
Well a state.
And first of all of a nice to hear from you and and blood everything is well with you.
Thank you so we contemplated whether we wanted to talk.
Talking about San Francisco or whatnot, and we really wanted the my comments at least to be acutely focused on the residential just because it's on everybody's mind right now and everybody knows that the residential market is doing very well and and then a third for I'd not want to dilute the strong message.
We're a discussions about you know commercial all of a San Francisco. So we contemplated the question and you're ready to pounce on it so here's the answer.
If you recall for the last two years since the Navy came out with the press release and he started dealing with the Asians and San Francisco.
And I used to say the unfortunately, the political environment that we let the existed before the November.
And the fixed line that existed between the federal government and the state of California, and this is another big secret was not helping a we found ourselves up and debt and that a friction.
What we've seen since the change of administration and since now the.
We've seen the amount of influence that the state of California has and Washington D C.
We did not let started seeing a lot of more of a movement, we've seen and reports from the Navy about cleaning up a we have now in front of US a schedule of the came out of the navy that shows that they're ready to deliver the first parcel a in 2020, three which is a very sizable parcel and roll through.
And the rest of the puzzle and pinpoint and 26. The reason I didn't want to say it was because we had a working right now extremely closely with a representative.
And the state level, but at the federal level with the with the city of San Francisco.
Multiple conversations happening to try to make sure that these schedules and these commitments a phone.
And that's why I didn't want to say anything on the whole thing I was hoping that I can actually a.
The liver that means a in the next call when we have more a confirmation, but I can tell you, but I am feeling much much better a.
About the way, we are and San Francisco and the types of things are going to move so going back for the first part of your question I think the opportunity and Densification and and I didn't want to say increased density because I don't want people to think what we were talking to our partners on the public side is going and the building a bunch of very high.
Dented the product in the at the Great Park and you've seen here.
And we'll probably be right now of the density that is almost 50 per cent of the density of what they're buying a company is built around us. So we have a lot of ability to do intensify without going to mid rise and high rise and a lot of intensification and not that we won't do it but we have the capacity in the lunch yeah. As you know we have a lot of land and that's something that we.
And we'll visit as we go with and the beginning of that they still have plenty of 1000 homes out of us and we want to make sure. That's really helpful. In terms of any needs that becomes a yes, San Francisco is a different story because of San Francisco, if there's a willingness by the city to go through a higher density a lot of the product that should be built on the wall.
San Francisco is more of a higher density high rise mid rise product mixed use and therefore, I think San Francisco a has a lot of capacity to a to intensify a those are.
And I really early discussions all I wanted you.
You do know is that the environment and California has shifted.
And in and a very very meaningful way to a full housing. The problem is the process takes too long the live.
Isn't much stand and the primary markets and that's why we find ourselves and the unique position pop into a public problems.
Well, that's great and I appreciate that and a don't worry of your secret say for me I won't tell anybody.
Well I know that.
I the only read about it this afternoon.
[laughter] a yeah so.
And that's very helpful. Second question relates to a great parks, specifically it took an impairment.
On that a.
Last year, when everything was all up and an uproar and I remember the you know kind of the J D nature of that sort of precipitated that ore and it compels you to do that.
If you were to get some additional homesites permitted I'm wondering if there's anything about that you know impairment.
That might influence the cost basis, a lower or just if you could just talk about how you would anticipate the cost basis to be determined a.
From you know a these.
And these extra on price it you know that could.
Conceivably be created.
So I'm gonna have if I say something that is a.
Inaccurate and he can jump in and correct, but let me just put a gun perspective the.
And the impairment, we took was $30 million and it's really a very very small number when you compare it to the total budget and total revenue.
And I thought so $30 million is not going to change the basis of all of the cost and any meaningful way the impact the margin.
We did that that time is we took a very conservative approach.
When the pandemic started by making assumptions that were based on all of you a best time of how the economy and how the Mark of my group and the main reason why a.
And the impairment of places because we assumed that home prices are going to stay flat on.
All through the year as builders were trying to sell and that's why we didn't sell any more of Homesites and we actually were told by our auditors that if we wanted we could have a void if they can the apartment and weight, but I did not want to not do it because I wanted to at least a deal with it for me.
The point of view the way I was seeing the world and that's nothing new.
Looking back obviously that the market behavior and the much about the way and if you wish to revoke the clock. We've thought of you wouldn't have taken a bit and but not what's going to happen, though is with the addition of the home sites.
And with the home price appreciation and moving up a.
And that should expand the margin over time, but the mother of all.
Does the button.
Got it.
Okay that and help them out just a clarifying comment you indicated.
Indicated that the density and Great Park I think he said it was about half that of Irvine.
And I assume that's including all of the land in a you know that's not talking about the portions of the of the sites that have been developed a you're talking about the entirety of the parcel right.
And that's what part of it.
And that's what he's the only 50%.
Yeah on what I'm doing as a yes, I'm I'm, saying, but if I take the the number of homes that we have a puzzle on which is 10005 hundred divided by the visible acres we have.
And we compare it to everything that surrounds us we would look.
And if that's half of the density.
Well, let me put it this way if I were to take the density up by about 50.
The 50 to 60 per cent of what we have done so far and the density we have built we probably couldn't build another 7000 homes. So we have a lot of capacity without starting to get into the area of very high density and that's what we have been analyzing and looking at and obviously the analysis of the weight.
It's a very complex analysis, because of capacities and traffic and all of that but from a pure.
So the point of view a.
If I were to just go up to what is the R&D I can probably and it adds anywhere between five to 7000 homes.
Great Yeah. Okay. That's helpful. And then lastly, I know that at.
And at one point there was some conversation.
The speculation on might say about Concord, and I know when I was very actively involved and that and then that deal fell apart what I haven't heard what I have no idea if there's been any additional a movement. There in light of your comments about you know, California, generally and the political environment around housing whether that has.
And any way shape or form come back into the conversation or if theres any other potential sites. A you know that are of interest that you're doing any kind of active work on.
Feasibility analyses and and that kind of stuff around.
Sure nothing has happened on corn on corn in particular a.
I can tell you a.
And discussions that I've had.
With the state.
The.
Of identifying land that the state the homes and finding all five of partners to put them on a public private partnership.
The body of housing and.
And with the you know as you know with the role I played up there and with the amount of involvement and who we are as a company and the state and that's what I see the possibility.
The question is is focused on phone calls and particular nothing's happening of course, the Concorde, we stopped getting involved and Oh.
And right now candidly, we feel the there's so much value back and that we can extract from our own communities and life of the shifts we're seeing the positive shifts a focus of being much more on the ultimate, especially the there's only four of US that you off of the office every day and everybody's busy at home.
And we have a big lift and San Francisco So.
If you ask me is there going to be opportunities and the future of the answer is yes, but right now we're focusing on what the rehab.
Great and then last one I promise just kind of big picture and that's what really at the very early stages of the Valencia, which is a multi decade kind of a <unk>.
Project I'm, a I'm curious as to whether you have any thoughts about how a.
A rapid acceleration and home prices at the beginning of the project.
You know influences either the way you think that project ought to be valued or a.
That's a how you anticipate a what is the optimal strategy for working through that project, because that's kind of what we're seeing right now you're a home price was up you know mid teens year on year over year of comps and unheard of right and a really I'm not in any way, suggesting that's going to stop the near term, but certainly that's well beyond what you know for.
Years people were sort of talking about.
And honestly everybody kind of straight line of things. So the fact that it's happening right at the beginning of your project a.
On a selling does that have any implications for how you're strategically worked through that project and maximize value.
Well they see the answer is probably not really I think that would be obviously like to see a home price appreciation because that translates to a big movement and land price.
But you had the can be very careful when you're developing something like the landscape.
As you said, that's going to take a long time because of all of a long time I don't think of any of US expect the home prices to appreciate that the rate of 18% on an annual basis and that actually is a dangerous place to go.
And we tend to focus on what does the home price appreciation and meet the affordability.
And what we thought about the malls is staying within a range of affordability that allows a very broad base of buyers to be of homebuyers and that's why we deal with the.
For the product type and the diversity of products. So if you look at the right now in and <unk>.
And in Valencia, and you will see that we start actually a 700 and twenties splits the tones, one bedroom, which is an entry of a home for anybody who wants to move from an apartment to a homeownership and part of building equity and we go all the way to the 3700 and as I said.
And later this year and if you're Gonna go you have to spend a few days a bad because you're going to visit the more than 50 model homes that cater for all of that so all of the view was always about okay and I on the positive side of the pump price appreciation and the translation into value for the Haynesville, but also a cautious eye about the possibility that might start actually getting us.
And trouble so when you look at that.
The strategy of the company.
Even with non US a long time has been very very consistent which is the right the amenities and build the right schools and build the right mix of products attract the people, who really are not speculators, but really a homeowners and give them. The program that everybody is looking for in terms of amenities open space for us.
And as well as and health care, and and and public education, and if we stay true to that at the end of the day, we can actually navigate the cyclical nature of the business and a much by the way.
Yeah makes sense.
For a lot and we all appreciate it.
Of course.
Thank you and we'll take our next question from Ken Hanson with Stifel.
Well, thank you gentlemen for taking the time for answering my questions.
It was for a full disclosure of purposes and I'm listening for a while on the chartered financial analyst point, and calling and again I'm a shareholder.
And I'm not representing the <unk>.
Companies and interest as People's interest on the phone line.
I'm familiar with the Great Park, because and moved my office to a 400 and spectrum Center drive so I can look down on what Youre doing every day I also spent and.
Good many years flying off of those runways at all for a marine base.
So.
And I'm familiar with what you've done, but I really didn't the accrued and until I went over to the Harvard unless you're a.
A hockey game on December 19, and.
And found out what a truly world class community and you were building.
And so I became a.
A hold of just this last year and and the reason I did it because what I see you're doing and so world class yet.
And look at the performance of the class a shares and there's a disconnect there.
And you rightly point that out and your page 30 of your.
Of your 10-K, so it's not simple.
The people don't know who owns a share class and.
So I just wonder about why that is the wall Street isn't rewarding you for what I see the on the ground.
And.
What can you do about it is at the capital structure is too complex for people to do a discounted cash flows as a debt.
And the rewards too.
And the builders and their vertical and infrastructure costs are higher than the rewards too.
The innovators like either build a community and all of these horizontal of investments.
Is that just the.
One of them fundamental nature of the development business.
But I'm curious to know.
What happened and.
And what can be changed to.
T.
The other enlighten people or to financial and it is clear.
So that investors really rewarding for what a what.
Done.
Well first of all Ken really appreciate the nice words, you used about world class a communities and it means a lot of all what I heard.
And to us over here and we'll be working on these crazy and for two decades.
You see the there are people who are buying off of a shelf just because they come and visit.
And remember these and what we're doing so let me answer the question because it's it's a it's a great question and you're talking to a.
Frustrated shareholder.
A one of the largest share holders, who obviously probably the most of the surgeon because I put all my eggs and this basket I am very as.
As you know I'm very committed to this and have been for the longest time and it's very frustrating to see that the public market does not having the ability to see what you have seen a somebody who came and saw that so let me just take the first of all of you go into the heart of the a discussion that we're currently having with our board as to how do we educate the market.
How do we tell the market, but the disconnect between the value of our assets and the market is so large that it actually should be much more attractive for people who want to get on the ground floor of this company. So the.
Here's the things that I can tell you from my perspective.
<unk> been factors and here's what we are doing and order for us to help the market understand so far for the number one.
And as you know and obviously you do because if you're referencing page 30 of of the a of the relief of the of finding you know I know that you've read it we have a very complex.
Structure organizational structure that came about as a result of the combination of for entities and that was focusing a lot on tax efficiency for it either in the investors or talk with you and other things. So so we were looking at all of that and trying to figure out how do we explain to the market how do we simplified the.
The complex structure.
Number two.
Uh huh.
Valencia up until now.
<unk> has been a little bit of a mystery to people because a lot of people and I've been hearing about the new haul over lunch there for many years and a lot of people wanted to see it to believe it and the good news for US is the right now it's happening and you go up that the homes being built and Valencia has the largest assets we have and.
And that is turning the corner and I think that gives us an opportunity now to start explaining to people.
The value.
Does exist and Valencia, and the amount of cash that's going to come out.
Sure.
Half of all of the book value is.
And it's in San Francisco, and San Francisco, Nobody's Gonna ask questions about the location of San Francisco and the San Francisco market and how fortunate we are to be where we are unfortunately over the last almost three years. The noise that came up as a result of the navy and the contractor and all of that.
He has really created a lot of ambiguity about the timing and Steven was asking the San Francisco and we can actually pinpoint a shift and the stock price downward that started with the press release that came out of the Navy I mean I have a chart that they've shown on the board that shows of the company lost on.
The <unk> 50 per cent of a small kick out within a very short period. After the Navy came out with the snow and I think that's going to fix itself. This year would be with a inflammation and there's going to come out of the navy and with us being able to articulate more and more of the fact of the San Francisco is going to be back on track for at some point in time the.
A lot of stuff for a major factor is the only as of that has been a contributor for the company.
On the operation up and to the Valencia has been the great book and as Eric said, the mass eye and he was in my opening remarks, because of the priority of distribution to the legacy and the amount of the prior to the distribution being almost 500 millions of dollars of.
A lot of people.
Have a downside.
The other the 500 million and thought it was going to be paid off in two years five years of tenures because we you know, it's a big number and until that number gets to reschedule the fired five point towards not going and get the distribution and the good news is a weird announcing on this call that this year. It will be retired the prior to the components and.
And we're gonna get a $100 million hopefully more and distributions of the company.
Those are the factors that are going on.
Help us bundle of that and what we're talking about and I always find that he asked the being public for a total of almost four years, we're gonna be able to go out to the public most of it in June and we're gonna be able to articulate all of these changes that should change the behavior now.
You mentioned this kind of as Gaslog.
And I don't think of discounted cash flow is meaningful to anybody because our other communities. The over a two decade, sometimes and so when you start getting into a assumption that a lot of past two or three years that information is not helpful and who knows what the market is going to be doing in 'twenty five.
We believe the the best way for people to look at the value and the disconnect in asset value versus a stock.
The value is either a multiple of book.
And in a day.
And what we will be doing is we will be helping people like yourself analysts and investors to understand what day and a V is and how that's N V is so much disconnected from the market cap of the company, which you know for my perspective, I believe there's almost a full of ex this one.
Correct.
Thank you that's kind of appreciate that I am a product in the U S is a fantastic and county school, but I must say that.
I have to do a lot of work to get through the details of your.
Of your 10-K to find out what what sort of over there. So whatever you can do the simplify what I think a help the process. One last question for you.
There's a lot of development a commercial development around you.
Down here in Irvine, and the spectrum terrorists for example, a off the 133 and then I'll say, a sand canyon, five and a change and wondering with pandemic and with that local.
Build out and.
How do you see that impacting your commercial.
The build out.
Yeah, and we met and Susan a probably about three years ago to pivot all of the promotion into a.
The healthcare and life science.
And lifestyle retail and.
Food and beverage that is really more of an.
Added to the amenity to the coming out of the city of Hope a partnership is a big step forward.
And I think what you probably should expect from us is more and more in the space of commercial being the targeting healthcare and life science, a we have a lot of interest not because of us only but because of people who want to be and the same all of it as the city of hope and we have a.
A lot of people, who want to be part of that and even the city of hope now is expanding its footprint and asking for additional space and and they have now believe that theyre going to actually add potentially do more close to the hospital, so that expanding the footprint and there's a lot of people want to be within that area and I think that's why.
We don't see ourselves competing for and things, where they are buying a company in and office space and and and we work type of a program a week.
Much more focus on.
A very very specific segment, which is health care and life science.
Thanks for the time and the comments and those in Irvine and residence. Thanks for the the quality of a environment and create a here.
And I am familiar of Robert Stone and have a conversation with him.
A mutual friends of a.
Memorial Service and he mentioned it was a commitment to Irvine and two a five point and that's a that's a a indication of the quality of the people that you're tracking to your projects. So I appreciate that as a shareholder I hope a.
And the recent shareholder so I haven't gone to the pain and suffering of the previous shareholders have the.
I think with the clarity of that Youre going to bring to the a the medicine and value calculation.
And the streamlining of it and the legacy payments and that's gonna make things a lot easier. So I know from a from the Iran residents stay on point and thank you for it and you do and for my shareholder I think the things are kind of a appreciate it.
Thank you very much going on really I for sure.
Yeah.
Thank you [laughter] can once again at the start.
If I kind of Hudson County.
And we'll take care of last caller on the Q, Sean and Terry Nokia the Raws and group.
A good afternoon, and it's a pleasure here for you guys and the a lot of really.
And so for perspective rendered.
I really appreciate you guys touching on the San Francisco, specifically, because obviously that's in the area.
The words, the timelines and then possibly relative to the initial expectations.
And I was wondering if you had any update on like the other.
And we give it supposed to see any promise of upon a little slip and fall the next day.
And the medium for them.
I'm, sorry, Sean and I was having difficulty hearing you could you repeat the question. Please.
I apologize no I was just a hoping to a here.
And whether you guys have any insight as to whether you were going to see some progress on candlestick point this year and San Francisco like I appreciated the commentary on the shipyard and the timeline, but I know that you know what areas. The advanced prior to that and maybe you know, finishing with reviews and so I wondered if there's any activity we can expect to see there.
Yes.
First of all of the answer is yes.
And yes, but it's not the active would be probably what you can see and tons of construction, but you're going to see a lot of more a things we're gonna be able to share about a the.
And the alignment of interest that we have with the community and of the city and the fact of the city and and people who are representing a San Francisco and the federal government, you're going to hear us all speak with the same voice about a fulfilling the commitments made to the community a better and the city of San Francisco I didn't hear and see a lot of a.
All statements that they're gonna be indicating what's coming and you're gonna come next week.
We are having extremely constructive discussions with the city above the physician and Kansas thick.
And in house, Kansas and could actually move forward and.
As you know I have been saying all along that from a technical point of view.
As it relates to the timing of the Navy cleanup Candlestick is not a dangled in any of that but obviously, we look at it as one community that is all tied together commitments and that's what it made to the larger communities a lot of those benefits come from hunters point and I don't want to end up.
Sending the wrong signal for the community over there that we're moving forward with Kansas stake and abandoning the community of baby of Hunters point and the community over there that really was what else from day. One. So the short answer is yes, I think you should see movement.
We believe the 2021 and 'twenty 'twenty two would be talking with and then the last two years in terms of San Francisco, but I can't tell you, but that's kind of translate to a construction going on and.
And the next few months, but we are definitely on the right track.
Thanks, very much that's very helpful and I guess, just a a lot of lost.
A more question would be.
I wanted to you and I can feel like the city of hope with such a a great archetype of.
The type of collaboration.
The occupier of.
The real estate that you guys on that and I know debt.
And monetize the a larger amount of a gateway venture.
But I would also in the U.
On the clean some of the bill.
And then some land and a I was wondering whether you know things are going as expected so far with regards to the construction of the city of hope and both of you guys had a good outlook on your ability to generate more value from the residual assets on that.
Yeah, and and kind.
And then before before you were talking about the five if he knows of all the storm the CEO of city of hope and a few of you listen to all of the conversations which we have a very frequently about a what.
And we both and vision weird in terms of the relationship.
And that's that's a loan might actually move the share price.
And so they asked a question and first of all of the city of hope is under construction.
And every day and they're all doing the tenant improvements.
And it's moving.
Really well.
And we got a call from them two weeks ago. The the board had a meeting and they decided to expand the a the hospital beds, the floors and and they're now asking us for more space and.
And there's a lot of actually activity that's happening between the two of us that not only is going to be dealing with the cancer Center and the hospital, but also in terms of collaboration together and with others about and he imagined and health care delivery moving it in our community that they convinced of ex.
For the Ingrid also of Boston and the city of hope potentially of a about having a footprint and Valencia and and others, who are floating with the orbit. So.
We have a lot of a false right now on plans on adding on.
More health care for widens.
And to the area and hopefully within the coming quarter of two and be able to speak more about them, but I can tell you a wasp.
Last year has accelerated a lot of us we always we're thinking of in terms of a health.
The health care and all of the community so stay tuned, but youre going on here I think on some very encouraging things.
Awesome. Thank you so much.
Thanks, Rob.
Take care.
And that does conclude today's question and answer session and I turn the conference back over to Mr. Neil a head on.
For any additional or closing remarks.
Well. Thank you everyone for joining us I don't know, how you feel but I'm starting to feel.
Really optimistic of above whats coming both in terms of health and.
And all of them.
All of a dealing with the a with the virus independent make a we all are starting to see a life of the end of the ton of a this is a different much than the ones we had last year.
And I can tell you from my perspective a.
And I am so excited.
The slides so you got to go back to a normal life a.
With a backdrop does it so far is the.
And of our embassy and a I really want to take this opportunity to thank every one of other associates, who has contributed to our success the last year and is working very hard.
And from home most of them and.
Of the balance of the debt and I wanted a reward.
For their support on all through this period of it there's nothing and ease of use it for anybody.
But we're very very excited about where we are and we look forward to mortgages and we unfolds.
Unfold the balance of 23 of them. Thank you very much St Patrick's day, and thank you.
The.
Thank you and that does conclude today's teleconference. Thank you for your participation you may now disconnect.
[noise].
[noise] [noise].
[noise].