Q2 2022 Five Point Holdings LLC Earnings Call

you

Oh.

Greetings and welcome to the Five Point Holdings LLC second quarter 2022 conference call. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business financial condition, operations, cash flow strategy, and prospects. Forward-looking statements represent Five Point's estimates on the date of this conference call and are not intended to give any assurance to the actual future results.

Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risk and uncertainties. Many factors could affect future results and may cause five points actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

These factors included those described in today's press release, and five points SEC filings including those in the risk factor section of five points most recent annual report on form 10k filed with the SEC.

Please note that 5 point assumes no obligation to update any forward looking statements.

And now I would like to turn the call over to Mr. Dan Hedigan, Chief Executive Officer. Please go ahead.

Good afternoon, everyone, and thank you for joining our call. I am joining remotely today as I have COVID, and I'm still under the restrictions to isolate, so I am calling in from my home office. And we have Leo Key, our interim chief financial officer, and Mike Alvarado, our chief legal officer, at our offices in Irvine. And Stuart Miller, our executive chairman, is also joining us from Colorado.

I'm very pleased to update you today on the progress of the company through the second quarter of 2022. We'll also update you on our team's focus during the quarter and on the steps we have taken towards implementing our strategies.

then Leo will give an overview of the company's financial performance and condition. We will then open the line for questions to our management team.

Let me begin by saying that our second quarter has been a pivotal quarter for five point.

As we have focused our attention on positioning and building for our future.

Although we have not actually closed land sales this quarter.

and we record an overall $11 million loss, we are positioned with near-term residential land closings that will be profitable and will fortify our already strong balance sheet.

We have right size operating platform with our do more of less overhead strategy and we're executing a carefully crafted commercial property strategy that we can to produce results as well.

Let me break this down and give you some more detail.

Everything at five point today starts with our doing more plus operating strategy. we hate a human issue of rights? plus operating strategy.

While we have carefully managed our master plan communities, we have concurrently focused our attention on managing our costs.

of doing deserts.

Our efforts to manage costs and our prior quarter restructuring has now resulted in approximately 34% reduction in our expenses over the same quarter last year and approximately 25% reduction in our expenses from the first quarter.

We're continuing to focus on managing our costs, and at the same time creating greater efficiencies in our day-to-day operations as we continue to drive greater productivity across our platform.

with a smaller and more efficient operating team, we have done a top to bottom reevaluation of each of our communities, carefully positioning our high quality residential sales.

begun a commercial properties execution program, and reconfigured our engagement with our public partners in San Francisco, position our high value properties there for contribution in the future.

On the residential side of our business, our second quarter activities focused on moving our residential programs forward by closely monitoring the current macroeconomic headwinds facing the housing market.

Even while the residential markets have cooled both nationally and California, as expected, response to the Fed's aggressive and rapid interest rate moves to inflation. The Fed's aggressive and rapid interest rate moves to inflation. The Fed's aggressive and rapid interest rate moves to inflation.

Well located residential land in California is still in demand as the California housing shortage continues to be a dominant theme.

While there is some uncertainty in the new home market, the long-term outlook remains quite favorable given disciplined mortgage underwriting standards that have been in place, the favorable demographics to support the need for new housing, as well as the general overall shortage of housing supply.

Experience tells us that at times like these in the new home market, the very best well-planned and executed master plan communities retain the greatest value and move through market uncertainties with the best results.

FivePoint has two active and very strong master plan communities with a level of maturity and position the market that we believe will, along with our strong balance sheet.

Allow us to address market demands of a performing current market conditions.

Accordingly, we're moving forward land sales that are expected to close in the third and fourth quarters of this year, which will build profitability and enhance our ready strong balance sheet.

In addition to our high quality residential land strategies.

We're not beginning to market some extraordinary commercial and opportunities in both a great part and in blinchets.

With a majority of both these communities and our current stage of completed land development, we're in a position to begin blending our commercial opportunities with our continued residential land sales programs. With our continued residential land sales programs.

We are quite certain that these first-of-their-kind offerings in very constrained commercial markets will meet with strong market acceptance, and we look forward to building stronger revenues, greater cash flow, and greater bottom-line profitability as these commercial properties come online.

Of course, our strong communities and our unique product offerings are complemented by extremely well-positioned balance sheet to enable us to maximize value with patient offerings, allow us to match the right offering with the right purchaser. Thank you. Thank you. Thank you. Thank you.

The quarter-and-route balance sheet was rock solid.

with a 25% debt to total capital ratio, 128 million of cash on hand, and zero dollars drawn on a $125 million revolving, revolving, giving us a bail-bolt liquidity of $253 million. Giving us a bail-bolt liquidity of $253 million.

By 5.0 has a very solid balance sheet. We're looking to strengthen that position as we run an ever more efficient business. As we run an ever more efficient business.

We're increasing our focus on cost management and on increasing cash flow, a particular focus on carefully matching land development capital deployed to residential and commercial land sale executions.

in order to create more revenue with less cash deployed.

Again, our strategy is to produce more with less. 5.0 is driving efficiency in every part of our business.

Excuse me. Now let me turn to our community review.

The five point communities at Great Park in Valencia.

Continue to sell homes but at a somewhat reduced absorption rates.

As has been the pattern in prior new home slowdowns, sales slowdowns, coastal California holds up better than inland markets.

And that is what we're seeing in our communities.

During the second quarter, builders at our great park community sold 37 homes down from 94 homes in the first quarter to a large park to limit inventory homes for sale.

and our only open neighborhood rise the roof and the recently opened solace park.

Ryzen's nearly sold out with only 22 homes remaining to be sold. So was Park of 849 homes had the first model complex opened in July . The balance neighborhood's plan opened late August . The balance neighborhood's plan opened late August .

through September .

These nominees will greatly expand available homes for sale at the Grave Park and should increase home sales in the community as well. Local

During the quarter, we initiated the land sales process and our next residential community, the Deakin Vins for District 5 South. The Deakin Vins for District 5 South. The Deakin Vins for District 5 South.

a community of 719 homes and 11 neighborhoods.

Even with the uncertainty in the market, we receive strong interest and have accepted bids on eight and 11 neighborhoods that we're in the offering.

We're now working with successful bitters.

Complete your due gel auditions and move forward in the sales process.

These eight programs are with seven different builders, which provides our great park into a good diversity.

and our builder base and minimize the impact might of us… closes for its community.

Our printer has bids.

While Ventura had bids on the three main programs, we feel there will be more value created by either holding them off the market for now, or working with our guest builders to design higher value new programs for these three sites. The design higher value new programs for these three sites.

As for the eight programs we were proceeding with, the bids were highly competitive and the prices were strong.

We did not end up contracting for the last three neighborhoods this year. Our anticipated Great Park land closing is projected to be approximately 660 homes for the year.

versus our original projection of approximately 850 home sites.

And we'll push to the sale of the remaining 190 home sites in the 2023.

In Valencia, New Home sales by Builders total 168 during the second quarter, down from 211 homes in the first quarter. In the first quarter.

LUNCH has now sold a total of 725 homes out of 1268 home sites in our first 18 neighborhoods.

since our opening in May 2021 through June 2022.

We now have 16 open neighborhoods as two substantially sold out during the quarter.

We have also now closed our 500th home and the community is filling with families and taking on a life of its own.

We have also been looking at our planned home site sales in Lynch in the fourth quarter of this year to better match the current sales pace and market demand.

looking at the current market.

Our current expectations will reduce our anticipated lots of sales from our original projection of approximately 350 home sites to approximately 160 home sites. The reduction will be primarily

In the higher density product segments to avoid additional product overlap, and to give the existing builders more time to work through their open programs. In the higher density product segments,

As the master developer, we feel it is important to continue to monitor the market and work towards the stale success of all the neighborhoods in the community.

Sales these home sites will move into 2023.

Sam Francisco remains a priority for five point and for the city and county of San Francisco.

It is irreplaceable land along San Francisco Bay with a broad mix of approved development opportunities.

This quarter, a new executive director of the Office of Community Investment and Infrastructure, the lead government agency for the project, was appointed.

We're actively engaged with new leadership to understand the economics of the current development plan and how the current autonomous timber repalals are going to move forward across the two sides. We're going to move forward across the two sides.

Go out, cannel stick to move forward ahead of Hunter's point. Shift yard.

Working with our public partners and using our experience to lessen concern from our other fan communities, we continue to review the various options to initiate development of San Francisco, including how best the leverage is taxing when financing available to the project. Fral sexually deactivated funds, and they also subsequently button off the high-profile overnight for replacement of overall payment for the production contract. while failing at about one fixed month, signatures required. Regarding the funds, GPF problème is not allowed the offer required on..." the project?? fund executive grant was signed uh..."? ???? visit the project.

Tampa and Cisco will remain a work in progress as we work through these issues, but it is a project we are focused on into which we are fully committed.

I'm pleased by the SWIP action and progress we have made in advance to advance our five core strategies. While some of this will repeat prior comments, I think it's important to not lose track these important priorities and where we stand on each.

Optimization or rationalization of our cost structure is a continuing focus. Optimization or rationalization of our cost structure is a continuing focus.

We continue to focus on a strategy doing more with less.

We continue to look for opportunities to create operating efficiencies across the company. With a focus on accountability, we're looking to drive bottom line performance, drive cash flow, and fortify our balance sheet while building shareholder value.

Another core priority has been to continue our work on the development plans for the 23 million square feet of planned commercial opportunities and our three communities.

with an active focus on the Great Park and Valencia.

We've completed our full review of commercial opportunities at Great Park and are in the process of doing the same in Valencia.

On top of the ongoing Resinistop 2's at Great Park.

Our commercial parcels will offer to the Orange County commercial market, something that has not been available for years.

large parcels of entitled land with flexible entitlement, which can allow for a multitude of uses including...

Life Sciences, R&D, Office and Adustro.

And majority of these commercial parcels are near City Hope's new cancer treatment facility and future dedicated cancer hospital which broke ground last week.

The perfect use to support a strong life sciences market.

These unique attributes create a great opportunity for the Great Park Venture and one we will be patient with in order to drive maximum revenue and maximum bottom line.

We are also actively working with the City of Irvine to support their vision for completing a great park and to add multiple multifamily housing opportunities to build much more housing to fill the ongoing California housing shortage. The City of Irvine is currently working with the City of Irvine and the City of Irvine. The City of Irvine is currently working with the City of Irvine and the City of Irvine. The City of Irvine is currently working with the City of Irvine.

both who create value for the city of Irvine.

and support and enhance the value of our ongoing residential and commercial land holdings.

to spend all these ongoing efforts to drive greater capsule in 2023 for great park venture in each year for their after. for their after. for their after. for their after. for their after. for their after. for their after. for their after. for their after. for their after. for their after. for their after.

which result in greater distributions to five points.

On top of our commercial review at Valencia, we're also actively looking to add multi-family opportunities to our mix of land offerings. Thanks for joining us.

A strong real estate segment will also help address California's current housing shortage.

We are committed to continue to work with our public partners and community leaders to help address the current housing shortage.

I've mentioned San Francisco and my community marks. It is one of our five priorities. We'll continue to work with our public partners in San Francisco to move the community forward in a cooperative and economically viable manner.

Last but not least, FivePoint continues to look for opportunities to expand our leadership in building sustainable, mixed-use communities in California.

Our Certified Program Deliverant Nexero greenhouse gas feed of luncheon has set an industry standard to differentiate differentiation from other planning communities who continue to support our own sales. We will continue to support our own sales.

In summary, our second quarter is one of progress for five points.

We're gaining confidence in our strategies and feeling it ever more enthusiastic about our future. We have made material, progress, and rationalizing our cross-structure. We're across structure. We're across structure. We're across structure. We're across structure. We're across structure. We're across structure.

Enhancing residential offerings about the same time looking to seize upon our commercial opportunities and enhance our commercial revenue. Enhancing residential offerings and enhance our commercial revenue.

I remain optimistic about both the short and long term future of our company, acknowledging that the housing market is in a period of flux because of the Fed's aggressive efforts to address inflation through interest rate increases.

We have two very well located, attractive, open communities and are well positioned to ride out the current market uncertainty, but know that as market uncertainty clears, we will be best positioned for continuing success.

We're monitoring impact rise interest rates and inflation of buyer demand for housing and we'll adjust our plans for act late to maintain the values of our master plan communities.

Now let me turn over to Leo to report on our financial results.

Thanks, Dan.

Summary of our financial results was included in the earnings release issued earlier today, in which we reported it consolidated net loss of $11 million for the quarter.

While no land sales were closed, we did recognize $5.4 million in revenue that was mostly generated by our Valencia and management company operations.

Selling, general and administrative expenses were $12.7 million, which represents a significant reduction compared to $19.2 million for the same quarter last year.

The decrease is primarily the result of a reduction in headcount.

And as Dan has pointed out and as reported during our previous earnings call.

We continue to invest in inventory during the quarter, which increased by 42.9 million dollars.

This is mostly related to land development and activities in Valencia.

Also included in this increase is capitalized interest on our senior notes.

Reflective of our continued investment in our inventory at a $24.6 million interest payment on our senior notes are cash balance decreased to 127.8 million at the end of the quarter.

We currently have no outstanding borrowings under our $125 million unsecured revolving line in a credit.

Our debt to total capitalization ratio was stable at 25.2% and our net set to capitalization ratio after taking into account our cash balance was 21.1%.

The company has four reporting segments.

Valencia, San Francisco, Great Park, and Commercial.

Segment results for the second quarter are as follows.

The volunteer segment recognizes a $2.9 million loss for the quarter.

There were no land sale closings in Valencia. However, the segment did report revenue of $2.6 million.

Most of us revenue related to changes and estimates of variable consideration from those amounts previously recorded.

This includes profit participation that we collect from our home builders.

The only general administrative cost of $3.6 million were primarily comprised of selling and marketing expenses in support of our first development area, as well as employee compensation costs incurred to support the segment's operations.

The San Francisco segment recognized an $814,000 loss for the quarter.

This loss is comprised of general and administrative costs and CURD to support the segment's operations as they focus on reassessing the development plan and approval process for our San Francisco assets. San Francisco assets.

Our Great Park segment reported a net profit of $1.9 million for the second quarter, which was comprised of $1.5 million in income from the Great Park Ventures operations and approximately $400,000 in income from management services we provide to the venture.

Segment revenues were 27.9 million, which included 23.3 million from the closing of 13 homes under the Ventures Feb Build Program.

Also, the segment recognized $2.6 million in management fee revenues.

There were no land sale closings at the Great Park in the second quarter.

The profit, recognized by the fee-billed home sales of $5.4 million, was partially offset by the venture's selling, general, and administrative expenses of $4.4 million.

The expenses were mostly comprised of selling and marketing costs, incurred to support, incurred in support of home sales, including those anticipated at the next neighborhood plan fully open later this summer, Solus Park.

The remainder of the expenses relates to general administrative cost to support the Ventures Operations.

During the second quarter and as previously announced, the initial term of our development management agreement with the Great Park venture was extended through December 31, 2022.

Compensation for this extension was revised to eliminate the variable cost reimbursement component and to increase the 2022 annual fixed base fee to $12 million.

This extension did not change the agreement's incentive compensation provisions applicable to the initial term.

The provision continues to provide for incentive compensation payments equal to 9% of the ventures distributions available to be made to holders of percent interest ownership.

However, if the development management agreement is not extended by mutual agreement of the parties beyond December 31st, 2022, the management company will only be entitled to incentive compensation payments equal to 6.75% of distributions paid during 2022 and thereafter.

We own 37.5% of the interest of the Great Park Venture and 100% of the management company.

Although the Great Park Segment reports the full results of the Great Park Venture, our investment in the venture is reported under the equity method of accounting and therefore the assets, liabilities, results of operations and cash flows of the venture are not consolidated with honor of financial statements.

The company's equity and earnings from the Great Park Venture after adjusting for a difference and investment basis was approximately $200,000 for the quarter. The company's equity and earnings from the Great Park Venture was approximately $200,000 for the quarter.

The Great Park Venture is a self-funding operation with no debt and had a cash balance of $118 million at the end of the quarter.

Our commercial segment income was approximately $200,000 for the quarter, which included $100,000 from operations of the Gateway Commercial Venture and $100,000 from the services provided by our management company.

We own 75% of the Gateway Commercial Venture and 100% of the management company.

Our investment in the venture is reported under the equity method of accounting, and therefore the assets, liabilities, cash flows, and results of operations of the venture are not consolidated within our financial statements.

Five points equity and earnings for the quarter from Gateway Commercial Venture was $100,000.

With that, I'll turn it over to the operator for questions.

Thank you. If you would like to ask a question, please sign up by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you would like to ask a question.

We'll take our first question from Alan Ratner with Delmin and Associates.

Hey guys, good afternoon. Dan, hope you feel better soon.

Quick recovery. So I guess first question on the discussion on the commercial side. I was wondering if you could maybe help frame that a little bit for us just in terms of you know either magnitude of transactions that you're anticipating you know over the next 12 months or so. You know price point in terms of acreage any kind of color you can give us a little bit in terms of where you anticipate that going I think would be helpful considering it hasn't really been a

Yeah, a core part of your business up to this point.

you know a core part of your business up to this point. Well, let me yeah.

Well Mary, thank you. I actually am feeling pretty good, but you might notice that my throat gives out to me every once in a while. So I've been one of the very fortunate folks. I would call it the head cold case of COVID, but that still gets through throat. So if I pause here, it's because I need to take a drink of hot tea I have in front of me. But I have a problem, sides.

Yes, and a commercial side-out, one of them.

One of the, you know...

The Irvine company is our neighbor on many sides.

and their commercial development spectrum kind of ends where our property starts. And so there's been a natural market created in that area and the Irvine company hasn't sold large blocks of land in a long time and if you had the option to visit. And so there's been a lot of people who have been to visit. And so there's been a lot of people who have been to visit. And so there's been a lot of people who have been to visit.

Our properties, we do have large, contiguous blocks of land that have not been in the market. We're obviously...

have been doing extensive review.

of those assets over the last quarter. And we are working with CBRE and looking at a strategy for bringing these properties forward. As with everything we do, we wanna be sure we're really gonna maximize the value across.

across all of our assets.

And so we don't think it's one of these things where we should flood the market as much as we should be strategic about what and when we bring it to the market.

So that sizing is literally, as we're talking, we're in active conversations where we are kind of sizing what we think the market will take right now. But as many of you know, we have very flexible zoning in our commercial properties, which is also a very unique attribute and with our development agreements in place today.

So when we get on the call for a third quarter, I'll be able to give you some very specific information both about what land we thought was the right size it takes to the market right now. But if you've been following the industrial market at all, I'm sure you have, you know, we think our values are very competitive with what folks were seeing in this area and the industrial side. So, but that's only one use. We have incredible synergy with City of Hope there now. So we think there's a lot of opportunities in what kind of, so we're trying to be very strategic.

to really maximize our income. Got it. I appreciate the Dexter color. Yeah. But if you can't think about it. But if you can't think about it.

If you know the property, we have something called we call South of the railroad tracks, which is most of our commercial holdings, so they'll be someone the other side.

You know, there's almost 200 acres there. And, you know, industrial properties today in parts of Southern California are going between $5 and $7 million in acre. They are going between $5 and $7 million in acre.

Got it, okay. That's helpful. I think that sounds higher than maybe what the implied value was when you guys did the city of Hope, if I remember correctly.

The market has moved in our favor.

Perfect. Now, I think thank you for all of that that color there, Dan. Second question, you know, I know it's probably a little bit ways off into the future, but just given that you kind of reiterated the commitment to San Francisco.

Can you just help us think a little bit about what the cash flow needs of that project will look like once it does get off of the ground? If I look back at Valencia, you had about a year's worth of development before your first lot sale there. It looks like maybe that total $2.5 300 million before revenue started coming in the door there. So I would imagine there's going to be a period.

when San Francisco does get up and running where it will be a cash drain on the company. And while you have liquidity today, which obviously can fund your current operations, I would think that that would be something that would require some type of capital raise. So any commentary or any thoughts there to see there in terms of timing, magnitude of kind of the expected outlay before that that project starts the cash flow.

Well.

You know, the part that is maybe, you know, maybe not as clear, you know, the whole project has an extensive underwriting and thought through that process, but it's always thought of as one project and not as kind of two standalone projects. So the biggest thing that we're working on right now, and we've had some very positive meetings with the public officials up there, is that... The public officials up there, is that...

You know, the part that is maybe, I mean, I was clearing out the whole project has a, you know, has an extensive underwriting and thought through that process, but it was always thought of as one project, not as kind of two standalone projects. So the biggest thing that we're working on right now, we've had some very positive meetings with the public officials up there, is that we need to kind of rationalize the economics. Is that we need to kind of rationalize the economics.

so that we can move more quickly on Candlestick. And so those type of questions are actually perfect questions, Alan, and they're good questions, but until we can really work with the public officials to kind of understand how we're gonna move forward as two standalone projects as opposed to one concurrent project, then we'll, you know, Hunter's point will follow.

But, you know, I think that...

You know.

It will be a lot like what we're doing today, note it will require some cash, along the way it's gonna generate cash, both from sales.

You know, it'll have opportunities for sales there, especially commercial sales there. The first pad we have out there identified is a commercial pad. And then we also have, you know, public financing that can support us. So we don't, I don't have an exact budget day, but it is one of the things that we are deep diving with the public officials to understand that.

And how best to move forward.

Right, okay. Well, we eagerly await more details on that. So, uh...

Looking forward to hearing more about that.

Thanks a lot.

There.

Thank you and once again that's a story. If you'd like to ask a question, we'll take our next question from Ryan Dobrats with the third Avenue Management.

Hi, Dan and Leo. Thank you for holding the call and Dan glad to hear that you're doing well because there are circumstances. I'm glad to hear that you're doing well because there are So

You know, we also appreciate, yeah, absolutely, and also appreciate you providing the, you know, very thorough update on the five core strategies which the company's, you know, focused on. And, you know, we're just hoping to ask, I guess, a few quick questions here about the communities and positioning going forward. So if I could just jump in, it'd be terrific to, you know, start with Gray Park. You know, clearly there's a lot of momentum there.

You know with that being the case would it be possible to add any context relating to the revised management contract for the venture you know in particular maybe why it was only extended through year-end is as as opposed to maybe a more traditional multi-year arrangement.

Sure, I mean, that's absolutely no problem at all. You know, obviously, we've been in partnership with our other three partners there for a number of years. And we actually thought that the best way to move forward with them, you know, we're in a transition period, transition period with management with myself joining the company. And we actually thought that, you know,

we need to get them comfortable what we're doing, where we're going, who I am, and that rather than the contemplated three year agreement, kind of have them try to make a lot of near term decisions, we thought it would be more fair to them to just move forward on a one year basis, and really build that relationship that we need with them to kind of work through everything. And to date, I will tell you, we're working very comfortably with them, it's going really well. We're having calls with them every two weeks, very positive calls, as we talked about that commercial strategy.

at a great park. They're an integral part of that. And so we need to work with them closely and they're a very supportive, aware we're heading what we're doing. So it was really just kind of a decision that that was how best to kind of really respect those partners and give them an opportunity to get to know me and know where we're heading on a transition basis.

Okay, that's helpful and great to see that the City of Hope Center opened last week with the ribbon cutting. Very exciting.

I whatms of.

I'm sorry, please quit.

It was very exciting. For those of us that were there, it's an amazing facility. And if you guys don't know, City of Hope is ranked the seventh.

Cancer hospital in the country. So it is a huge position in the country. So it is a really value add to our holdings.

Great, and if it would be all right to maybe just turn over to Valencia real quick, it seems like things are generally progressing there quite well. You know, that being so, you know, would it be possible to provide a frame of reference on how much more capital is going to be needed there to build out the 1,100 or so remaining lots at admission village?

Sure.

You know, there's a lot of, there's a lot of in place infrastructure, especially some of the near term commercial we're looking at, they're all the infrastructures in place, and all of the current residential infrastructures in place. But as you talk about the build out, but as you talk about the build out.

You know, it's probably, and it's over the next couple years, not in anything necessarily near term, there's probably a couple hundred million of capital that's required. And some of it's actually for development there, and some of it is really kind of getting us positioned for additional communities that are coming down. And a lot of it, you know, is timing dependent. So it isn't something we have to do at a particular time. It's going to be dependent upon the market and what our needs are. At a rough level.

It would be a couple hundred million over a couple years, but also should be offset with revenue opportunities that are coming in concurrently or very near to concurrently. So we'll be harvesting revenue and we'll also be investing some capital.

Okay, that's helpful. That's helpful. I mean, putting per lot.

values up there at call it 250 to 300 a lot.

2100 lots remaining that would get you to a figure that's well and excessive.

I guess what was sort of indicated would be needed there to finish it out. So that's positive. And I guess somewhat related to Valencia, it really hasn't been much of a focus more recently, but the company owns approximately 16,000 acres in Finterra County as well. I think it generates some ag and energy income. And while we recognize that you're still kind of settling into your role, have you given any thought to what the potential?

use or value of this really unique land position could be, you know, over the medium to long term.

You know, I haven't really spent any time really considering that. I've been really focused on what we have in place, the residential, the commercial opportunities we have. And, you know, you're right in identifying that as a kind of a deep long-term asset. But we're really having a look at the opportunities because, you know, in front of us we have a lot of entitlement in Valencia that we really need to focus on.

And so we really haven't focused on where that one could go, but you're right, it's actually out of the county, it's in Ventura. So it really be a different jurisdiction, and we're currently working obviously close to it, the county falls to Angeles for our current venture program. But that's one, I think we're gonna, that one is a great kind of future opportunity, but it really is kind of a future day before we start digging into that with any love, love of detail.

Is it a contiguous piece of land? There's not a great deal of information on the entire 16,000 acre land position.

Well, it is all held together. Some portions of it as you would expect if you kind of followed.

you know, development in California. Some portions of it's dedicated open space. You know, it's already dedicated. And it's part, you know, even parts of that are tied into our entitlement ed colincia. So, but you know, it really, it was, you know, new hall ranch was an incredible piece of property. And it does kind of extend into our county. But that's kind of a, I would call that the deep future for another day. And always great to own California land if you've got a long view.

All right, and then I just have one final question if I may and more about just kind of industry.

Specific question and you know, you clearly have had a lot of great experience that Irvine which is

you know, a wildly successful private enterprise. Now that you've been in your, you know, CEO seat for a few quarters just wondered if you could maybe talk about what some of the advantages as well as maybe disadvantages are of running kind of a land development company as a public entity versus as a private entity. I would imagine there's trade-offs on both sides would be great to hear yours.

You're perspective on that. You know, I have to have a glass of wine someday and go through that. I mean, there are pros and cons on both sides. You're right. I've looked at it from both sides and seen it from both sides. I've looked at it from both sides and seen it from both sides.

you know

The land is such a unique resource.

that when I really think about it,

You know, when I really think about it, the biggest challenge we have in this business right now is public. It's not just public. It's public. It's public. It's public.

is the quarterly reporting.

Beyond that, you know,

I've got lots of land development experience. I've been through lots of cycles up, down, you name it, after 30 plus years. And the only thing is when you try to think about land as a quarterly enterprise, it really isn't... It doesn't break down well as a quarterly enterprise, but that's probably the biggest differentiation.

But once again, though, the...

The biggest thing, and I come from a background of discipline, is that the public market does put a discipline on us that we have to do more with less, especially with the corner reporting.

And I'm really bringing that focus to our team right now because I know I'm gonna get to chat with all of you every quarter and I wanna be able to hold true to what we're trying to accomplish as a company. Bye.

You know, once again, public private discipline is incredibly important to be successful, but you guys are gonna hold me accountable every quarter. That's a real difference, so I mean, I can't.

Public private discipline is credit, credibly important to be successful. But you guys are gonna hold me accountable every quarter. Ha, ha, ha, ha. That's a real difference. So, I mean, I can't, you know, put out a say. So, I mean, I can't, you know, put out a say.

The land development, you know, it is a, you know, it's a, it has its unique attributes, and I don't think it changes by whether you're private or public. But it does take, you know, it just does take a lot of patience to be, to really maximize value over time. And I don't want to be in this business with a short view.

All right, well, thank you for that and congrats on the progress so far. It's been impressive. So thank you.

Thank you.

Thank you. We'll take our next question from John Moran with Robody and Company.

Hi, thanks for taking my question. Just in reference to your comments about improving the balance sheet. I'm going to talk about improving the balance sheet.

I think you've made him in the past few quarters as well.

made them in the past few quarters as well.

In terms of the commercial property sales or deals, you said something about marketing commercial opportunities. Are those outright land sales? And also you didn't mention anything about Valencia. Is there anything active commercially in Valencia? Is there anything active commercially in Valencia?

John , thank you. Thank you for the question. And you know what? Let me start with your second question because if I haven't been clear, I apologize. Absolutely. There are commercial opportunities in Valencia. We are actually refining those a little bit more. We really started with refining Great Park commercial, but we actually are in the process in Valencia and there are commercial sites available to us today with infrastructure and that conversation about infrastructure.

doesn't need infrastructure. So we actually are actively looking at all those right now. We do believe there's commercial opportunities there that will be, we'll shortly be bringing a market. Once again, we're trying to really do the same discipline, study we did in Great Park for Valencia. So that process is just kicking off. We did one now, a role in this second, but there are opportunities there.

then John I'm sorry what was the first part of your question? Well are those are so I can be you

I thought what you mentioned. Yeah, sales and what you, your comments at Great Park were really helpful. You're really helpful.

about values there and how much land.

is less so obviously if you liquidated that, that would have a material impact. I don't think that's what you were suggesting but my point is if you're going to improve the capital structure, strengthen the balance sheet, that's what you're saying.

The only thing, when I look at your company...

That suggests outright land sales or asset sales. So can you confirm that's being contemplated?

Yeah, well, yeah, John , first of all, one of the words you use, I want to be sure you know that it's not in my vocabulary, liquidation. That's not our business. And so, I just spent this position, so selling my own.

I like that word better, thank you. But you know, but yes, our thought is, once again in a very

major managed discipline approach. We are looking at commercial land sales. We are looking at commercial land sales.

And the thinking around that is that really looking at where the highest value demand is today, and then only offering a portion of our property to the market because we think over time we're gonna build a lot more value. We wanna be sure we continue the build on that. So, but the current absolutely the...

you know the current thinking is now

you know, there are land sales, but you know, with, you know, with capital, we could do more. It's kind of like a, it'll be a process.

But right now,

They would be cast generating land sales.

and they're gonna be measured to really maximize value.

I just might make a comment from...

In closing for me.

for me it I think since this companies come public

Every quarter there's a reference to debt to total capital or debt to total assets.

And I understand that...

you know if you're in a textbook 20% debt to capital would be a low

debt balance but it's something altogether different.

when the

Left side of the balance sheet is all land.

that essentially isn't learning anything in the velocity on an eternal verse going to slow down.

the coupon that's on the debt.

I think it's expressive of...

you know, how conservative or lack thereof...

is embedded in the balance sheet and I think I know there's not too much trading volume in the bonds but they're trading at 86 or something.

You know, to yield double digits.

so mine

My point is I don't when you go into recession you own land and I

the processor company could, I think, vouch for that.

Those ratios mean nothing because you can't borrow on land in a recession.

mean nothing because you can't borrow on land in a recession or a downturn.

Anyway, and...

Big favor of selling some land assets.

and there's a lot of capital commitments.

needs ahead of you and

And...

You know, I just assume this thing to be run debt-free when you've got hundreds of millions of dollars in spend in front of you. Anyway, that's just it.

My two cents, but I appreciate.

My, my two cents and I, but I appreciate you're taking the question.

All right, John , appreciate that. You know, and once again, I'm looking forward to talking to you in the third quarter. I think that we'll have a much better idea on those commercial sales we're talking about now come third quarter. So I think that some of your questions will be better for us to, or we'll be better able to address after we get through one more quarter.

Thanks very much.

All right, John .

Thank you. And at this time, that does conclude our question and answer session. I'd like to turn the conference back over to Mr. Hedigan for any additional closing remarks.

Well, thank you. On behalf of our management team, we want to thank you for joining us today. And today's call. We look forward to speaking with you next quarter. Thanks again.

Thank you, and that does conclude today's conference. We thank you all for your participation, and you may now disconnect.

you