Q2 2023 Five Point Holdings LLC Earnings Call
Greetings and welcome to the $5 35.
Quarter 2023 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 estimates on the date of this conference call.
Not intended to give any assurance as to actual future results because forward looking statements relate to matters that have not yet occurred.
These statements are inherently subject to risks and uncertainties.
Many factors could affect future results and may cause five point's actual activities or results to differ materially from the activities and.
Dissipated and forward looking statements. These factors include those described in today's press release, and five point's SEC filings, including those in the risk factors section of five point most annual most recent annual report on Form 10-K filed with the S. E C.
Please note that the five point assumes no obligation to update any forward looking statements now I'd like to turn the call over to Dan Hanrahan, Chief Executive Officer.
Thank you.
Good afternoon, everyone and thank you for joining our call.
I have with me today, Leo key our interim Chief Financial Officer, Mike Alvarado, our Chief legal officer.
And Kim told or our vice president of Treasury and tax.
Stuart Miller, our executive Chairman is joining us remotely.
I'm pleased to update you today on the progress of the company through the second quarter of 2023.
I'll also update you on our team's focus during the quarter no steps youre, taking diplomat our strategic priorities in 2023.
Next well hear will give an overview of the company's financial performance and condition.
Well then open the line for questions to our management team.
So let me begin by telling you we have made considerable progress since I last spoke to you in advancing our business and to that end. We have continued focusing on controlling our business and executing on our three main priorities.
So in writing revenue another positive cash events.
Managing and right sizing our SG&A.
And managing and limiting our capital spend and matching those expenditures as much as possible to revenue events.
As a result, we ended the quarter with consolidated net income of $56 million.
As compared to a net loss of 9.7 million for the first quarter.
Our balance sheet reflects a $193 2 million of cash on hand versus $106 6 million at the end of the first quarter.
But $0 drawn on our $125 million revolver given.
Given us liquidity of $318 $2 million today versus 231.6 million last quarter.
And improving our debt to cap ratio to 24.7% versus 25, 2% last quarter.
They also have no principal debt repayment obligations on our senior notes this year or next.
These results reflect the team's efforts and focus on our priorities.
At the beginning of the year, we provided guidance for the first half of the year, we expected negative cash flow of $24 million to $56 million in.
In fact for the first half of the year, we generated positive cash flow of $61.4 million.
Fortifying, our balance sheet and positioning five point for future success.
Along with significant improvement in revenue and cash flow, we've been able to hold our SG&A in check with SG&A at $12 $7 million this quarter versus $13.8 million last quarter.
$26 5 million for the first six months of 2023 versus $29 4 million for the first six months of 2022.
With respect to managing our capital spend for the first six months, we spent $46 $8 million before recoveries in capitalized interest as compared to our guidance at the beginning of the year of $45 million to $55 million and compared to $63 1 million for the first six months of 2022.
We are clearly controlling our business.
Yes.
In many ways our strong financial results were due to a combination of focused management as well as a constructive economic environment.
Economic perspective, the challenges from interest rate increases and the banking crisis from earlier in the year began to dissipate during the second quarter and.
In the housing market began to stabilize as homebuyers adjusted to an accepted higher interest rates.
Interest rate fluctuations have moderated and were seeing more measured rate movements that allow the market to adjust in an orderly fashion.
A particular note resale home inventory remains at very low.
Increasing interest in and demand for new homes.
While affordability continues to be a challenge housing continues to be in short supply in our California markets and there is still demand for well located homes and master planned communities.
On the commercial land side of our business.
We're seeing strong interest in our unique commercial land offerings at the Great Park and Valencia.
We continue to have low vacancy rates and industrial market and our communities.
We expect we'll continue to drive demand in this preferred asset class.
Notwithstanding the adjustments to capital markets have made in the commercial market segment.
Yeah.
And now I'll provide some updates on each of our communities.
The open builder neighborhoods at the Great Park continue to sell homes with a strong increase in sales in the first half this year compared to second half of 2022.
During the second quarter.
Other than a great Park community sold 177 homes.
So it was part which is a primary community with multiple active offerings.
Its first model complex opened in July 2022.
And currently has only 200 homes remaining to sell out of the original 849 homes.
As we discussed last quarter, we're seeing strong home butter interest in acquiring Homesites at Great Park on our prior call I mentioned that we were actively engaged in a process of selling the remaining 81 homesites in rising community and 770 home sites and our next communities district five south.
That transaction closed in may of this year.
Great Park venture recognized $357 $8 million of revenue.
Also in the second quarter, the Great Park venture received $61 million of Cfd proceeds as reimbursement for public improvements adventure had completed are paid for.
With this pace of new home sales, we are continuing to see strong builder interest in acquiring new home sites at Great Park.
During the quarter, we entered escrow for the sale of another 80 to home program, which we anticipate closing by year end. We're also negotiating a sale of another 100 and for home sites with the closing anticipated in early 2024.
On top of the ongoing residential opportunities at Great Park, we continue to market and sell our commercial land, including the industrial land offerings that we brought to market in August last year as well as other commercial oriented users.
Well not the most opportune time to enter the market our location in the heart of Orange County in support of strong interest.
Our commercial partials are unique our limited resource and offered to the South Orange County markets something that has not been available for years.
Large parcel of entitled land with flexible zoning allows a multitude of uses including industrial.
Distribution life Sciences, R&D and office amongst others.
To that end, we anticipate closing sales of approximately 40 acres either by the end of this year or early next year.
Yes.
After these residential and commercial sales the great Park venture will have about 295 acres remaining depending.
Depending on the pace of sales, we would expect to be through remaining inventory at great Park and five to eight years.
And Valencia, New home sales by builders totaled 79 homes during the second quarter.
As of mid July 1100 homes from our initial offering of 268 homes have been sold with only 168 homes remaining.
Both are now opened the models in two of the eight new neighborhoods in the next era of Valencia, which encompasses 598 homes.
Like Irvine, those or get engaged with us in Valencia, and we entered into one new land sale contract during the quarter anticipate finalizing another both of which we anticipate will close during the third quarter.
We also anticipate filing a third land subcontract that we believe will close by year end.
We also continue to market a prime 35 acre commercial site in the community.
Got to have more to report on that later in the year.
Well, we didn't have land sales in Valencia in the first half of the year.
And instead of planning for sales that closed in the second half of the year, we're still able to execute on some significant reimbursements and recoveries.
You'll recall that we reported a $17 7 million CFT reimbursement in the first quarter.
Additionally, in the second quarter, we collected a $44 5 million recovery from a third party arising out of prior work and perform that's project.
From an accounting perspective, these amounts have been offset against our inventory costs ultimately increase our gross margin for a bunch of sales.
As you've heard me state in the past San Francisco remains a priority for five point and we are progressing in our efforts to establish candlestick as a standalone project separate from a complimentary to the ultimate development of a 100 point shipyard site. When it has completed its remediation by the Navy.
These efforts include working with the city and county agencies to rebalance the current development entitlements between the two areas I can.
Currently working with the city to update the existing tax increment financing timelines to account for the Navy delays at hunters point.
I believe that we are building momentum on resolving these issues, which will allow us to unlock the standalone development candlestick as the first phase of this larger mixed use community located on irreplaceable land along the San Francisco Bay.
As we look ahead, we're starting to build confidence and certainty and our expectations for future accomplishments.
Although our business is often dependent on government approvals and a competence can be pushed from one quarter to another we are building visibility into future quarters and years.
To that end, we expect in the second half of 2023, if you're able to reduce it produced an additional $50 million to $70 million of net income.
And and generate additional cash flow as well.
During the year with a cash balance of $250 million to $300 million.
By some of these results can be pushed quarter to quarter or the next year for folks on generating revenue.
Managing SG&A and managing our capital spend.
We have positive momentum remain optimistic about our future.
Land development is a long game and we are just the beginning of the game at some of our communities, but they're not making any more land and there will never be an abundance of entitled land in California.
Our efforts today are ensuring we are well positioned for that long game are recognizing the importance of focusing on creating and maintaining shareholder value.
Now, let me turn it over to Leo who will report on the financial results.
Thanks, Dan a summary of our financial results was included in the earnings release issued earlier today.
And what should we reported consolidated net income of $58 6 million for the quarter.
We recognized $21.3 million in revenue that was primarily generated by management services provided by our management company.
Selling general and administrative expenses were $12 7 million, which is consistent with the average of $12 9 million that we have reported over the past four quarters.
Cost of management services was $9 7 million, which includes $8 million for intangible asset amortization expense at our Great Park segment.
Equity in earnings from our unconsolidated entities for the quarter was $52 1 million and primarily results represents our interest and net income generated at the Great Park venture.
Turning to the balance sheet and liquidity.
Our net decrease in inventory for the quarter was $5 7 million.
This includes a decrease for our nonrecurring $44 5 million recovery from.
From a third party related to certain project development costs at our Valencia segment.
And includes an increase for our shared capitalized interest on our senior notes of $12 3 million.
Excluding the recovery and capitalized interest the resulting increase in inventory of $26 5 million was consistent with prior quarter and 13% lower than the prior year increase of $36 million.
In addition to 700000 of interest we paid 2.5 million against our San Francisco segments related party reimbursement obligations during the quarter.
Approximately 8.4 million of this reimbursement obligation that was previously expected to be paid in the second quarter has been deferred to 2024.
A related party has a history of receiving maturity date extensions and we expect additional deferrals during the second half of 2023.
Total liquidity was $318 2 million at quarter end and is comprised of $193 2 million of cash and cash equivalents and $125 million of available borrowing capacity under our revolving credit facility.
No borrowings or letters of credit were outstanding against the revolver as of June 30th.
In addition, no principal payments are currently due on our senior notes nor are any payments currently do honor payable pursuant to our tax receivable agreement.
Our debt to total capitalization ratio was stable at 24, 7%.
And our net debt to capitalization ratio after taking into account our cash balance was 18, 5%.
Turning to our statement of operations.
The company has four reporting segments.
Valencia, San Francisco, Great Park and commercial.
Segment results are as follows the Valencia.
<unk> segment recognized a 4.5 million loss for the quarter.
There's no sales were close most of this loss was comprised of selling general and administrative expenses of $3 4 million.
Related to employee compensation as well as selling and marketing expenses in support of our active development areas in the pursuit of 2023 land sales.
The San Francisco segment recognized a loss of 885000 for the quarter. This loss is comprised of general and administrative costs incurred to support the segment's continued focus.
On rebalancing the current entitlement between Candlestick and hunters point shipyard sites as well as working with the city to update the existing tax increment financing timelines.
Our Great Park segment reported net income of $179 1 million for the quarter.
This was comprised of net income of $168 2 million for the venture's operations and $10 9 million and net income generated by our management company.
The ventures operations recognized revenue of $360.6 million during the quarter.
Most of this revenue is comprised of 357 8 million recognized from the sale of 798 Homesites on approximately 84 acres of land adjacent to the ventures Solus and rise neighborhoods.
The ventures land sale agreement was comprised of a fixed amount paid at closing and a price participation right to be paid from future homebuilder sales.
Accordingly, the revenue recognize consist of $214 7 million paid at closing.
$143 million for recognition of a contract asset representing debentures estimate of variable consideration from future price participation payments.
<unk> recognizes contract revenue upon satisfaction with contract performance obligations and reports contract assets. When there is a timing difference between recognition of revenue and there's variable consideration coming due.
After completing the land sale a great part venture made aggregate distributions of <unk> $25.5 million to holders of legacy interests and $218 million to holders of percentage interests.
We received 81 8 million for our 37, 5% percent interest.
Offsetting these revenues our cost of sales of $165 7 million S.
SG&A of 1.8 million and related party management fee expense of $27 4 million.
Management fee expense is comprised of $3 million of monthly base fee payments and a $24.4 million increase in accrued incentive compensation, mostly resulting from a change in estimate.
Aggregate payments probable of being made as adventure mix future distributions.
As it relates to the management company five point recognized 20 $20.7 million in management fee revenues during the quarter.
$3 million of which was from monthly base fee payments and a 17.7 million increase and its incentive compensation contract asset most of which is related to changes changes in estimated incentive compensation payments expected to be received as future distributions are made from them.
Sure.
Offsetting these revenues were expenses of 9.7 million comprised of 1.7 million for the cost of providing management services, primarily the project team compensation as well as $8 million of our development management agreement intangible asset amortization expense.
Resulting from incentive compensation revenue recognized in the quarter.
Concurrent with the ventures distributions Patriots holders of legacy and percent interest, we collected $22 million and incentive compensation payments due under our development management agreement.
We own 37, 5% interest of the great part venture and 100% of the management company.
Although the Great Park segment reports default interests of the great part venture.
Investment is reported under equity method of accounting and therefore, the assets liabilities and results of operations and cash flows are not consolidated within our financial statements.
The company's equity and earnings from the Great Park venture after adjusting for a basis difference was 52.3 million for the quarter.
The Great Park venture is a self funding operation with no debt and had a cash balance of $149 million at the end of the quarter.
Lastly, our commercial segment venture is a self funding operation and had a cash balance of 5.1 million at the end of the quarter.
The Great Park venture.
We only own 75% of the Great Park commercial venture our investment in the venture as 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.
With that I'll turn it over to the operator for questions.
Okay.
At this time, we'll be conducting a question and answer session if.
If you would like to ask a question. Please first start wondering your telephone keypad.
It makes them vulnerable indication thank.
Keith.
You May press star two if you'd like to remove your question from the queue.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Alan Ratner with Zelman and Associates. Please proceed with your question.
Hey, guys good afternoon.
Congrats on the success in the quarter and thanks for all the detail in guidance so far.
Dan I'd love to drill in a little bit on pricing power that you might have with homebuilders right. Now obviously the land market has really shifted quite a bit over the last year, yes. It was pretty pretty quiet in the back half of last year and now it seems like builders have returned pretty aggressively and.
I know, it's always a little bit hard to tell just from your reported results exactly what's going on with log prices I look at your lot sale in Great Park this quarter and on a per acre basis. It looks like the price you guys got was it was a bit lower than kind of what you've received in prior offerings, but I'm sure. There's some mix component.
To that and you know you've got the Valencia deals under contract. So any commentary any color you can give on what's going on with log prices in your communities would be helpful.
Also any guidance.
Guidance, you can give on specifically the Valencia sales would be great as well.
Hello, Alan always good to hear from you what was your I got the first part on lot price what was your last question about Valencia.
Just if you can I know you mentioned, you've got I think two deals under contract right now.
Yeah.
Specifics surrounding that in terms of what we might expect in the back half of the year to flow through.
Okay.
Well first of all just starting on our all of our land remember that we're using a pop or some type of participation with all of our builders.
And as prices go up obviously the revenue we receive is also going to be going up.
And so as far as what the market. We're seeing the day you know Alan you're absolutely right.
There is a lot of interest in land, which is driving up the price of land.
But I think part of that or we're also trying to work with the builders to really maximize value. It's really trying to work the builders on product as we've all talked about theres, a theres really a constrained in the market on resale homes. So theres some theres some interest or a stronger interest in new homes, but we also have to worry about affordability. So what we're finding is it.
Being able to work with the builders are one on one work with them on product and plotting is allowing us actually too.
Increase our land prices and it's really kind of unique around product and builders, but on all of our transactions. We are getting participation and the larger transaction that you referenced you know there is a participation component in that that if that participation comes through.
The per acre land, there will be comparable to other land other similar products in other similar land at the Great Park, so that one.
Well, what we've seen in the market and the fact that it actually will be producing revenue over the next couple of years our participation over the next couple of years, we think there's a real good opportunity.
To see additional revenue from that transaction.
As far as.
Once it goes in a couple of sales we have there.
Some respects we are you know.
We have some fixed pieces at all of our communities from the standpoint of our past development. So we're working with our builders up there on.
<unk> that we think is very stable.
Salable in the current market and but you know I have other negotiations going on so I don't necessarily want to get into how them valuing different sites.
Kind of hard to negotiate these things in public but you know what we're finding is that the more we can work with builders to come up with product that addresses the market and the market segments that have demand. It really is helping us generate stronger land revenue.
Got it that's all really helpful. Dan and I guess, just I want to make sure I'm thinking about it correctly I think you had previously mentioned that the next phase in Valencia was roughly 600 homesites communities. So I'm, assuming that's kind of.
The summation of these three deals.
Referencing or or am I mixing things up.
So the next area that we've talked about having said eight communities and right. Your memory is very good at is about 600 homes.
That those sites were all sold through the builders at the end of 2021.
So we've had other land that actually was ready to go and you know with all the homes are sound and the first phase, which is close to 1200 homes, we hadn't brought those to the market because of the segmentation, but now is that it's really winding down that first phase is winding down. We're now taking other land that we had prepared already and we're moving forward with what.
Kind of.
Individual transactions that fit well and it's from a segmentation perspective, and so those you know those 600 of those 600 homes those will be coming on the next six sets of models will be coming on market over the remainder of the year, but we find that there are segments. We can address and other land, we already had ready and those are the two transactions we're talking about.
And then we have some other opportunities on land that actually is ready to go.
We're really spending a lot of time on those because we're looking at product I really want to be sure that we're thoughtful about product as we move forward and maintain good segmentation.
Okay. Thank you for that clarification, and if I could just squeeze in one more.
The Cfd reimbursements.
The development of reimbursement that's been a nice.
We got surprised I'm not sure if it's a surprise for you but surprise for us you.
About $60 million year to date, and I know you referred to them as nonrecurring, but I'm. Just curious if you know as you look out into the future.
Give us any visibility on the prospect of getting more reimbursement over the next couple of years.
Yeah.
Well in the context of you know our cfd. He's absolutely. We have you know we talked about in Valencia as a one time.
Recovery, there, but all of our Cft's Theres there are for the most part our public improvements should be heavily funded by Cft's. Both at the Great Park and in Valencia, and so as we complete additional work.
You know invest additional capital here in Great Park, It will come back to us through the Cfd and there was at.
At the same time in Valencia, as we sell more homes, we're going to have more opportunities to collect under the CFT.
Got it okay, great well, thanks for all the color and best of luck.
Thank you.
Our next question comes from the line of Terence Balkin with Diamond capital. Please proceed.
Hey, guys. Thanks for taking my question and congrats on a good quarter.
Thank you.
For the I guess for the second half, maybe just piggybacking off the CFT reimbursement. It definitely was a nice surprise when you when we think about the cash guide, which I think is implied to be $50 million to $100 million of.
Cash flow generation over the back half.
Is there a way to understand what do you expect to be from earnings versus maybe additional CFT reimbursement and anything else, we should be focused on.
Yeah.
So I think.
We're certainly.
Yeah, there there'll be limited Cft's I'm trying to you know the numbers that we gave you I think.
We're talking about a range on net revenue and then we're also talking about our increasing our cash but almost all of those are going to be from transactions that we have.
Our working on today.
And two we don't have a lot of CFT and those now the cfd will kind of keep coming in over time as either work is completed our homes are completed that allow us to sell additional cfd bonds, but for the most part what we'll be looking at in the second half of the year actual transactions that we're working.
With with various builders.
Got it that's helpful and so for the sales that you're thinking about.
For the back half.
It sounds like you have that land already prepared maybe you can help us just think about how how we should be viewing capex spend for the back half and then maybe as demand seems to be coming off of a trough how youre thinking about it for 24 across the different developments.
Certainly well once again.
Start with Irvine, because I think it's great.
Great Park.
If you've been out here there are some there are some backbone infrastructure is still being completed mostly marine way, but for the most part.
All of the backbone is in and.
The Great Park was getting marine way is probably the biggest section that needs to be completed out there. So from a standpoint of great Park almost all of the sites, we talk to our talk about most of the the backbone infrastructure to get those sites are actually already in.
Okay. So there's still some to be completed nurse and those would be reimbursed in Valencia Youre right. We have from past work, we have a number of areas that we're great at and we're just getting the opportunity to bring them to the market right now and so for the most part.
Everything we're looking at this quarter.
Has limited capital requirements.
Yeah.
Certain amount of work that has to be done whenever we deliver land, but for the most part all of the heavy lifting has been done on that those sites as we look into 'twenty.
24, we will have additional.
Needs to invest capital, but we're also looking at ways as we've talked about is utilizing the builders.
You know working with our builders and having them invest some of that capital. So as we think about Valencia going forward and say, we've got land that is mostly ready and as we look at our future we're really looking at.
Working with the builders to have them do a lot of that front end capital investment kind of tying us and them together.
You know for the kind of success of the project.
And we think that model will work pretty well because builders have a real need for pipeline and so working with them on on the capital side will help ensure their pipeline and also get our land are completed and developed.
So you know in all of these as we talked about those transactions and you know.
In Valencia or other places.
We're always you know these can always move around quarter to quarter.
Just because theres always government approvals that are tied to all of these but you know right now we're feeling pretty pretty good about what we're suggesting but I don't ever want anyone to think that.
We don't we aren't subject to a little bit of the government permitting requirements that everyone in our industry deals with.
Makes sense, maybe last one for me in going back to the CFT is just.
So the the.
The 60 million received year to date can you give us a sense of when you completed the work that those cft's were attached to and then any guidance you can give us on what a reasonable number is for either the first half of 'twenty four or just the full year.
Well first you know going back to those.
We've been on over the last year, there was a lot of work done by our team with the city of Irvine to kind of.
Two.
To allow us to expand on the public improvements that we can.
Get reimbursed for through the CFT. So a lot of those efforts that we put in and is that mostly happened last year. We were seeing those earlier this year, where we were literally catching up for work that we had done.
So I think as we go forward.
Yeah.
If you have to understand the difference between Irvine in Valencia to stand point that Irvine has got a lot of rooftops. So we can pretty much get reimbursed as the work is completed and I would say that for most part where we're close to caught up there and.
And as we complete work, we'll be able to still achieve.
Near term reimbursement in Valencia, we're actually out of head.
And so as we complete that's about completing rooftops and getting buyers and then we have the ability to issue additional bonds and get reimbursed.
I don't know I don't actually have a number for next year on reimbursement, so I'm not going to try to guess on that at this moment in time.
But for.
For the most part we.
We're kind of we're moving through it as quickly as we can both from a standpoint of.
Completing work that it is subject to reimbursement and then having the binding capacity that's needed through the rooftops in place.
Great. Thanks, that's it for me for now, but I really appreciate it. Thank you.
Youre welcome.
Our next question comes from the line of Robert Cohen, a private Investor. Please proceed with your question.
Yeah, Hi, thanks for taking my questions.
My first question is are you planning on doing any actual development, great parks will lend to you or San Francisco or are you just planning on doing land sales.
You know.
Robert that's actually a very good question, we have the opportunity because of our kind of land positions to look at vertical development and all of those communities I think our near term plan is to stick to the horizontal development, which is kind of where our expertise is but as we look at Valencia and San Francisco we.
Think there's some really unique opportunities probably the partner people with that vertical expertise and that's so that's something we do look at but it's not near term, but we think long term there are some really interesting opportunities there.
Okay.
You would be thinking about bringing in maybe larger real estate investment larger real estate companies to maybe invest with you to fund these developments.
Well part of it is you know once again, if we're going to you know if we were moving into an area. We don't have necessary expertise to do industrial development. So you'd want to work with somebody that has that expertise both to develop and operate it and we have the we have the land.
And so those are the types of things that we look at as long term opportunities, but I think that rather than trying to develop all that expertise inside of the company. We think there's a lot of expertise in other places that we could tap into which would which would be a good match between their expertise on our land positions.
Okay and do you have any timeframe for may be doing.
Some of that actual development.
Well once again I think that the.
Obviously the thing that we are most focused on and that type of development would be in the commercial areas and so right now.
Some of our bigger commercial opportunities in Valencia are going to be coming in some area called Valencia Commerce Center.
Which we're in the process of processing the entitlement for that and then in San Francisco, there there'll be various opportunities in San Francisco, when we get there.
That community up and running because it is a very.
It's got a lot of mixed use across the entire site.
But I think that you know we're a couple years out simply because we really need to be in the right.
Land position.
To do that from a perspective of actually being in that segment of the market.
Oh, okay.
That would make sense and my just my final question is.
You know the stock price is down almost 80% since its IPO if you will.
Or the board of directors considered possibly selling the company since the assets of the company appear to be appear to greatly exceed.
The stock price the stock valuation.
Yeah.
Yeah, Robert once again I appreciate that question.
I think how I would comment on that is it to.
The board is always looking at any type of opportunities that come their way to really enhance shareholder value and so you know that.
Whereas it's not something that.
No.
You know that we.
We have on the table, where we we can't we will consider all alternatives.
That may be presented to the board, but at this point you know.
We kind of we know that we want to look at opportunities to enhance shareholder value and so something like that came up we would always look at those alternatives.
Okay, Great those were my questions.
I appreciate you answering them. Thank you.
Youre welcome.
Yeah.
And our next question comes from the line and I'm sure I agree with BNP Paribas. Please proceed with your question.
Yes, hi, Thanks for taking my questions. Just a couple from me your cash balance guidance for the rest of the year exiting <unk>.
2023 does that include the Valencia land sale completed are expected to be completed post Q2, and then also the land parcel sales as.
As well as the I guess the third line sale contract that you did you expect to close in Q3.
Yes, it does.
Okay got it. Thank you and then as far as capital expenditure for the back half of the year and then.
Capital expenditures for next year do you have a rough sense for where they could shake out.
From where you stand right now.
Yeah.
Really think it'll be similar to the first half of this year is what we would estimate I. Once again, we're in we're in a pretty good land position in Valencia from the standpoint of where we're at and in Irvine, where in a really good land position from standpoint of finishing so I would say comparable over the same six month period.
Similar Okay got it. Thank you and then and then SG&A a nice reduction again sequentially.
Are you do you think that there are further opportunities in SG&A reduction or should we expect this type of run rate for our for I guess for the next few quarters.
Well I will just tell you we're always going to be very.
You know focused on managing our SG&A.
But I do think that we're kind of getting to a kind of a run rate I think what number you are seeing there is kind of closer runway right that we think we will look at going forward, but we're going to continue to.
Always look at opportunities to improve on that number it's something that's once again, it's when I talk about the three things that we're trying to focus on we really are focusing on revenue Manny.
Managing our SG&A and managing our capital and really kind of keeping our heads down and running our business and.
And so we've got everyone everyone heading in that direction.
Got it thank you very much and nice job this quarter appreciate it.
Thank you.
And we have reached the end of the question and answer session I will now turn the call back over to you.
With those remarks.
Thank you.
Behalf of our management team. We thank you for joining us on today's call and we look forward to speaking with you next quarter. Thank you everyone.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
Yeah.
Yeah.