Q3 2023 Five Point Holdings LLC Earnings Call

[music].

Greetings and welcome to the five point Holdings LLC third quarter 2023 conference call.

Speaker 1: This call is being recorded. Today's conference may include forward-looking statements.

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 perspectives.

Forward looking statements represent five point's estimates on the date of this conference call and are not intended to give any assurance that the actual future results.

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 results anticipated in 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's. Most recent annual report on Form 10-K filed with the SEC.

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

Now I'd like to turn the call over to Dan had again Chief Executive Officer.

Thank you.

Good afternoon, and thank you for joining our call.

Speaker 2: I have with me today Kim Tobler, our Chief Financial Officer, Mike Alvarado, our Chief Legal Officer, and Leo Key, our former Interim Chief Financial Officer, who is now our Senior Vice President of Finance and Reporting.

I have with me today, Kim Tobler, our Chief Financial Officer.

Mike Alvarado, our chief legal officer, and loyal key our former interim Chief Financial Officer, who is now our senior Vice President of financial reporting.

Speaker 2: Stuart Miller, our Executive Chairman, is joining us remotely.

Stuart Miller, our executive Chairman is joining us remotely.

Before we get into the quarterly update I'd like to mention some positive news on our recent management changes.

Speaker 2: Before we get into the quarterly update, I'd like to mention some positive news on a recent management change.

Speaker 2: Since our last call, Kim Toder was promoted from his position as Vice President of Treasury and Tax to his new role as Chief Financial Officer.

Since our last call Kim toddler was promoted from his position as vice President of Treasury and tax to his new role as Chief Financial Officer.

Kim brings a great deal of viable background and experience to his position and is well suited to help us navigate the current economic environment and execute on our business priorities.

Speaker 2: Kim brings a great deal of valuable background and experiences to this position and is well suited to help us navigate the current economic environment and execute on our business priorities.

Congratulations Kim.

Speaker 2: We are all very appreciative of the great job Leo Key did as an interim CFO , and I personally very much appreciated his assistance as we focus our attention on right-sizing our SG&A to position us to achieve our long-term goals. Thank you Leo.

We are all very appreciative of the great job. He did as interim CFO and I personally very much appreciated his assistance as we focus our attention on right sizing our SG&A to position us to achieve our long term goals. Thank you Leo.

Now, let me turn to our Q3 results and update you on the progress of the company through the third quarter.

Speaker 2: Now let me turn to our Q3 results and update you on the progress of the company through the third quarter.

Speaker 2: I'll also update you on our team's focus during the quarter and the steps we are taking to implement our strategic priorities for the balance of the year.

Also update you on our team's focus during the quarter and the steps you are taking to implement our strategic priorities for the balance of the year.

Next Ken will give an overview of the company's financial performance and condition.

Speaker 2: Next, Kim will give an overview of the company's financial performance and condition. We will then open the line for questions.

We will then open the line for questions to our management team.

Speaker 2: begin with, I'd like to congratulate our team for remaining focused this quarter on both controlling our business and executing on our three main priorities. 1. Creating positive cash flow and earnings.

To begin with I'd like to congratulate our team for remaining focused this quarter on both controlling our business and executing on our three main priorities.

Writing positive cash flow and earnings.

Establishing appropriate loves SG&A.

Speaker 2: and managing and limiting our capital spend, matching those expenditures to near-term revenue.

And managing and limiting our capital spend matching those expenditures to near term revenue events.

We ended the quarter with consolidated net income of $14 $2 million at at $25 1 million to our cash balance.

Speaker 2: We ended the quarter with consolidated net income of $14.2 million and added $25.1 million to our cash balance.

Speaker 2: Our balance sheet at the end of the third quarter reflects $218.3 million of cash on hand, with zero dollars drawn on our $125 million dollar revolver. We have total liquidity of $343.6 million dollars, and we have no principal debt repayment obligations on our senior notes for over two years.

Our balance sheet at the end of third quarter reflects $218 3 million of cash on hand.

$0 drawn on our $125 million revolver.

We have total liquidity of $343 $6 million and we have no principal debt repayment obligations, our senior notes for over two years.

Yeah.

Reflecting our considerable progress in cash and revenue generation.

Speaker 2: Reflecting our considerable progress in cash and revenue generation, I'm pleased to report on the extension of our revolving credit facility with our bank group, which extends its maturity until April 2026.

I'm pleased to report on the extension of our revolving credit facility with our bank group, which extends the maturity until April 2026.

Speaker 2: This allows us to focus our attention on our senior notes that are due in November 2025. Our senior notes don't mature.

This allows us to focus our attention on our senior notes that are due in November 2025.

Our senior notes don't mature for another two years.

Speaker 2: With our growing profitability and cash position, we are focused on repositioning and extending this debt. And we are confident that we'll be able to provide for the long-term capital needs of the company as we manage the upcoming maturity of our notes.

With our growing profitability and cash position, we are focused on repositioning and extending this debt.

And we are confident that we will be able to provide for long term capital needs of the company as we manage the upcoming maturity of our notes.

Our SG&A and capital spend continue to be in line with our recent trends.

Speaker 2: Our SG&A and capitalist spin continue to be in line with our recent trends.

Speaker 2: Kim will provide additional detail on these numbers during his remarks.

Ken will provide additional detail on these numbers during his remarks.

Speaker 2: The macroeconomic environment for most of this year has been constructed the home building. But there are challenges that we and our

The macroeconomic environment for most of this year has been constructive to homebuilding.

But there are challenges that we and our guest builders are facing.

Speaker 2: While we have entered a phase of more major interest rate adjustments by the Fed, home buyers are feeling the effects of...

Well, we have entered a phase of more major interest rate adjustments by the fed homebuyer.

Homebuyers are feeling the effects of higher interest rates and.

Speaker 2: And the market appears to expect rates to stay at elevated levels for longer than originally anticipated.

And the market appears to expect rates to stay at elevated levels for longer than originally anticipated.

Notwithstanding these headwinds we still see demand for new homes up as homebuyers are dealing with the reality of higher interest rates.

Speaker 2: Now I was standing in these headwinds. We still see demand for new homes as home buyers for dealing with the reality of higher interest.

Speaker 2: Home builders have also assisted in stabilizing the man by offering mortgage products with reduced interest rates that have allowed new home sales to continue even as the retail market slows.

Homebuilders have also assisted in stabilizing demand by offering mortgage products with reduced interest rates and if allowed new home sales to continue even as the resale market slows.

Speaker 2: Additionally, as you may recall from my comments last quarter.

Additionally, as you may recall from my comments last quarter.

Speaker 2: As a consequence of increased interest rates, resell home inventory means very low, helping to support the new home market.

As a consequence of increased interest rates.

Resale home inventory means very low helping to support the new home market.

Speaker 2: Overall, affordability continues to be a challenge in California, as housing continues to be in short supply.

Overall affordability continues to be a challenge in California.

As housing continues to be in short supply.

Speaker 2: This supply constraint has allowed home builders in our communities to continue to sell homes at consistent price levels, albeit at a slightly reduced pace, through the combination of elevated interest rates and limited builder inventory in our community.

The supply constraint has allowed homebuilders and Archimedes to continue to sell homes at consistent price levels, albeit at a slightly reduced pace due to a combination of elevated interest rates and a limited builder inventory in our communities.

On the commercial land side of our business, we are seeing interest in our unique unlimited commercial land offerings.

Speaker 2: Now the commercial land side of our business, we're seeing interest in our unique and limited commercial land off.

Speaker 2: While capital markets have slowed for speculative commercial development in our communities, we've still seen interest from the user market as users have limited options if they want to own and control their own facilities on a long-term basis.

Capital markets has slowed for a spectrum of commercial development our communities.

Still seeing interest from the user market as users have limited options, if they want to own and control their own facilities on a long term basis.

Speaker 2: We expect this user interest will continue support demand in this preferred asset class, notwithstanding adjustments in the capital.

We expect this user interest will continue to support demand and this preferred asset class.

Notwithstanding adjustments in the capital markets.

Speaker 2: Finally, I would be remiss. I did not note the emerging geoplitical risks that could impact the economy and our industry, which we will continue.

Finally, I would be remiss I did not note the emerging geopolitical risks that could impact the economy and our industry.

Which we will continue to monitor.

Speaker 2: Let me pivot now and provide you with some updates on our communities, starting first of the great park neighborhood.

Let me pivot now to provide you with some updates on our communities starting first the great Park neighborhoods.

During the third quarter builders and our Great Park community sold a 113 homes.

Speaker 2: In the third quarter, builders in our Great Park community sold 113 homes.

Speaker 2: Solace Park is currently our only actively selling neighborhood and is nearing its maturity with approximately 100 homes remaining to sell.

So let's park is currently our only actually selling neighborhood and is nearing its maturity with approximately 100 homes remaining to sell.

Speaker 2: Sales Pasteuring in quarter was impacted by a combination of factors, including limited releases and product offerings, rising home prices and climbing interest rates.

Sales pace during the quarter was impacted by a combination of factors, including limited releases and product offerings rising home prices and climbing interest rates.

Speaker 2: Despite these challenges, we're encouraged by the sustained interest in trafficking the community, affirming the ongoing appeal of our home as a prospective buyer.

Spite these challenges we're encouraged by the sustained interest in traffic in the community affirming the ongoing appeal of our homeless prospective buyers.

During the quarter Solus averaged a sales pace of 0.9 homes per week and four collections sold out.

Speaker 2: During the quarter, Solace Dauert's sales pace of .9 homes per week and four collections sold out. Our next major neighborhood, Luna Park, with a debut with 798 homes across 13 collections and projected open and phases from February through December next year.

Our next major neighborhood Luna Park.

Debut with 798 homes across 13 collections is projected to open in phases from February through December next year.

Speaker 2: There remains strong home builder interest in acquiring home sites a great part due to the continuing home sales pace.

So it remains strong hall Miller interest in acquiring Homesites in great part due to the continuing home sales pace.

Speaker 2: To support underlying land prices, we are carefully monitoring builder inventory by product statement, which allows us to work with our builder partners to identify product offerings that will optimize our land sale revenue.

To support underlying land prices, we are carefully monitoring builder inventory by product segment, which allows us to work with our builder partners to identify product offerings that will optimize our land sale revenues.

Speaker 2: The two Landsfail Conjects we entered into during the third quarter were executed using Builder Selective Product.

The two land sale contracts, we entered into during the third quarter were executed using builder selected product.

On top of the ongoing residential opportunities at Great Park, we continue to market and sell our commercial land.

Speaker 2: On top of the ongoing residential opportunities a great part, we continue to market and sell our commercial land.

Speaker 2: There has been a reduction in speculative building in relevant Southern California markets that have slowed the pace of offers and pricing being offered for our land. Our location in the heart of Orange County has supported continued interest in our commercial land.

Well there has been a reduction in spec building and relevant southern California market that has slowed the pace of offers and pricing being offered for our land.

Our location in the heart of Orange County has supported continued interest in our commercial and wealth.

Speaker 2: We have for one of the few opportunities on market for large parcels in Tidal Land with flexible zoning that allows a multitude of uses.

Well for one of the few opportunities our market for large parcels entitled land with flexible zoning allows a multitude of uses.

Speaker 2: As we mentioned last quarter, we're so attracted close approximately 40 acres of commercial land so that from dust and distribution uses, either by the end of this year or early next year.

As we mentioned last quarter, we're still on track to close approximately 40 acres of commercial land slated for industrial distribution uses either by the end of this year or early next year.

Speaker 2: In Valencia, new home sales totaled 75 homes through the quarter, and overall sales pace of .7 homes per week.

And Valencia, New home sales totaled 75 homes for the quarter and overall sales pace of 0.7 homes per week.

As of the end of September 1156 homes from our initial offering of 268 homes have been sold with only 112 homes remaining.

Speaker 2: As of the end of September , 1,156 homes from our initial offering of 1268 homes have been sold with only 112 homes remaining.

Speaker 2: Our newest neighborhood is open with two detached counter products and has experienced strong interest average sales pace of point eight homes per week. Each new phase release has seen gradual increases in price, reflecting strong demand for our volunteer community.

Our newest neighborhood is often with two detached counter products as experienced strong interest average sales pace of 0.8 homes per week.

Each new phase release has seen gradual increases in price, reflecting strong demand for our Valencia community.

Speaker 2: Looking ahead, the anticipates remaining five neighborhoods open throughout the rest of this year and into 2024.

Looking ahead, we anticipate to remind the remaining five neighborhoods open throughout the rest of this year and into 2024.

Speaker 2: He's offering to augment our current line up and result in increased sales.

These offerings will augment our current lineup and result in increased sales.

Builders remain engaged with us in Valencia, and we closed two land sales in the third quarter for a total of $67 million. Additionally.

Speaker 2: Goals remain engaged with us in Valencia, and we close two land sales in the third quarter for a total of $60.7 million. Additionally, we anticipate closing the sale of a number of finished home sites by year end.

Additionally, we anticipate closing on the sale of a number of finished home sites by year end.

Speaker 2: As we move forward with monetizing our volunteer land holdings, we feel they are ideally positioned for expanding on our strategy capital management.

As we move forward with monetizing our Valencia land holdings, we feel they are ideally positioned for expanding on our strategy capital management.

Speaker 2: both by Tyna Capitalist and your term revenue events and by structuring land sales with our home building partners to shift certain land improvement costs to the builders which helps reduce our capital.

Both by tying our capital expenditures to near term revenue events and by structuring land sales with our homebuilding partners to shift certain land improvement costs to the builders, which helps reduce our capital spending.

We also continue to market a prime 35 acre mixed use commercial site in the community. We expect to have more to report on that next year.

Speaker 2: We also continue to market a prime 35 acre mixed use commercial site in the community. We expect to have more to report on that next year.

Speaker 2: In San Francisco, we're happy to report that we completed an important step in order to extend the existing tax increment financing program. When the State of California passed legislation that, among other things, allowed for the extension of the timeline to collect taxing generated by the project, and the issue bonds secured by this taxing.

In San Francisco, we're happy to report that we completed an important step necessary to extend the existing tax increment financing program.

When the state of California passed legislation that among other things allowed for the extension of the timeline look like tax increment generated by the project issue bonds secured by this tax increment.

Speaker 2: This is an important first step in extending the public financing program. So it remains integral to the development of both candlestick and the shipyard.

This is an important first step in extending the public financing program. So remains integral to the development of both candlestick and the shipyard.

Speaker 2: We're also progressing an average-established candlestick of the standalone project, separate from the conflomerate to the ultimate development of the shipyard site, which will be developed once the Navy has completed its remuneration activity.

We're also progressing in our efforts to establish candlestick as a standalone project separate from but complementary to the ultimate development of the shipyard site, which.

Which will be due at bell once the Navy has completed its remediation activities.

Speaker 2: Are we balancing efforts include working with city and county agencies to adjust the current development time between the two areas.

Our rebalancing efforts include working with the city and county agencies to adjust the current development items between the two areas.

Speaker 2: With the state's legislation benefiting the public financing program, we believe that we are building momentum to move forward with the stand alone development of the panel stick as the first phase of this larger mixed-use community located on Eerie Place, the land along the San Francisco Bay.

The state's legislation benefiting the public financing program. We believe that we are building momentum to move forward with the Standalone development, a candle sticks as a first phase of this larger mixed use community located on irreplaceable land along the San Francisco Bay.

Speaker 2: In closing, other is uncertainty in this market. We have positive momentum and remain optimistic about our future. Land development is a long game and we are just as beginning of the game at some of our communities. But they are not making any more land and there will never be a bundish and paddle land in California.

In closing while there is uncertainty in this market, we have positive momentum and remain optimistic about our future.

Land development is a long game, we're just at 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.

Speaker 2: For efforts today are ensuring we are well positioned for that long game, are recognizing the importance of focusing on creating and maintaining shareholder value.

Our efforts today are ensuring we are well positioned for that long game are recognized the importance of focusing on creating and maintaining shareholder value.

Speaker 2: Now let me turn over to Kim, who report on our financial results, who will provide some limited guidance for the fourth quarter and year end.

Now, let me turn it over to Kim who will report on our financial results and provide some limited guidance for the fourth quarter and year end.

Thanks, Dan.

Speaker 3: A summary of our financial results was included in the earnings release issued earlier today. And as Dan mentioned, we reported consolidated net income of $14.2 million for the quarter.

A summary of our financial results was included in the earnings release issued earlier today and as Dan mentioned, we reported consolidated net income of $14 $2 million for the quarter.

Speaker 3: We recognized $65.9 million in revenue, which was primarily generated by the sale of 25.8 acres of land, entitled for 146 home sites, for cash proceeds of $60.7 million before our traditional profit participation.

We recognized $65 $9 million in revenue, which was primarily generated by the sale of $25 eight acres of land entitled for 146, Homesites for cash proceeds of $67 million before our traditional profit participation.

Speaker 3: Two separate home builders purchased those parcels.

Two separate homebuilders purchased those parcels.

Speaker 3: We recognize a 34.2% gross margin on the sale.

We recommend it to Valencia project, we recognized a 34.2% gross margin on these sales.

Speaker 3: In addition, we recognized $4.5 million in management services revenue and other revenue of $700,000.

In addition, we recognized $4 $5 million in management services revenue and other revenue of $700000.

Speaker 3: Selling general administrative expenses were $11.9 million, which is slightly lower than our projected average quarterly range of $12 to $13 million. This reflects our efforts to hold the line on administrative costs. We expect the fourth quarter S-GNA to be within the projected range.

Selling general and administrative expenses were $11 $9 million, which is slightly lower than our projected average quarterly range of $12 million to $13 million. This reflects our efforts to hold the line on administrative costs, we expect fourth quarter SG&A to be within the projected range.

Speaker 3: The cost of management services was $2.4 million, which includes $600,000 for intangible asset amortization expense at our great park segment.

The cost of management services was $2 $4 million, which includes $600000 for intangible asset amortization expense at our Great Park segment.

Speaker 3: We also earned $2.4 million in interest income on our cash and cash equivalents for the quarter.

We also earned $2 $4 million in interest income on our cash and cash equivalents for the quarter.

Equity in earnings from our unconsolidated entities for the quarter was a loss of $600000. This includes small amounts of income or loss from the great Park venture the gateway venture and our Valencia land Bank venture.

Speaker 3: Equity and earnings from our unsconcordated entities for the quarter was a loss of $600,000. This includes small amounts of income or loss from the Great Park Venture, the Gateway Venture, and our Valencia Land Bank Venture. Although the Great Park Venture didn't have any land sales during the quarter, it did recognize profit participation revenue, which together with interest income, offset most of its operating expense.

Although the Great Park venture didn't have any land sales during the quarter. It did recognize profit participation revenue, which together with interest income offset most of its operating expenses.

Speaker 3: Before I talk about our inventory changes, I'd like to take a moment to review the role of CFDs and TIFF play in our business.

Before I talk about our inventory changes.

Like to take a moment to review the role of C F D's and Tiff play in our business.

Speaker 3: Since our last call, we've received numerous questions regarding our CFD and TIFF reimbursement.

Since our last call. We've received numerous questions regarding our cfd in Tiff reimbursements. So I thought it would be helpful to provide some additional information on these funding sources.

Speaker 3: So I thought it would be helpful to provide some additional information on these funding sources. In California, community facilities districts, also known as CFDs or Melarous, provide public financing through the sale of bonds for the purpose of financing public improvements and services. These improvements may include streets, water, sewage, and drainage, infrastructure, parks,

In California community facilities districts also known as C F D's or Mello Roos provide public financing through the sale of bonds for the purpose of financing public improvements in services.

These improvements may include streets water sewage and drainage.

Infrastructure parks and fire stations.

Speaker 3: to name a few things, to newly developing areas. We use this financing to construct such improvements within all of our communities. In addition to

To name a few things.

Two newly developing areas, we use this financing to construct such improvements within all of our communities.

In addition to Cfd financing.

Speaker 3: In San Francisco, the Candlestick and Shipyard projects also benefit from tax increment financing, also known as TIFF.

In San Francisco, the Candlestick and shipyard projects also benefit from tax increment financing also known as Tiff chip.

Speaker 3: TIF is another mechanism used to fund and finance public facilities and other improvements, often in infill locations where upfront investments are needed to enable real estate redevelopment.

<unk> is another mechanism used to fund and finance public facilities and other improvements often in infill locations, where upfront investments are needed to enable real estate redevelopment.

Speaker 3: TIF captures the incremental growth in tax revenues, in our case property taxes, above and beyond what taxing entities currently receive within a designated geographic area.

Tiff captures the incremental growth in tax revenues in our case property taxes.

Unknown Attendee: [inaudible] know I'm wrong, but I know[inaudible] I have with me today, Kim Tobler, our Chief Financial Officer, Mike Alvarado, our Chief Legal Officer, and Leo Kee, our former Interim Chief Financial Officer, who is now our Senior Vice President of Finance and Reporting.

Bhavan beyond what taxing entities currently received within the designated geographic area.

Speaker 3: With that background, I'd like to emphasize that the great park is a mature community. And there have been multiple bond issuances due to the large number of existing homes in the community. Therefore, when we make expenditures for qualifying improvements, we can receive reimbursements within a reasonably short period of time. Valencia, on the other hand, is a newer community with not as many residents as of yet.

With that background I'd like to emphasize that the great Park is a mature community and there have been multiple bond issuances due to the large number of existing homes in the community. Therefore, when we make expenditures for qualifying improvements we can receive reimbursements within a reasonably short period of time.

Valencia on the other hand, as a newer community with not as many residents as of yet.

Speaker 3: So it could take longer for the CFD to have adequate bond proceeds to be in a position to immediately reimburse qualifying costs.

So it could take longer for the cfd to have adequate bond proceeds to be in a position to immediately reimburse qualifying costs.

Speaker 3: Likewise, the San Francisco projects are in the early stages of the development where we haven't started receiving CFD reimbursements yet and are in the very early stages of participating in TIFF reimbursement.

Likewise, the San Francisco projects are in the early stages of the development, where we Havent started receiving cfd reimbursements, yet and are in the very early stages of participating in chip reimbursements.

Speaker 3: I hope you find this useful in understanding the role of public financing to our business. Now I'd like to talk about our

I hope you find this useful in understanding the role of public financing to our business.

Now I'd like to talk about our changes in inventory.

Speaker 3: During the quarter, the Great Park Venture Inventory increased by $17 million before a reduction for CFD and other reimbursements received of $17.4 million, resulting in a net decrease in inventory of $400,000.

During the quarter the Great Park venture inventory increased by $17 million before a reduction for CFT and other reimbursements received of $17 $4 million, resulting in a net decrease in inventory of $400000.

It is unusual for cfd reimbursements to exceed our capital expenditures and you Shouldnt expect that going forward on a reoccurring quarterly basis.

Speaker 3: It is unusual for CFD reimbursements to exceed or capital expenditures, and you shouldn't expect that going forward on a reoccurring quarterly basis.

At the Valencia segment.

Speaker 3: for the quarter are inventory increased by $26 million before a reduction for cost of sales of $13.9 million resulting in a net reduction of $13.9 million.

For the quarter, our inventory increased by $26 million before a reduction for cost of sales of $13 $9 million, resulting in a net reduction of $13 9 million.

Speaker 3: of the increase, 2.5 million was attributable to capitalized interest, and approximately $4 million was attributable to fees which are paid when homes are built. We had no CFD reimbursements this quarter in Valencia.

The increase 2.5 million was attributable to capitalized interest and approximately $4 million was attributable to fees, which are paid when homes are built we had no cfd reimbursements this quarter in Valencia.

During the quarter, our San Francisco segment's inventory increased by $11 $7 million. The majority of this increase was attributable to capitalized interest of $7 $6 million. We also received a chip reimbursement of $570000.

Speaker 3: During the quarter, our San Francisco segments inventory increased by $11.7 million. The majority of this increase was attributable to capitalized interest of $7.6 million. We also received a TIF reimbursement of $570,000.

Speaker 3: Now I'd like to emphasize our liquidity. As Dan mentioned, our total liquidity was $343.3 million at quarter end and was comprised of $218.3 million of cash and cash equivalents and $125 million of available borrowing capacity on a revolving credit facility. No borrowings or letters of credit were outstanding against a revolver as of September 30th.

Now I'd like to emphasize our liquidity as Dan mentioned, our total liquidity was $343 $3 million at quarter end and was comprised of $218 $3 million of cash and cash equivalents and 2100 $25 million of available borrowing capacity on our revolving.

Credit facility, no borrowings or letters of credit were outstanding against the revolver as of September 30th.

Speaker 3: I want to take a moment to thank our banks, the banks in our revolving credit facility, for working with us to extend our facility for two years in these challenging credit markets. They have shown their commitment to five point and our ability to deliver housing in California's supply and strain market.

I wanted to take a moment to thank our banks the banks in our revolving credit facility for working with us to extend our facility for two years in these challenging credit markets. They have shown their commitment to five point and our ability to deliver housing in California is supply constrained markets.

Speaker 3: Our debt to total capitalization ratio is stable and slightly down at 24.5% and our net debt to capitalization ratio after taking into account our cash balance was 17.5%.

Our debt to total capitalization ratio is stable and slightly down at 24, 5% and our net debt to capitalization ratio after taking into account our cash balance was 17, 5%.

Unknown Attendee: Stuart Miller, our Executive Chairman, is joining us remotely. Before we get into the quarterly update, I'd like to mention some positive news on recent management changes.

Unknown Attendee: And so last call, Kim Tobler was promoted from his position as Vice President of Treasury and Tax, to his new role as Chief Financial Officer. Kim brings a great deal of valuable background and experience to this position, and as well suited to help us navigate the current economic environment and execute on our business priorities.

Speaker 3: For more information regarding our four reporting segments, Valencia, San Francisco, Great Park, and Commercial, I recommend that you review our earnings release or the 10Q when it's filed. As Den mentioned, I will now provide an update on our year end guidance.

For more information regarding our four reporting segments Valencia, San Francisco, Great Park in commercial I recommend that you review our earnings release or the 10-Q, when it's filed.

As Dan mentioned I will now provide an update on our year end guidance.

On our last call. We stated that we expected the second half of the year to produce an additional 50 million to $70 million of net income.

Speaker 3: On our last call, we stated that we expected the second half of the year to produce an additional 50 million to 70 million dollars of net income.

Daniel Hedigan: Congratulations, Kim. We are all very appreciative of the great job Leo Kee did as an Interim CFO, and I personally very much appreciate his assistance as we focus our attention on right-sizing our SGNA to position us to achieve our long-term goals. Thank you Leo. Now let me turn to our Q3 results and update you on the progress of the company through the third quarter. I'll also update you on our team's focus during the quarter, and the steps you're taking to implement our strategic priorities for the balance of the year.

Speaker 3: and that we expected to end the year with a cash balance of between 250 million to 300 million.

And that we expected to end the year with a cash balance of between 250 million to $300 million. We currently have expected sales in our pipeline in both Valencia and integrate part that continue to support that expectation.

Speaker 3: We currently have expected sales in our pipeline in both Valencia and in the great part that continue to support that expectation.

Speaker 3: With that said, it is always possible that one or more sales that are expected to close in the fourth quarter drift into the beginning of the year.

With that said it is always possible that one or more sales that are expected to close in the fourth quarter drift into the beginning of the year.

Speaker 1: With that, I'll turn it over to the operator for questions. Thank you. Ladies and gentlemen, at this time we'll be conducting a question and answer session. If you'd like to ask your question, you may press star one on your telephone keypad. The confirmation.

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

Daniel Hedigan: Next, Kim will give an overview of the company's financial performance and condition. We'll then open the line for questions to our management team. Again, I'd like to congratulate our team for remaining focused this quarter on both controlling our business, next getting our three main priorities, generating positive cash flow and earnings, establishing appropriate levels SGNA, and managing and limiting our capital spend, matching those expenditures to near-term revenue events. We ended the quarter with consolidated net income of $14.2 million, and added $25.1 million to our cash balance.

Thank you ladies and gentlemen at this time, we'll be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.

Our first question comes from the line of Iran. She charged me with BNP. Please proceed with your question.

Yes, hi, thank you thank.

Speaker 4: Yes, hi, thank you for taking my questions.

Thank you for taking my questions.

Daniel Hedigan: Our balance sheet at the end of the third quarter reflects 218.3 million of cash on hand, with a $0 drawn on our $125 million revolver. We have total liquidity of $343.6 million, and we have no principled debt repayment obligations on our senior notes for over two years. Reflecting our considerable progress in cash and revenue generation, please report on the extension of our revolving credit facility with our bank group, which extends us maturity until April 2026.

Speaker 4: in a difficult environment. I just wanted to first talk a little bit about Great Park.

And a good job in a in a difficult environment.

Just wanted to go.

First talk a little bit about great Park.

Speaker 4: I think the last time you talked about interest in both the residential as well as the commercial and marketing. I think you talked about 48 cars as being the expectation. Just wanted to see if if there's any update there and maybe start with that.

And I think the last time, you talked about interest in and in both.

The residential as well as the commercial land into marketing I think you'd talked about 40 acres as being the expectation just wanted to see if there's any update there and you know maybe it's maybe start with that.

Thank you.

The 40 acres is still progressing.

Speaker 2: The 40 acres is still progressing. We're still anticipated to be closed at end of this year. It does take some actions by the city, which means it could slip a little bit. But right now we're still on track with that. We still also have...

We still anticipate it to be close at the end of this year. It does take some actions by the city, which means it could slip a little bit but right now we're still on track with that we still also have a another hundred acres of commercial land that we are you know.

Daniel Hedigan: This allows us to focus our attention on our senior notes that are due in November 2025. Our senior notes don't mature for another two years. With our growing profitability and cash position, we are focused on re-positioning and extending this debt, and we are confident that we'll be able to provide for the long-term capital needs of the company as we manage the upcoming maturity of our notes. Our SGNA and capital spend continue to be in line with our recent trends. Ken will provide additional detail on these numbers during his remarks.

Speaker 5: another hundred acres of commercial land that we are only marketing on a kind of a lot by a lot basis. It's not all on the market, but we're actually looking at as we close on this last 40 acres of moving another group, another section of land into the market.

Only marketing on a.

There are a lot by lot basis, it's not all on the market, but we're actually looking at as we close on this last 40 acres of moving another group another section of land into the market.

Got it. Thank you Dan and then can you also talk a little bit about.

Daniel Hedigan: The macroeconomic environment for most this year has been constructed the home building, but there are challenges that we and our gift builders are facing. While we have entered a phase of more major interest rate adjustments by the Fed, home buyers are feeling the effects of higher interest rates, and the market appears to expect rates to stay at elevated levels for longer than originally anticipated. Notwithstanding these headwinds, we still see demand for new homes as home buyers are dealing with the reality of higher interest rates.

In your prepared comments.

You mentioned the headwinds created by the interest rate environment can you talk a little bit broadly about your.

Speaker 5: talk a little broadly about your expectations in terms of maybe modest slippage in the sort of year end.

And your expectations in terms of maybe modest slippage in the in the sort of year end cash guidance.

You sort of expect that to be.

End of <unk>.

Speaker 5: year, maybe like early next year, is that sort of the thought process? And are there any additional sort of details you can provide in terms of?

Or maybe like early early next year is that sort of a thought process.

Are there any additional sort of details you can provide in terms of in terms of what you know.

Daniel Hedigan: Home builders have also assisted in stabilizing demand by offering mortgage products with reduced interest rates that have allowed new home sales to continue even as the resale market slows. Additionally, as you may recall from my comments last quarter, as a consequence of increased interest rates, resale home inventory remains very low, helping to support the new home market. Overall affordability continues to be a challenge in California as housing continues to be in short supply.

Where exactly you are seeing.

The impact of high interest rates.

Well first on the year end guidance, we actually are on track.

Speaker 2: Well, first on the year in guidance, we actually are on track consistent with that guidance. And so at this point, we're feeling very good about that based on various transactions that are in escrow are very close to being finalized. On the issue of interest rates, that's a very...

Daniel Hedigan: This supply constraint has allowed home builders and our communities to continue to sell homes at consistent price levels albeit at a slightly reduced pace to the combination of elevated interest rates and limited builder inventory in our communities.

Consistent with that guidance and so at this point, where we're feeling very good about that based on.

Various transactions that are in escrow or very close to being finalized.

On the issue of interest rates, that's a very.

Speaker 2: very interesting question. You know, home buyers.

Very interesting question.

Homebuyers.

Speaker 2: kind of went through a shock of very quickly rising rates and adjusted to what is the new normal and they have been buying homes at our communities. Now, in many instances, the home builders are buying down interest rates.

Kind of went through a shock up very quickly rising rates and adjusted to what is the new normal and they have been buying homes at our communities now in many instances the homebuilders are buying down interest rates. It just support those sales and we think builders will keep doing that.

Daniel Hedigan: On the commercial land side of our business, we are seeing interest in our unique and limited commercial land offerings. While capital markets have slowed for speculative commercial development in our communities, we're still seeing interest from the user market as users have limited options if they want to own and control their own facilities on a long-term basis. We expect this user interest will continue to support demand in this preferred asset class, notwithstanding adjustments in the capital markets.

Speaker 2: to support those sales. And we think builders will keep doing that. We're going to mark on our rates or taking back up again, which will drive towards another new normal. But we believe demand will find its way over these increases. And the thing we're facing in California is just a terrible shortage of housing. And with interest rates, the resale market is very limited. So.

Well when a market our rates are ticking back up again, which drive towards an.

Another new normal, but we believe demand will find its way over these increases and you know the thing we're facing in California. Its just a terrible a shortage of housing and with interest rates. The resale market is very.

Daniel Hedigan: Finally, I will be remiss. I did not note the emerging geopolitical risks that could impact the economy and our industry, which we will continue to monitor.

Very limited so.

Speaker 2: You know, affordability will always be an issue. So I don't want to make light of that, but the extent of buyer can afford a new home, there is going to be, we feel there is going to be demand.

So you know and affordability will always be an issue. So I don't want to make light of that but to the extent of buyer for a new home. There is going to be we feel there is going to be demand.

Daniel Hedigan: Let me pivot now and provide you with some updates on our communities starting first with the Great Park neighborhood. In the third quarter, builders in our Great Park community sold 113 homes. Solus Park is currently our only actually selling neighborhood and is near and its maturity with approximately 100 homes remaining to sell. Sales pace during the quarter was impacted by a combination of factors including limited releases and product offerings, rising home prices, and climate interest rates.

Yes.

Got it. Thank you one last question and then maybe this is for Kevin.

Speaker 5: Got it. Thank you. Oh, one last question. And then maybe this is for Kim, which by the way, Kim, congratulations on your elevation. Just wanted to maybe talk a little bit about the revolver extension. Great job in getting that done. Just a sense of any terms around the revolver extension.

Which by the way Kevin Congratulations on your elevation just wanted to you know maybe talk a little bit about the revolver extension.

Job in getting that done just a sense of any any terms around the revolver extension and sort of any details you could provide around the terms and whether theres any conditionality on the on the bond maturity. That's all for me. Thanks.

Daniel Hedigan: Despite these challenges, we're encouraged by the sustained interest in trafficking in the community, affirming the ongoing appeal of our home's perspective buyers. During the quarter, Solus averaged the sales pace of .9 homes per week, and four collections sold out.

Speaker 3: Yeah. So as it relates to the to the revolver, we'll be publishing an 8K and you'll be able to read the documents and see there. But largely it was rolling forward the existing terms. And really the only thing was they raised the cost. So we're going to have to pay more when we draw on the revolver. But beyond that, it stayed pretty close to what we've done. We lost what's known as a term out.

Yeah, so as it relates to the to the revolver.

It will be published in an 8-K and you'll be able to read.

The documents and see there, but largely it was rolling forward the existing terms.

Daniel Hedigan: Our next major neighborhood, Luna Park, with a debut with 798 homes across 13 collections is projected open in phases from February through December next year. There remains strong homebiller interest in acquiring home sites at Great Park due to continuing home sales pace. To support underlying land prices, we are carefully monitoring builder inventory by product segment, which allows us to work with our builder partners to identify product offerings that will optimize our land sale revenues.

And and really the only thing was they raised the cost. So we're gonna have to pay more when we draw on the revolver, but beyond that.

It stayed pretty close to what we've done we lost what's known as a term out so.

Speaker 3: So we had a term out which allowed us to

So we had a term out which allowed us to.

Speaker 3: to take whatever balance was due with the maturity and pay out over 12 months equally.

To take whatever balance was due with the maturity and pay it out over 12 months equally.

Speaker 3: That's an unusual provision in a revolver like ours. And so the banks came back and said they didn't see how they could continue that in the current market. And we understood that and we're willing to give that up.

That's an unusual provision and a revolver like ours and so.

Daniel Hedigan: The two land sale contracts we entered into during the third quarter were executed using builder selected product. On top of the ongoing residential opportunities at Great Park, we continue to market and sell our commercial land, while there has been a reduction in speculative building in relevant Southern California markets that has slowed the pace of offers and pricing being offered for our land. Our location in the heart of Orange County has supported continued interest in our commercial land.

The banks came back and said they didn't see how they can continue that in the current market and we we understood that and we're willing to give that up but they gave us a two year extension, which we're very grateful for and thought we deserved and I'm very glad that the four banks stayed state altogether and we kept the 125 in place.

Speaker 3: But they gave us a two-year extension which we were very grateful for and thought we deserved.

Speaker 3: and very glad that the four banks stayed all together. And we kept the 125 in place.

Speaker 3: As it relates to the senior notes, as Dan said, we're turning our attention to that. Don't want anyone to think that we're not thinking about those. We've been regularly meeting with our board and together as management, reviewing the different options that we think we may have. That's part of the reason why we've been working so hard to increase our cash balances so that we have some things to work with. But we don't have anything really specific that I can talk about right now that we've done.

As it relates to the senior notes as Dan said, we're turning our attention to that don't want anyone to think that we're not thinking about those we've been regularly meeting with our board and together as management reviewing the different options that we think we may have.

Daniel Hedigan: We offer one of the few opportunities on market for large parcels in Title Land, with flexible zoning that allows a multitude of uses. As we mentioned last quarter, we're so 1,156 homes from our initial offering of 1268 homes have been sold with only 112 homes remaining. Our newest neighborhood is open with two detached count of products and has experienced strong interest, average sales pace of point eight homes per week. Each new phase release has seen gradual increases in price, reflecting strong demand for our service throughout the rest of this year and into 2024.

That's part of the reason why we've been working so hard to increase our cash balances. So that we have some things to work with but we don't have anything really specific that I can talk about right now that we've that we've done so aaron's good good to hear you and I look forward to talking more in the future.

Speaker 1: So Aaron, it's good to hear you and look forward to talking more in the future. Thanks very much. Our next question.

Thanks very much.

Our next question comes from the line of Alan Ratner with Zelman and Associates. Please proceed with your question.

Hey, guys. Good afternoon, thanks for all the detail.

And congrats on the progress here.

Speaker 6: on the progress here. First question on the Valencia cell. It looks like the...

First question on the Valencia sale.

Looks like the I guess the competition of this particular lot sale was quite different than prior ones. It's much lower density much higher price per lot.

Speaker 6: of this particular lot of sale was quite different than your prior ones, much lower density, much higher price per lot. I'm just curious if you can give a little bit more detail in terms of how you're thinking about segmentation of...

Daniel Hedigan: These offerings will augment our current lineup and result in increased sales. Doggers remain engaged with us in Valencia, and we close two land sales in the third quarter for a total of $60.7 million. Additionally, we anticipate closing the sale of a number of finished home sites by year end. As we move forward with monetizing our Valencia land holdings, we feel they are ideally positioned for expanding on our strategy of capital management, both by tying our capital expenditures in your term revenue events and by structuring land sales with our home building partners to shift certain land improvement costs to the builders, which helps reduce our capital spending.

I'm just curious if you can give a little bit more detail in terms of how youre thinking about segmentation of <unk>.

Speaker 6: product and lot cells in Valencia in the intermediate term. Is this a...

Product and lot sales in Valencia.

In the intermediate term is this a.

Speaker 6: certain effort to kind of mix in more move up product or lower density product and any kind of guidance you can give on the expected force quarter. Lots of sale.

Concerted effort to kind of mixing.

More move up product or lower density product in any kind of guidance you can give on the expected fourth quarter.

Lot sale, if it is going to look similar or different would be helpful.

Thanks Alan.

Valencia actually has a broad.

Speaker 2: Valencia actually has a broad

Speaker 2: for our level of segmentation. And in its entitlement, it actually has zones that are identified for lower density and higher density. And what you're seeing in the two sales that closed this quarter, they're in the area that was by design set up for lower density. And we are seeing.

Broad level of segmentation and it in its entitlement. It actually has zones that are identified for lower density and higher density and what youre seeing in the two sales that closed this quarter. They are in the area that was by design set up for lower density.

Daniel Hedigan: We also continue to market a prime 35 acre mixed use commercial site in the community. We expect to have more to report on that next year.

Daniel Hedigan: In San Francisco, we're happy to report that we completed an important step, necessary to extend the existing tax increment financing program. When the state of California passed legislation that among other things, allowed for the extension of the timeline to collect tax increment generated by the project due to bond secured by this tax increment. This is an important first step in extending the public financing program, which remains integral to the development of both candlestick and the shipyard.

And we are seeing.

Good demand for that move up buyer and Valencia, very we're talking very traditional homes with.

Speaker 2: Good demand for that move up buyer and volentia. Very, you know, we're talking very traditional homes with, you know, driveways and backyards. And we're definitely seeing, buy

Driveways, and backyards and were definitely seen buyer demand there.

Speaker 2: You know, as I think I've commented in the past, I'm really trying to work with the builders to be sure our product is really responding to the market. But some of our product is kind of pre-set just on where we're at, but both of those were previously identified and they were just in a lower density area. As to the fourth quarter land sales, they're actually going to be in different sections of

I've commented in the past I'm really trying to work with the builders to be sure. Our product is really responding to the market, but some of our product is kind of a preset just on where we're at but both of those were previously identified and they were just in a lower density area as to the fourth quarter land sales theyre actually going to be.

Daniel Hedigan: We're also progressing and are able to establish candlestick as a standalone project separate from the component to the ultimate development of the shipyard site, which will be developed once the Navy has completed its remediation activities. Our rebalancing efforts include working with city and county agencies to adjust the current development entitlements between the two areas. With the state's legislation benefiting the public financing program, we believe that we are building momentum to move forward with the standalone development of candlestick as the first phase of this larger mixed use community located on every place of the land along the San Francisco Bay.

Be in different sections of.

Speaker 2: the Lynch project and so there's gonna have a mix of products.

The Lynch a project and so theres going to have a mix of product there's going to be some that as you know our traditional detached condos now also be a small portion of that would be attached but it will be it'll be more diverse than what you have seen that closed this quarter.

Speaker 2: There's going to be some that is our traditional detached condos. And also a small portion will be attached, but it will be more diverse than what you're seeing that close this quarter.

Understood that's helpful color Dan.

Daniel Hedigan: In closing, although there is uncertainty in this market, we have positive momentum and remain optimistic about our future. Land development is a long game and we are just as beginning of the game at some of our communities, but they're not making any more land and there will never be an abundance in Patelan and California. Our efforts today are ensuring we are well positioned for that long game or recognizing the importance of focusing on creating and maintaining shareholder value.

Speaker 6: Second, I know the timeline is still uncertain with San Francisco and you haven't given it a target there, but my question is, you know, when that project does get off the ground, is there any way you can kind of help us think through what the cash flow impact would look like initially? I would imagine you would have to put up some development dollars before the first phase.

Second I know you know the timeline is still uncertain with San Francisco and you haven't given a target there but.

My question is when that project does get off the ground is there any way you can kind of help us think through what the cash flow impact would look like initially I would imagine you would have to put up some development dollars before the first phase of land would be ready for sales so any.

Kim Tobler: Now, let me turn over to Kim, who report on our financial results and provide some limited guidance for the fourth quarter and year-end. Thanks, Dan. A summary of our financial results was included in the earnings release issued earlier today. As Dan mentioned, we reported consolidated net income of $14.2 million for the quarter. We recognized $65.9 million in revenue, which was primarily generated by the sale of 25.8 anchors of land entitled for 146 home sites for cash proceeds of $60.7 million before our traditional profit participation.

Speaker 6: land would be ready for sale. So any way to think about what that initial outlay might look like, how long that might be before revenue is begin to recognize the interest kind of thinking.

Way to think about what that initial out outlay might look like how long that might be before revenues begin to recognize that and just kind of thinking through the go forward look there.

Yeah.

Speaker 2: Well, when we think about San Francisco, we really do think of ourselves as the horizontal developer. You know, there will always be the need for vertical development in that site, but we are the horizontal developer. So from a standpoint of revenue events on the landside, they will be pretty much tied to completion of a deliverable site.

Well when we think about San Francisco, we really do think of ourselves as the horizontal developer.

You know there will always be.

The need for vertical development in that site, but we are the horizontal developers so from a standpoint of revenue events on the land side, they will be pretty much tied to completion of a.

A deliverable site.

Kim Tobler: Two separate home builders purchased those parcels. We recognized a 34.2% gross margin on these sales. In addition, we recognized $4.5 million in management services revenue and other revenue of $700,000. Selling general administrative expenses were $11.9 million, which is slightly lower than our projected average quarterly range of $12 to $13 million. This reflects our efforts to hold the line on administrative costs. We expect the fourth quarter SGNA to be within the projected range.

Speaker 2: And you know, as part of the conversations we're having right now with the

And you know as part of the conversations we're having right now with the.

Speaker 2: City and County of San Francisco is, you know, we are looking at that first phase and how you access that first phase.

City and county of San Francisco is we are looking at that first phase and how do you access that first phase.

So.

Speaker 2: So, but you know, there's always going to be kind of a variety of options of how we approach that as far as matching, you know, the spin to capital and near term revenue, but the revenue really does, it does flow from the horizontal development. We're not really going to need to vertical development. That protocol development as Kim talked about is going to be a big part of future capital through CFDs and TIFF.

But there's always going to be kind of a variety of options of how we approach that as far as matching.

Spend the capital and near term revenue, but the revenue really does it does flow from the horizontal development, we're not really going to need to vertical development that political development as Kim talked about is going to be a big part of future capital through Cft's, and tiff, but app, but the initial read.

Speaker 2: But the initial revenue is going to be tied to horizontal land sales.

Kim Tobler: The cost of management services was $2.4 million, which includes $600,000 for intangible asset amortization expense at our Great Park segment. We also earned $2.4 million in interest income on our cash and cash equivalents for the quarter. Equity and earnings from our unconsolidated entities for the quarter was a loss of $600,000. This includes small amounts of income or loss from the Great Park Venture, the Gateway Venture, and our Valencia Landbank Venture. Although the Great Park Venture didn't have any land sales during the quarter, it did recognize profit participation revenue, which together with interest income offset most of its operating expenses.

<unk> is going to be tied to horizontal land sales.

Just to follow up on that Dan I think.

Speaker 6: just to follow up on that then, yeah, I think I understood that. But is that kind of like a 12 month horizontal development lead time from shubbling ground to having a parcel ready to sell and begin to recognize revenue on? Is it longer, shorter? What any?

Understood that but is that kind of like a 12 month.

Horizontal development lead time from shovel in ground to having a parcel ready to sell and begin to recognize revenue on is it longer shorter.

A frame of reference there.

Well from the standpoint of the getting to the first phase.

Speaker 2: Well, from the standpoint of getting to the first phase, you know...

All things always are driven by having the.

Speaker 2: All things always are driven by having the approval from the city to move forward.

Approvals from the city to move forward.

Speaker 6: But what I think I would say on that, I mean, to get to the first phase is not going to be extraordinarily long. I don't want to try to put a timeframe on it today, simply because there's so many variables that we'd be dealing with. But the initial phase, once we are positioned and kind of have the rebalancing done, is actually not that hard to get to, especially in candlestick. In the notes of commencing an miracle, the series starts to strike at 10 o'clock, and as the mess is??? added, theörper has to realign for it as well.

But what I think I would say on that I mean to get to the first phase is not going to be extraordinarily long I don't want to try to put a timeframe on it today.

Kim Tobler: Before I talk about our inventory changes, I'd like to take a moment to review the role of CFDs and TIFF play in our business. Since our last call, we've received numerous questions regarding our CFD and TIFF reimbursements, so I thought it would be helpful to provide some additional information on these funding sources. In California, Community Facilities Districts, also known as CFDs or Melarus, provide public financing through the sale of bonds for the purpose of financing public improvements and services.

Simply because there's so many variables that we'd be dealing with but the initial phase. Once we are positioned and you know kind of have the rebalancing done is actually not that hard to get too, especially in candlestick.

Got it okay. That's helpful. Thanks, a lot guys I appreciate it.

As a reminder, it is star one to ask your question. Our next question comes from the line of Myron Kaplan private Investor. Please proceed with your question.

Kim Tobler: These improvements may include streets, water, sewage, and drainage, infrastructure, parks, and fire stations to name a few things, to newly developing areas. We use this financing to construct such improvements within all of our communities. In addition to CFD financing, in San Francisco, the Candlestick and Shipyard projects also benefit from tax increment financing, also known as TIFF. TIFF is another mechanism used to fund and finance public facilities and other improvements, often in infill locations where upfront investments are needed to enable real estate redevelopment.

Speaker 7: Yeah, hi.

Yeah, Hi.

Thanks for taking my questions.

Speaker 7: First of all, I'd like to commend you for timely and ship shape reporting. Congratulations.

First of all I'd like to commend you for timely and Shipshape reporting.

And congratulations Kim for your elevation.

Thanks Meyer, it's good to hear from you.

No.

Speaker 5: I wanted to ask, what's the rate of the C-year notes Twitter

I wanted to ask what's the range of the senior notes are due in 2025 coupon.

Seven and seven eights and what she and watch the principal amount.

$625 million.

So that's it's really the elephant in the room so to speak.

Kim Tobler: Tip captures the incremental growth in tax revenues, in our case property taxes, above and beyond what taxing entities currently receive within a designated geographic area. With that background, I'd like to emphasize that the great park is a mature community and there have been multiple bond issuances due to the large number of existing homes in the community. Therefore, when we make expenditures for qualifying improvements, we can receive reimbursements within a reasonably short period of time.

It is the elephant I look at every day, when I didn't when I wake up.

Speaker 8: It is the elephant I look at every day when I wake up.

Yeah.

Right.

The I just wanted to ask just a informational question what I didn't understand what she is you were talking about a partial in the great Park of 40 acres of commercial land.

Speaker 9: I just wanted to ask you just an informational question. What I didn't understand, what's the, you were talking about a parcel in the great park, of 40 acres of commercial.

Yes, those are actually two piece that's a combination of two pieces of property that are actually in escrow today. So those those would be closing.

Speaker 9: Yes, those are actually two pieces. That's a combination of two pieces of property that are actually in escrow today. So those would be closing, we anticipate by the end of the year. I see. So those are basically under contract. Correct. Correct.

Kim Tobler: Valencia, on the other hand, is a newer community with not as many residents as of yet. So it could take longer for the CFD to have adequate bond proceeds to be in a position to immediately reimburse qualifying costs. Likewise, the San Francisco projects are in the early stages of the development where we haven't started receiving CFD reimbursements yet and are in the very early stages of participating in TIFF reimbursements.

We anticipate by the end of the year.

So those are those are those are basically under contract.

Correct.

Yeah.

And also just an informational question.

Sure.

Okay.

The Great Park.

You have builder sales of 113 homes.

Kim Tobler: I hope you find this useful in understanding the role of public financing to our business.

So those revenues are substantial but.

Kim Tobler: Now I'd like to talk about our changes in inventory. During the quarter, the great park venture inventory increased by $17 million before a reduction for CFD and other reimbursements received of $17.4 million, resulting in a net decrease in inventory of $400,000. It is unusual for CFD reimbursements to exceed our capital expenditures and you shouldn't expect that going forward on a reoccurring quarterly basis. At the Valencia segment, for the quarter, our inventory increased by $26 million before a reduction for cost of sales of $13.9 million, resulting in a net reduction of $13.9 million.

On consolidated yes.

Okay.

Speaker 9: That's correct. Those are the sales that the builders themselves are reporting. They bought the land and they're reporting those sales on there. I see. I see. You've previously sold.

Thats correct. Those are the sales that the builders themselves are reporting that they bought the land in their reporting those sales on their findings I see show you've you've previously show them the land.

Speaker 10: yeah we give that guidance my answer that people can understand uh... the pace of sales of homes because that indicates when they'll need more land in the future

Yes, we give that guidance my own so that people can understand.

Pace of sales of homes, because that indicates when they'll need more land in the future right. So then you then you said you were.

What are you seeing some more atrocious.

You'll be able to book more more revenue.

Well I guess I guess, that's pretty much what I yeah. Thank you for taking my questions in mind.

It seems like you're doing doing pretty well in a very tough environment.

Kim Tobler: Of the increase, $2.5 million was attributable to capitalized interest and approximately $4 million was attributable to fees which are paid when homes are built. We had no CFD reimbursements this quarter in Valencia. During the quarter, our San Francisco segments inventory increased by $11.7 million. The majority of this increase was attributable to capitalized interest of $7.6 million. We also received a TIFF reimbursement of $570,000.

Martin Thank you.

Yes.

Our next question comes from the line of Ben Fader Rattner with Space Summit Capital. Please proceed with your question.

Speaker 11: Hi, just going back to the Valencia sale, unless I'm doing the math wrong, it looks like it was over 400,000 per whole.

Hi, just going back to the Valencia sale.

Unless I'm doing the math wrong. It looks like it was over 400000 per home site I think in the past you talked about an average more in the 200.

Speaker 11: you talked about an average more in the 200.

With this sale.

Speaker 11: above expectations. I wasn't clear from the answer to the previous question.

Kim Tobler: Now I'd like to emphasize our liquidity. As Dan mentioned, our total liquidity was $343.3 million at quarter end and was comprised of $218.3 million of cash and cash equivalents and $125 million of available borrowing capacity on a revolving credit facility. No borrowings or letters of credit were outstanding against the revolver as of September 30. I want to take a moment to thank our banks and our revolving credit facility for working with us to extend our facility for two years in these challenging credit markets.

Above expectations I wasn't clear from the answer to the previous questioner you know if this is more of an expected outlier or there're some other read through.

Speaker 11: You know, if this was more of an expected outlier or there's some other read through on this.

On the sale.

Yeah, well thanks.

Speaker 2: Thanks. You know, it is not an outwire. It really is, you know, the different, most of the homes in our initial phase. We have two phases we talk about. The initial first phase is about 1200 homes, and then we have another phase, which it has about 800 homes. make calls.

It is not an outlier it really is the different most of the homes in our initial phase we have two phase that we talk about just that initial first phase about 1200 homes and then we have another phase.

Which has about 800.

Entered homes.

Kim Tobler: They have shown their commitment to five point and our ability to deliver housing in California's supply and strain market. Our debt to total capitalization ratio is stable and slightly down at 24.5% and our net debt to capitalization ratio after taking into account our cash balance was 17.5%.

And so the.

As part of of that overall land plan that was put in place there are always larger lots in a certain area that actually buy zoning are supposed to be lower density.

Speaker 2: As part of that overall land plan that was put in place, there are always larger lots in a certain area that actually by zoning are supposed to be lower density. So they were zoned to be lower density in a way they've been produced.

They were they were zoned to be lower density, but had been produced.

Kim Tobler: For more information regarding our four reporting segments, Valencia, San Francisco, Great Park, and Commercial, I recommend that you review our earnings release or the 10Q when it's filed.

Speaker 2: So, you know, all we're really seeing is that we're actually finally getting to them. You know, the infrastructure is kind of caught up to them. It's kind of followed to them. And so we've had some, we've had some S, traditional SFD lots.

So.

All we're really seeing is that we're actually finally getting to them. The infrastructure is kind of caught up to them. It's kind of followed to them and so we've had some we've had some S. Traditional SMT lots and the market before but not of not a whole lot of them and in particular toll has a project up there, but selling right now and selling very well.

Kim Tobler: As Den mentioned, I will now provide an update on our year end guidance. On our last call, we stated that we expected the second half of the year to produce an additional $50 million to $70 million of net income, and that we expected to end the year with a cash balance of between $250 million to $300 million. We currently have expected sales in our pipeline in both Valencia and in the Great Park that continue to support that expectation. With that said, it is always possible that one or more sales that are expected to close in the fourth quarter drift into the beginning of the year.

Speaker 2: in the market before, but not a whole lot of them. And in particular, Pearl had us a project up there that's selling right now and selling very well. And they basically saw an opportunity to kind of continue that program through lots that were coming available in the Duke course, based on our development course, that is a larger traditional SFD. So it's kind of all Duke course, it's just how the land and when we get to the land, how it's been flowing.

And they were and they basically.

So an opportunity to kind of continue that program through lots that were coming available in the due course based on development course that has a larger traditional SMT. So it's kind of all due course as just how the land and when we get to the land how it's been flowing.

Well can you give a sense for if you look across the land bank in Valencia.

Speaker 11: Can you give a sense for, if you look across the land bank in Valencia, what sales...

Right.

Unknown Attendee: With that, I'll turn it over to the operator for questions. Thank you.

What sales price per home site.

Speaker 11: you would expect or maybe a range. And is this my correct in thinking that this is consistent with your expectations? It's just a higher value entitlement as compared to.

You would expect or you know maybe a range and is it am I correct in thinking that this is.

Unknown Attendee: Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask your question, you may press star one on your telephone key pass. A confirmation total indicate your line is in the question Q. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Consistent with your expectations or just the higher valued entitlement as compared to perhaps some other acreage that you have in the portfolio.

Speaker 2: So I think the best way to answer that consistent with this density and product type, that is definitely kind of in the ballpark of what we'd expect.

Well I, yeah. So I think the best way to answer that consistent with this density and product type that is definitely you know kind of in the ballpark of what we'd expect on the other hand as we as we go as we look at what's coming up in the market I don't think I have anything else to traditional asset deep and as part of this is ware.

Alan Ratner: Our first question comes from the line of a run. She's shardry with BNP. Please proceed with your question. Yes, hi. Thank you. Thank you for taking my questions and a good job in a difficult environment. I just wanted to first talk a little bit about Great Park. I know I think the last time you talked about interest in both the residential as well as the commercial and marketing. You talked about 40 acres as being the expectation.

Speaker 2: On the other hand, as we go, as we look at what's coming up in the market, I don't think I have anything else that's additional SFDs. And part of this is where we're at, kind of in the land, uh, planets out there. So most of them are going to be either detached kind of minions or attached. And all of those have higher density and they will definitely have a lower price per unit.

We're at kind of in the land plan that's out there. So most of them are going to be either detached condominiums are attached in all of those have higher density and they will definitely have a lower price per unit and so it really is very product specific and this was in this product is what's driving those numbers here.

Speaker 2: And so it really is very product specific. And this product is what's driving those numbers you're looking at.

Youre looking at.

Alan Ratner: Just wanted to see if there's any update there and maybe start with that. Thank you. The 40 acres is still progressing. We're still anticipated to be closed into this year. It does take some actions by the city, which means it could slip a little bit, but right now we're still on track with that. We still also have another hundred acres of commercial land that we are only marketing on a lot by lot basis. It's not all on the market, but we're actually looking at as we close on this last 40 acres of moving another group, another section of land into the market.

Speaker 11: I see. Okay. All right. Thank you. Thank you on that. And then just one other question. And I know you haven't given numbers on 24 and I'm not asking.

I see okay, alright. Thank you thank.

Thank you on that and then just one other question and I know you haven't.

Given numbers on 24 and I'm not asking.

Speaker 11: for them, but I guess if you could, as you think about now versus the point at which you'd, you know, pro-ac...

For them, but I guess, if you could.

As you think about now versus the point at which you'd.

Proactively refinance the bonds.

Speaker 11: Are you comfortable with the cash balance here? Or do you think the cash balance is likely to be higher?

Are you comfortable with the cash balance here or do you think the cash balance.

You know, it's likely to be higher at the point at which you proactively decided to refinance your bonds.

Speaker 8: Ben, this is Kim. I would tell you that we're monitoring that regularly and again, given Dan's leadership, we've been focused on increasing our cash balance.

Ben This is Kim.

I would tell you that we are monitoring that regularly and again given dan's leadership, we've been focused on increasing our cash balance.

Daniel Hedigan: Thank you, Dan. Can you also talk a little bit about, I think in your prepared comments, you'd mentioned the headwinds created by the interest rate environment. Can you talk a little broadly about your expectations in terms of maybe modest slippage in the sort of year and cash guidance? Do you still expect that maybe to be, instead of end of the year, maybe early next year is that sort of the thought process?

Strategically we're going to keep working on that the moment when we're going to deal with the bonds is going to be based on the market.

Speaker 3: strategically and we're going to keep working on that the moment when we're going to deal with the bonds is going to be based on the market and We're not going to wait for a certain amount of cash. We wanted to have enough as soon as possible so that we had options.

We're not going to wait for a certain amount of cash we wanted to have enough as soon as possible. So that we had options.

Speaker 8: So, you know, again, we're still optimistic about 24 and we haven't given any guidance on that, but, you know, the challenge we've been given and that we've been trying to address is more regular, positive cash and earnings, each quarter, which is, you know, something we're trying to maintain, but can't promise every quarter.

So.

Again, we are still optimistic about 24, and we haven't given any guidance on that but.

Daniel Hedigan: Are there any additional details you can provide in terms of where exactly you're seeing the impact? of High Interstrates. Well, first on the year in guidance, we actually are on track consistent with that guidance. And so at this point, we're feeling very good about that based on various transactions that are in escrow are very close to being finalized. On the issue of interest rates, that's a very interesting question. Home buyers kind of went through a shock of very quickly rising rates and adjusted to what is the new normal and they have been buying homes at our communities.

The challenge, we've been given and that we've been trying to address is more regular positive cash.

And earnings each quarter, which is something we're trying to maintain but can't promise every quarter.

Speaker 8: But so what I would say is we're focused on increasing our cash.

So what I would say is we're focused on increasing our cash and then we'll be watching and working with the market to figure out when we can go into it and deal with.

Speaker 3: And then we'll be watching and working with the market to figure out when we can go into it and deal with our senior notes.

Deal with our senior notes if that makes sense.

Speaker 11: If that makes sense. Yeah, that does. And then just when you say you're optimistic on 24, is it my correct in assuming that you believe that in 20?

Yeah, No that does and then just when you say youre optimistic on 24.

Am I correct in assuming that.

Do you believe that in 2004.

Proceeds will be in excess of G&A costs and interest expense and any other fixed obligations.

Speaker 11: be an excess of GNA costs and interest expense than any other fixed.

Daniel Hedigan: Now, in many instances, the home builders are buying down interest rates to support those sales and we think builders will keep doing that. We're going to mark on our rates are taking back up again, which drive towards another new normal, but we believe demand will find its way over these increases. And the thing we're facing in California is just a terrible shortage of housing and with interest rates, the resale market is very limited.

If you were to ask me today, that's what our plan is to do.

Speaker 9: If you were to ask me today, that's what our plan is to do.

Speaker 11: Okay. Okay. Obviously it's uncertain, but that's very helpful. Thank you.

Okay. Okay, obviously, it's uncertain, but that's very helpful. Thank you.

Our next question comes from the line of Kyle Chung Private Investor. Please proceed with your question.

Hi, Thanks for taking my question and congrats on a great quarter I'm actually congrats on the on what you guys have accomplished over the past year ourselves. So I want to commend you on that first.

Speaker 12: Hi, thanks for taking my question. And congrats on a great quarter. I'm actually congrats on what you guys have accomplished for the past year or so. So I can want to commend you on that first. My first question is, if I did my math right, it looks like your fourth quarter free cash flow guidance is...

Daniel Hedigan: So, affordability will always be an issue, so I don't want to make light of that, but the extent of buyer can afford a new home, there is going to be, we feel there is going to be demand. Got it. Thank you.

My first question is if I, if I did my math right. It looks like your fourth quarter free cash flow guidance is.

Speaker 12: 32 million and 82 million.

$32 million and $82 million, which seems like a relatively wide guidance range and that's $50 million range I'd like to understand.

Speaker 12: seems like a relatively wide guidance range and that's 50 million range. I like to understand why it's so wide. I mean, is it wide because...

Kim Tobler: One last question and maybe this is for Kim, which by the way, can congratulations on your elevation. Just wanted to maybe talk a little bit about the revolver extension, great job in getting that done. Just a sense of any terms around the revolver extension and sort of any details you can provide around the terms and whether there's any conditionality on the bond maturity. That's all from you. Thanks. Yeah, so as it relates to the revolver, we'll be publishing an 8K and you'll be able to read the documents and see there, but largely it was rolling forward the existing terms.

Why it's so wide.

Why because.

Kim Tobler: And really, the only thing was they raised the cost. So, we're going to have to pay more when we draw on the revolver, but beyond that, it stayed pretty close to what we've done. We lost what's known as a term out. So, we had a term out which allowed us to take whatever balance was due with the maturity and pay out over 12 months equally. That's an unusual provision in a revolver like ours.

The acreage and the price.

Speaker 12: the acreage and the price that you expect to close for fourth quarter is uncertain or is it wide because the closing date might slip from fourth quarter into first quarter and so is it that more of a timing issue or is it because the amount and the price of the land for sale that's uncertain.

Do you expect to close for fourth quarter is uncertain or is it why because the closing date might slip from fourth quarter into into first quarter and so is it more of a timing issue or is it because of the amount and the price of the land for sale. That's that's uncertain.

Thanks, Kyle this is Kim yes. It is a timing issue, we we don't control everything as it relates to when we can get something closed and as we've been saying something may slipped from the fourth quarter into the first quarter because all of the <unk>.

Speaker 9: Thanks Kyle, this is Kim. Yes, it is a timing issue. We don't control everything as it relates to when we can get something closed. And as we've been saying, something may slip from the fourth quarter into the first quarter because all of the municipal approvals didn't get received in a timely fashion. So we are still expecting those sales. It's not a question of how much is going to be received.

Municipal approvals didn't get received in the in a timely fashion so.

We are still expecting those sales it's not a question of how much is going to be received.

Right. So just to be you know.

Speaker 12: Right, so just to be 100% clear, if it turns out that your fourth quarter-flee casual ends up being 32.

100% clear if it turns out that your fourth quarter free cash flow ends up being 32.

Kim Tobler: And so, the banks came back and said they didn't see how they could continue that in the current market and we understood that and we're willing to give that up. But they gave us a two-year extension which we were very grateful for and thought we deserved and very glad that the four banks stayed all together and we kept the 125 in place. As it relates to the senior notes, as Dan said, we're turning our attention to that.

Speaker 12: What investors should take from that is that 50 got pushed to first quarter. Is that right? Is that the right one to think about it? Yes.

What investors should take from that is that 50 got pushed to first quarter is that right is that the right way to think about it.

Yes, given that math, yes.

Speaker 9: And it would add to what we are planning to do in the first quarter.

And it would add it would add to what we are.

Planning to do in the first quarter.

Speaker 12: Right. Okay. So that's really helpful. Thank you. And my second question is, is a congrats on renewing your revolver. And I think the 8K on the credit agreement has been filed yet, but under the new revolver, do you have enough restricted payments capacity to, if you elect to do so, buy back the bonds, buy back, you know, to see your notes out of discount?

Right. Okay. That's really helpful. Thank you and my second question is this.

Congrats on renewing your revolver.

Kim Tobler: Don't want anyone to think that we're not thinking about those. We've been regularly meeting with our board and together as management reviewing the different options that we think we may have. That's part of the reason why we've been working so hard to increase our cash balances so that we have some things to work with. But we don't have anything really specific that I can talk about right now that we've done. So, Aaron, it's good to hear you and look forward to talking more in the future. Thanks very much. Thank you very much.

And I think the 8-K on the on the credit agreement has been filed yet but under the new revolver do you have enough.

Strictly payments capacity too if you like to do so buyback the bond buyback senior notes at a discount.

Oh Wow.

Speaker 12: I mean, there isn't enough capacity to buy back the senior notes at a discount. Again, the entire revolver is only $125 million. So, what I mean is for you to do a partial tender or just buy back bonds that are discounted, open.

I mean, there isn't enough capacity to buyback the senior notes at a discount I mean again the entire revolver is only $125 million.

So what I mean is for you to like.

Alan Ratner: Our next question comes from the line of Alan Ratner with Zoemon and Associates. Please proceed with your question. Hey, guys, good afternoon. Thanks for all the detail and congrats on the progress here. First question on the Valencia sale. You know, it looks like the, I guess, the composition of this particular lot fell was quite different than your prior ones, you know, much lower density, much higher price per lot. You know, I'm just curious if you can give a little bit more, you know, detail in terms of how you're thinking about segmentation of product and lot sales in Valencia, you know, in the intermediate term.

Do do a partial tender or just buy back bonds at a discount at the open market.

Speaker 12: you have restricted payment capacity under the revolver for that or

Do you have.

Our restricted payment capacity under the revolver for that or not.

Speaker 12: We don't have a restriction that would not allow us to do that. Great. Thank you very much.

We don't have a restriction that would not allow us to do that.

Okay, great great. Thank you very much.

Yeah.

There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.

Speaker 2: Thank you. On behalf of our management team, we thank you for joining us on the day's call. We look forward to speaking with you next quarter.

Thank you on behalf of our management team. We thank you for joining us on today's call. We look forward to speaking with you next quarter.

Alan Ratner: Is this a concerted effort to kind of mix in, you know, more move up product or, you know, lower density product and any kind of guidance you can give on the expected fourth quarter. A lot of sales, it's going to look similar or different would be helpful. Thanks, Alan. Valencia actually has a broad, broad level of segmentation and it in its entitlement, it actually has zones that are identified for lower density and higher density.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

Alan Ratner: And what you're seeing in the two sales that closed this quarter, they're in the area that was by design set up for lower density and we are seeing good demand for that move up buyer and very, you know, we're talking very traditional homes with, you know, driveways and backyards and we're definitely seeing buyer demand there. You know, I think I've commented in the past, I'm really trying to work with the builders to be sure our product is really responding to the market, but some of our product is, you know, kind of preset just on where we're at, but both of those were previously identified and they were just in a lower density area.

Alan Ratner: As to the fourth quarter land sales, they're actually going to be in different sections of the Valencia project and so there's going to have a mix of product. There's going to be some that is, you know, traditional detached condos, you know, also be a small portion will be attached, but it will be, it'll be more diverse than what you're seeing that closed this quarter.

Daniel Hedigan: Understand that that's helpful color Dan. Second, I know, you know, the timeline is still uncertain with San Francisco and you haven't given it a target there, but my question is, you know, when that project does get off the ground, is there any way you can kind of help us think through what the cash flow impact would look like initially, I would imagine. And, you know, you would have to put up some development dollars before the first phase of land would be ready for sale.

Daniel Hedigan: So, you know, any way to think about what that initial outlay might look like, how long that might be before revenue is begin to recognize the interest kind of thinking through the forward look there. Well, when we think about San Francisco, we really do think of ourselves as the horizontal developer, you know, there will always be the need for vertical development in that site, but we are the horizontal developer. So from a standpoint of revenue events on the land side, they will be pretty much tied to completion of deliverable site.

Daniel Hedigan: And, you know, as part of the conversations we're having right now with the. City and County of San Francisco is, you know, we are looking at that first phase and how you access that first phase. So, but you know, there's always going to be kind of a variety of options of how we approach that as far as matching, you know, the spin to capital and near term revenue. But the revenue really does, it does flow from the horizontal development.

Daniel Hedigan: We're not really going to need the vertical development. That vertical development, as Kim talked about, is going to be a big part of future capital through CFDs and TIFF. But the initial revenue is going to be tied to horizontal land sales. Just to follow up on that then, because yeah, I think I understood that. But is that kind of like a 12 month, you know, horizontal development lead time from shubbling ground to having a, you know, a parcel ready to sell and begin to recognize revenue on is it longer, shorter, what any frame of reference.

Daniel Hedigan: Well, from the standpoint of the getting to the first phase, you know, all things always are driven by having the approvals from the city to move forward. But what I think I would say on that, I mean, to get to the first phase is not going to be extraordinarily long. I don't want to try to put a timeframe on it today, simply because there's so many variables that we'd be dealing with.

Daniel Hedigan: But the initial phase, once we are positioned and, you know, kind of have the rebalancing done is actually not that hard to get to, and especially in candlestick. Got it. Okay, that's helpful. Thanks a lot guys. Appreciate it.

Unknown Attendee: I was going to mind here to start one to ask a question.

Myron Kaplan: Our next question comes from the line of Myron Kaplan, a private investor. Please proceed with your question. Yeah, hi. Thanks for taking my questions. First of all, I'd like to commend you for timely and ship shape reporting.

Daniel Hedigan: Congratulations, Kim, for your elevation. Thanks, Myron. It's good to hear from you. Yeah. I wanted to ask, what's the rate of the C-year notes that are doing 2025? The coupon? Seven and seven eighths. And what's the principal amount? $625 million. So that's really the elephant in the room, so to speak. It is the elephant I look at every day when I get in, when I wake up. Right off. The, I just wanted to ask you just an informational question.

Daniel Hedigan: What I didn't understand. What's the, you were talking about a parcel in the great park of 40 acres of commercial land? Yes, those are actually two pieces. That's a combination of two pieces of property that are actually in escrow today. So those, those would be closing, we anticipate by the end of the year. I see. So those are those are basically under contract. Correct. Yeah, just and also just an informational question or maybe it's a great park.

Daniel Hedigan: You have builder sales of 113 homes. So those revenues are substantial but unconsolidated, yes. That's correct. Those are the sales that the builders themselves are reporting. They bought the land and they're reporting those sales on there. I see. So you previously sold them the land. Yeah, we give that guidance Myron so that people can understand the pace of sales of homes because that indicates when they'll need more land in the future. Right. So then you then you said you're releasing some more trials so that you'll be able to book more more revenue.

Myron Kaplan: Well, I guess I guess that's pretty much what I hit. Thank you for taking the questions and my seems like you're doing doing pretty well in a very tough environment. Myron, thank you.

Ben Fader: Our next question comes from the line of Ben Fader right there with space summit capital. Please receive a question. Hi, just going back to the Valencia sale. Unless I'm doing the math wrong looks like it was over 400,000 for home site. I think in the past you talked about an average more in the 200s. Was this sale above expectations? I wasn't clear from the answer to the previous questioner. You know, if this was more of an expected outlier or there are some other read through on this sale.

Ben Fader: Well, thanks. You know, it is not an outlier. It really is, you know, the different most of the homes in our initial phase. We have two phases we talk about the initial first phase, about 1200 homes, and then we have another phase, which it has about 800 homes. And so, you know, as part of that overall land plan that was put in place, there are always larger lots in a certain area that actually by zoning are supposed to be lower density.

Ben Fader: So, they were they were zoned to be lower density in the way they've been produced. So, you know, all we're really seeing is that we're actually finally getting to them, you know, the infrastructure is kind of caught up to them. It's kind of followed to them. And so, we've had some we've had some as traditional SFD lots in the market before, but not a whole lot of them. And in particular, total has a project up there that's selling right now and selling very well.

Ben Fader: And they were and they basically saw an opportunity to kind of continue that program through lots that were coming available in the due course based on our development course. That is a larger traditional SFD. So, it's kind of all due course is just how the land and when we get to the land, how it's been flowing.

Daniel Hedigan: So, can you give a sense for, if you look across the land bank in Valencia, what, what sales price per home site you would expect, or maybe a range, and is it my correct in thinking that this is, consistent with your expectations, it's just the higher value entitlement as compared to perhaps some other acres that you have in the portfolio. So, I think the best way to answer that, consistent with this density and product type, that is definitely, you know, kind of in the ballpark of what we'd expect.

Daniel Hedigan: On the other hand, as we go, as we look at what's coming up in the market, I don't think I have anything else that's additional SFDs, and part of this is where we're at, kind of in the land, plan that's out there, so most of them are going to be either detached kind of minions or attached, and all those have higher density, and they will definitely have a lower price per unit, and so it really is very product specific, and this was, and this product is what's driving those numbers you're looking at.

Kim Tobler: I see, okay, all right, thank you, thank you on that, and then just one other question, and I know you haven't given numbers on 24, and I'm not asking for them, but I guess if you could, as you think about now versus the point at which you'd, you know, proactively refinance the bonds, are you comfortable with the cash balance here, or do you think the cash balance is, you know, it's likely to be higher at the point at which you proactively decide to refinance your bonds? Ben, this is Kim, I would tell you that we're monitoring that regularly, and again, given Dan's leadership, we've been focused on increasing our cash balance strategically, and we're keep working on that, the moment when we're going to deal with the bonds is going to be based on the market, and we're not going to wait for a certain amount of cash, we wanted to have enough as soon as possible so that we had options, so again, we're still optimistic about 24, and we haven't given any guidance on that, but the challenge we've been given and that we've been trying to address is more regular, positive cash, and earnings each quarter, which is, you know, something we're trying to maintain, but can't promise every quarter, but so what I would say is we're focused on increasing our cash, and then we'll be watching and working with the market to figure out when we can go into it and deal with our senior notes, if that makes sense.

Kim Tobler: Yeah, that does, and then just when you say you're optimistic on 24, is it my correct in assuming that you believe that in 24, land sale proceeds will be an excess of GNA cost and interest expense, and any other fixed outlook it, presentation. If you were to ask me today, that's what our plan is to do. Okay. Okay, obviously it's uncertain, but that's very helpful. Thank you. Yeah.

Kyle Chung: Our next question comes from line of Kyle Chung, Private Investor. Please proceed with your question. Hi, thanks for protecting my question and congrats on a great quarter. I'm actually congrats on what you guys have accomplished for the past year or so. So I want to commend you on that first.

Kim Tobler: My first question is if I did my math right, it looks like your fourth quarter free cash flow guidance is between 32 million and 82 million, which seems like a relatively wide guidance range. And that's 50 million range. I like to understand why it's so wide. I mean, is it wide because the the acreage and the price that you expect to close for fourth quarter is uncertain or is it wide because the closing date might slip from fourth quarter into into first quarter.

Kim Tobler: And so is it that more of a timing issue or is it because the amount and the price of the land for sale that's uncertain? Thanks, Kyle. This is Kim. Yes, it is a timing issue. We don't control everything as it relates to when we can get something closed. And as we've been saying, something may slip from the fourth quarter into the first quarter because all of the municipal approvals didn't get received in a timely fashion.

Kim Tobler: So we are still expecting those sales. It's not a question of how much is going to be received. Right. So just to be 100 percent clear, if it turns out that your fourth quarter free cash flow ends up being 32, what investors should take from that is that 50 that pushed to first quarter. Is that right? Is that the right one to think about it? Yeah, given that math, yes. And it would add to what we are planning to do in the first quarter. Right.

Kyle Chung: Okay, so that's that's really helpful. Thank you.

Kim Tobler: And my second question is is a congrats on renewing your revolver. And I think the 8K on the on the credit agreement has been filed yet, but under the new revolver, do you have enough restricted payments capacity to, if you elect to do so, buy back the bonds, buy back, you know, the senior notes out of discount. Well, it's, I mean, there isn't enough capacity to buy back the senior notes at a discount.

Kim Tobler: Again, the entire revolver is only $125 million. So what I mean is for you to like, you know, do a partial tender or just buy back, you know, bonds out of discount in the open market. If you do have a restricted payment capacity under the revolver for that, or no, we don't have a restriction that would not allow us to do that. Okay, great.

Unknown Attendee: Thank you very There are no further questions in the queue. We'd like to hand the call back to management for closing remarks. Thank you. On behalf of our management team, we thank you for joining us on the day's call. We look forward to speaking with you next quarter. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a one.