Q3 2024 Five Point Holdings LLC Earnings Call

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Unknown Attendee: Greetings and welcome to the Five Point Holdings LLC 3rd quarters. 2020 Four Conference Call. As a reminder, this call is being important.

Speaker Change: Greetings and welcome to the 5. Holdings LLC 3rd quarter 2024 conference call. As reminded, this call is being ported.

Unknown Attendee: Today's call may include four looking statements regarding five points of business, financial condition, operations, cash flow, strategy, and prospects. Four looking statements represent five points estimates on the date of this conference call and are not intended to get any assurance as to actual future results. Because four looking statements relate to the matters that have not yet occurred, these statements are inherently subject to risk and uncertainties. Many factors could affect the future results and may cause five points actual activities or results to differ materially from the activities and results anticipated in four looking statements.

Speaker Change: Today's call may include forward-looking statements regarding five points of business, financial condition, operations, cash flow, strategy and prospects. Forward-looking statements represent five points estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relates to the matters that have not yet occurred, these statements are inherently subject to risk and uncertainties.

Speaker Change: Many factors could affect the future results and may cause five points actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

Unknown Attendee: Those these factors include those described in today's press release at five points SEC filings, including those in the risk factor section of the five points most recent annual report on form 10-K filed with that SEC. Please note that five points assumes no obligation to update any four looking statements.

Speaker Change: Those these factors include those described in today's press release at five points SEC, five links including those in the risk factor section of the five points most recent annual report on form 10K filed with that SEC.

Speaker Change: Please note that five points assumes no obligation to update any forward looking statements. Now, I would like to turn the call over to Dan Hedigan, Chief Executive Officer.

Daniel Hedigan: Now I would like to turn the call over to Dan Hedigan, Chief Executive Officer.

Daniel Hedigan: Thank you. Good afternoon, and thank you for joining our call. I have with me today, Kim Tobler, our Chief Financial Officer, Mike Alvarado, our Chief Senior Vice President, Finance, and Reporting.

Dan Hedigan: Thank you. Good afternoon and thank you for joining our call. I have with me today Kim Tobler, our Chief Financial Officer.

Dan Hedigan: Mike Alvarado, our chief operating officer and chief legal officer, and Leo Key, our Senior Vice President Finance and Reporting. Sturdum Miller, our executive chairman, is joining us remotely.

Daniel Hedigan: Steve Miller, our Executive Chairman, is joining us remotely. On the day's call, I'll update you on our future results, on our team's focus during the quarter, and the steps we are taking to implement our strategic priorities. Next, Kim will give an overview of the company's financial performance in condition with some updated guidance for the rest of the year. We'll then open the line for questions to our management team. So that is again, I'm pleased to record another very successful quarter for Five Points as we continue to build a program with consistent profitability with a defined pathway to growth for our future.

Dan Hedigan: On the day's call, I'll update you on our Q-3 results on our team's focus during the quarter and on the steps we're taking to implement our strategic priorities.

Dan Hedigan: So let us begin. I'm pleased we report another very successful quarter for five points as we continue to build a program of consistent profitability with a defined pathway to growth for our future.

Daniel Hedigan: In the third quarter, we generate a stronger than expected net income of $12.3 million, which is our sixth consecutive quarter reporting net income as we remain focused on generating revenue, controlling our expenses, and managing our capital spend. Consistent with last quarter, most of our revenue and bottom line was driven by operational focus and execution in our great-part community. This community has become both the driver of current performance, as well as our model for future growth. During the three months in September 30th, 2024, our management team closed two retail land sales in a great-part, totally $12.8 acres for an aggregate purchase price of $25.4 million.

Dan Hedigan: In the third quarter, we generate stronger than expected net income of $12.3 million, which is our sixth consecutive quarter reporting net income, as we remain focused on generating revenue, controlling our expenses, and managing our capital spend.

Dan Hedigan: Consistent with last quarter, most of our revenue and bottom line was driven by operational focus and execution in our great part community.

Dan Hedigan: This community has become both the driver of current performance, as well as our model for future growth.

Dan Hedigan: During the three months in the September 30, 2024, our management team closed two retail land sales in a great park, totally 12.8 acres for an aggregate purchase price of $25.4 million.

Daniel Hedigan: The great-part venture also recognized additional revenue of approximately $36 million. which is derived from our strong price and profit-tissed patient programs that benefit from housing revenue increases for builders in the Great Park. There is all of these partnership revenues. Five point received 38.9 million distributions from the Great Park Venture during the quarter, representing in part a return on invested capital, and also received 10.5 million of incentive compensation payments, or promote, pursuant to our Great Park development management agreement. We also received approximately $3 million in base management fees in the quarter under the management agreement. Kim and our strong performance over the past years, the great park partners have agreed to extend this agreement through the end of 2026.

Dan Hedigan: The Great Park Venture also recognized the additional revenue of approximately $36 million.

Dan Hedigan: which has derived from our strong price and profit-tissed patient programs that benefit from housing revenue increases for builders in the great park.

Dan Hedigan: The result of these partnership revenues, 5 point received 38.9 million distributions from the great part venture during the quarter.

Dan Hedigan: and representing in part a return on invested capital, and also received $10.5 million of incentive compensation payments are promote for soon to our great part development management agreement.

Dan Hedigan: We also received approximately $3 million in base management fees in the quarter under the management grant.

Dan Hedigan: Kim and our strong performance over the past years, the great part partners have agreed to extend this agreement through the end of 2026. The eminent agreement includes an increased base-management fee on maintaining incentive compensation at existing levels.

Daniel Hedigan: The amended agreement includes an increased base management fee on maintaining incentive compensation at existing levels. This extension reflects the strength of the relationship between our management team and our partners. Reflex out a great park venture development management model is one that we believe can repeat it in new communities as we grow five point into a best-in-class asset lighter, land and community partnership manager. We expect to demonstrate growth in coming quarters. I'd also like to note that the Great Park venture reached another milestone in this quarter. And so now, the vendors had a legacy interest that initially had a priority over all distributions and, more recently, required 10% of all distributions be paid to the legacy interest holders.

Dan Hedigan: This extension reflects the strength of the relationship between our management team and our partners. Reflex out a great part venture development management model is one that we believe can repeat it in new communities as a grow-fly point into a best-in-class asset lighter, land, and community partnership manager.

Dan Hedigan: We expect to demonstrate growth and coming quarters.

Dan Hedigan: At also, I can note that the Great Park Venture reached another milestone this quarter.

Dan Hedigan: And so now, the Vinger has had a legacy interest that initially had a priority over all distributions and more recently required 10% of all distributions be paid to the legacy interest holders.

Daniel Hedigan: This legacy interest has now been satisfied, so 100% of all distributions will go to the great park percentage interest holders, 5.037.5% of the percentage interest. Our great park venture will continue to drive the most significant bottom line earnings for five points. Our planned fourth quarter closings at both the Great Park and the lunches are on track. If these sales close as scheduled, we'll likely exceed our prior guidance that we expected to finish the year with over 100 million annual net income and cash in excess of 300 million. Kim will update our guidance based on how we currently anticipate finishing the year.

Dan Hedigan: This legacy interest has now been satisfied, so 100% of all distributions will go to the great-part percentage interest holders, 5.037.5% of the percentage interest.

Speaker Change: are a great part of venture will continue to drive the most significant bottom line earnings for five points. Our planned fourth quarter closings at both the Great Park and Valencia are on track.

Speaker Change: If these sales close as schedule, we'll likely exceed our prior guidance that we expected to finish year with over 100 million and an end-in income and cash in excess of 300 million. Kim will update our guidance based on how we currently anticipate finishing the year.

Daniel Hedigan: Looking ahead, a great park venture currently finalizing contracts to sell an additional 470 home sites on approximately 28 acres in our next development area, pricing levels that reflect sustained, high levels demand for landed the great park. These sales are anticipated to close in the first half of 2025. We also began marking for sale additional residential land in another development area in Great Park. We anticipate closing in late 2025. We continue to see strong builder interest in these home sites with the potential for sustained, strong per acre land values, which we believe is driven in part by allowing our guest builders to design the home programs and our communities.

Speaker Change: Looking ahead, a great part of Ventures currently finalizing contracts to sell an additional 470 home sites on approximately 28 acres in our next development area, pricing levels that reflect sustained, high levels demand for land at the great park. These sales are anticipated closed in the first half of 2025.

Speaker Change: We also began marking for sale additional residential land in another development area in Great Park. We anticipate closing in late 2025.

Speaker Change: We continue to see strong builder interest in these home sites with the potential for sustained strong per acre land values, which we believe is driven in part by allowing our guest builders to design the home programs in our communities.

Daniel Hedigan: We'll also continue to manage program segmentation in order to maintain an appropriate velocity in each community. In addition to strong revenues, we have remained focused on reducing overhead and holding down costs. Even with increased performance, we have remained disciplined and held our overall SGA to $11.9 million, which is flat year over year and slightly down compared to the second quarter of this year. Once a Rebalancing is approved, anticipate working promptly with the city to initiate our infrastructure plans for the first stage at Candlestick in order to unlock the value of this favorite land in the city of San Francisco.

Speaker Change: Well, also continuing the managed program segmentation ordered to maintain the appropriate velocity in each community.

Speaker Change: And this year the strong revenues we have remained focused on reducing overhead and holding down costs.

Speaker Change: Even with increased performance, we have remained disciplined and held our overall SGA to $11.9 million, which is flat year over year, and slightly down compared to the second quarter of this year.

Speaker Change: Remain's vigilance about managing an excellent business with tightly controlled overage.

Speaker Change: Finally, we have also continued to focus on our balance sheet. We ended our third quarter with a very healthy, liquidity position with 224.5 million cash and $0 dollars drawn on $125 million.

Speaker Change: As we have carefully managed careful deployed as we develop our properties.

Speaker Change: By driving a bottom line, carefully manage an overhead and limiting development dollars to just in time deployment, we unit the third quarter of the total of $349.5 million.

Speaker Change: Kim will call the more details that are in our financials during his comments.

Speaker Change: Now let me move to a brief market update.

Speaker Change: For particularly please, we've been able to post consistent results, even as the macro-economic environment, as we mean somewhat challenging.

Speaker Change: Alvarado is over now to meaningful rate cut during the quarter. The news regarding interest rates and inflation continued to send mixed signals, with key mortgage interest rates initially moving down, but then rebounding higher.

Speaker Change: Interest rates are a key data point in the housing market, California generally, and our communities specifically, remain in chronically under-supplied residential landmarks, and this under-supplied contingency supporter, land sales even as interest rates fluctuate.

Speaker Change: The Land Shortage is primarily driven by California's challenging land use of approval process.

Speaker Change: We expect shortages of entitlement and existing home inventory will continue to drive strong demand from builders.

Speaker Change: The continued lack of existing home inventory, coupled with low unemployment and fairly strong consumer confidence, has helped sustain demand for land in our communities.

Speaker Change: A weird mindful of the potential impacts of affordability created by mortgage rates. Most of our guest-golders have been able to mitigate the impacts of higher rates to the use of a variety of incentive structures.

Speaker Change: The commercial lands out of our business have proved as to be more rates and stiff than residential.

Speaker Change: By the way, we report it to retail sales at the great part of this quarter, we do not expect to maximize value to commercial transactions in the near future.

Speaker Change: Accordingly, we are currently looking at opportunities to repurpose certain commercial sites for residential use given the depth of the man and values being driven by residential uses. Much like what we did with the 35-acre commercial site in Valencia, that we converted to a residential use.

Speaker Change: Well, I have more report on this in the coming quarters.

Speaker Change: Let me now provide you with some updates on our communities, starting first with the great park neighborhoods.

Speaker Change: As a reminder, the Great Park is the most mature of our communities and its ongoing contribution to our financial results reflects the benefits that we and our Great Park venture partners are receiving from the investments made in this community in prior years.

Speaker Change: During the third quarter, brothers and our great-part community sold 1606 homes versus 63 in Q2.

Speaker Change: This increase in sales is primarily true about the Luna Park, our newest neighborhood, which now has substantially all home offerings on the new for sale, who are once again able to offer a wide variety of housing options in great park neighborhoods.

Speaker Change: and this is a high level as a home buyer interest, we're still seeing strong demand from builders for our land at a great park.

Speaker Change: As I mentioned earlier, we are currently finalizing contracts with three builders for five different residential programs in assisting a 47-home site. We also completed the bidding process for a group of nine new residential programs, totaling 572 homes.

Speaker Change: We received strong interest in all nine programs, currently working on finalizing purchase and sale-grammics and due diligence with six different builders. We have more report on these programs in the future.

Speaker Change: During the quarter, the City of Irvine completed its state mandate of arena, general plan, and zoning updates for the great park planning area. This update will provide the great park venture with the opportunity to convert some or substantial portions of its remaining commercial and holdings to residential uses.

Speaker Change: We're continuing to study these options and the requirements to make these changes consistent with the rena program adopted by the city.

Speaker Change: Next, I'll move to Valencia or other active communities.

Speaker Change: As a reminder, Valencia is in the early stage of development and still has many future phases of land delivery ahead of it, which will enable us to provide much needed housing in the Los Angeles market.

Speaker Change: 2nd quarter, Home Sales remains steady as our Disbuilders sold 89 new homes for his 84 in Q2.

Speaker Change: And our current Flintshire development areas, we have eight builder programs open and actively selling. Additionally, from the land we sold it in the last year, there are six programs who anticipate it won't but in late 2024 and early 25. Offering a greater diversity of home offerings, so prospective home buyers.

Speaker Change: Projective Lands sales for a fourth quarter of receiving hasn't dissipated.

Speaker Change: It's completed in a version of a 35-acre commercial flight to residential use in a sailboat 179 homesites expected to close in December. We have also completed the bidding and our finalizing contracts for four additional programs, consisting of 314 homesites which are currently expected to close either in December or the first quarter of 2025.

Speaker Change: We continue to work with Los Angeles County and other agencies on approvals that will allow us to deliver thousands of additional home sites in the county to fairly under-supplied market.

Speaker Change: We expect our next active residential village will be in Trottis, South, which is an expected consist of approximately 116 net acres of residential land over 1,300 market-rate homesites and approximately 44 net acres of commercial land.

Speaker Change: We also expect to have additional commercial land available at the Blenschick Commerce Center.

Speaker Change: which is expected to include approximately 139 net acres and will cater towards industrial focus to use this.

Speaker Change: We're mainly fully committed to obtaining your approval necessary to unlock additional housing supply and remain focused on balancing and expediency with feasible conditions.

Speaker Change: Turning to San Francisco, the city, county, and other applicable regulatory agencies are continuing to advance the public approval process to rebalance the intolerance between our two San Francisco communities.

Speaker Change: Candlestick and the shipyard.

Speaker Change: for excited about the near-term possibility of the candlestick and we hope to have more to report on our next call.

Speaker Change: Once the rebalancing is approved, anticipate working properly with the city to initiate our infrastructure plans for the first phase at Candlestick in order to unlock the value of this Bayfront land in the city of San Francisco.

Daniel Hedigan: Let me conclude by saying I've never been more optimistic about the future of Five Points. We have remained focused on driving consistent quarterly earnings, carefully controlling our overhead, and carefully manage our land development spend. Accordingly, our balance sheet continues to strengthen, and our liquidity continues to grow. This focus will enable us to turn our attention to growth for our future as we continue to validate our asset-liter land partnership model that she's selected in our Z8 part venture. Some additional items have evolved over this quarter to pave the way for our future growth. Recent rotations in five point stock should enable future investment without unusual self-pressure on our stock.

Speaker Change: Let me conclude by saying I've never been more optimistic about the future of five points. We have remained focused on driving consistent, quarterly earnings.

Speaker Change: Kaffrey can join our overhead and carefully manage our land development spend.

Speaker Change: Accordling our balance sheet continues to strengthen, and our liquidity continues to grow.

Speaker Change: This focus will enable us to turn our attention to growth for our future as we continue to validate our asset lighter, land partnership model that's reflected in our Z8 part venture.

Speaker Change: To additional items that have evolved over this quarter to pave the way for our future growth.

Speaker Change: Recent rotations in five-point stock should enable future investment without unusual cell pressure on our stock.

Daniel Hedigan: Cassolade recently disclosed the sale of its sizable equity interest in the company and its subsidiaries to fund the owned by Click Family Investments. There have also been additional publicly disclosed rotations of our shares in the hands of longer-term investors. In connection with the Cassolade sale, we announced yesterday at Sam Levenson, Chief Investing Officer at Click has joined our board. We are very pleased to welcome Sam to the board, the seedlings, a history of success and extensive experience in real estate investment, owned hands are maximized out of our shareholders, holders, and to grow our business.

Speaker Change: Castellek recently disclosed the sale of its sizable equity interest in the company and its subsidiaries to fund owned by Click Family Investments.

Speaker Change: and I've also been additional publicity-to-scows rotations of our shares in the hands of longer-term investors.

Speaker Change: In connection with the Cassellate Sale, we now suggest that Sam Levinson, Chief Investigator at Glick, has joined our board.

Speaker Change: We are very pleased to welcome Sam to the board, as he brings a history of success and extensive experience in real estate investment. On hand, our efforts to maximize that of our shareholders, holders, and to grow our business.

Daniel Hedigan: At the same time, we also announced that Evan Crothers will be stepping down as a member of the board, finding completion of the sale of Cassolade's equity interest to Click. Cassolade has been an investor in Five Points since the business combination, and Evan's insight in guidance have been incredibly valuable in building the foundation in shaping the direction of Five Point. We are grateful for Evan's leadership and wish him all the best. Let me reiterate that our third quarter represents continuing progress on three main priorities: turning it in revenue and positive cash flow, and pulling SQ&A costs and managing capital spending to match near-term revenue opportunities.

Speaker Change: At the same time, we also announced that Evan Crothers will be stepping down as a member of the board, finding completion of the sale of Catholic equity interest to Gwick.

Speaker Change: Cassellic has been an investor in the five points in the business combination and Evans Insighton guidance have been incredibly valuable in building the foundation in shaping the direction of five point.

Speaker Change: Sir, grateful for Evan's leadership and wish him all the best.

Speaker Change: Let me reiterate that our third quarter represents continuing progress on three main priorities. Turn it in revenue and positive cash flow, employing SQ&A costs and managing capital spend the match in your term revenue opportunities.

Daniel Hedigan: Advancing entitlements for our next neighborhoods in Valencia, and finalizing the process of being critical, operational objectives. We believe that the underlying housing environment in California has not maturely changed, and we are focused on ensuring that we are positioned as low as the home sites that have been so severely lacking. As you can see, we have been continuously improving our financial condition, which allows us to not only focus on exiting our current projects, but also the plan for the growth of five point beyond our existing communities.

Speaker Change: Advancing the title is for our next neighborhoods in Valencia and the finalizing the candlestick rebalancing process remaining critical operational objectives.

Speaker Change: We believe that the underlying housing environment in California is not materialy changed and we're focused on ensuring that we are positioned as lower the home sites that have been so severely lacking.

Speaker Change: As you can see, we have been continuously improving our financial condition.

Speaker Change: which allows us to not only focus on ex-feet and our current projects but also the plan for the growth of 5. Beyond our system's communities.

Daniel Hedigan: Now let me turn it over to Kim, who will report on our financial results and provide some limited guidance for the remainder of the year.

Speaker Change: Now let me turn it over to Kim who report on our financial results and provide some limited guidance to put it in the remainder of the year.

Kim Tobler: Thank you, Dan. Please let me provide a little background around the improvement we experienced in our third quarter net income compared to what I shared with you last quarter. As you may recall, I had indicated that we were expecting to report a five to $10 million net loss for the quarter, owing to the fact that we didn't expect any residential land sales during the quarter. While we did not have any residential land sales, as Dan mentioned in his comments, the Great Park Venture recognized approximately $36 million of price and profit participation revenue from earlier residential land sales.

Kim Tobler: Thank you, Dan.

Kim Tobler: First, let me provide a little background around the improvement we experienced in our third quarter net income compared to what I shared with you last quarter.

Kim Tobler: As you may recall, I had indicated that we were expecting to report a $5 to $10 million net loss for the quarter.

Kim Tobler: Owing to the fact that we didn't expect any residential land sales during the quarter.

Speaker Change: Well, we did not have any residential land sales, as Dan mentioned in his comments.

Speaker Change: The Great Park Venture recognized approximately $36 million of price and profit participation revenue from earlier residential land sales.

Kim Tobler: The home cell velocity and pricing achieved by our builders during the third quarter exceeded our earlier expectations, which increased revenues at the Great Park. This recognition of revenue at the Great Park improved our third quarter results through higher-than-expected equity in earnings from the venture. Therefore, for the third quarter, we reported consolidated net income of $12.3 million, which was generated primarily from $12.9 million of revenue from incentive management compensation and $12.1 million of equity in our investment in the Great Park Venture. The Great Park Venture's income for the quarter was largely generated by the sale of an 11.1-acre retail site with a sales price of $21.1 million and a childcare use parcel on 1.7 acres for a sales price of $4.3 million.

Speaker Change: The home cell velocity and pricing achieved by our builders during the 3rd quarter exceeded our earlier expectations, which increased revenues at the Great Park.

Speaker Change: This recognition of revenue at the Great Park improved our third quarter results through higher than expected equity and earnings from the venture.

Speaker Change: Therefore, for the third quarter, we reported consolidated net income of $12.3 million, which was generated primarily from $12.9 million of revenue from incentive management compensation.

Speaker Change: and $12.1 million of equity and earnings, the more investment in the great park venture.

Speaker Change: The Great Park Ventures Income for the Quarter was largely generated by the sale of an 11.1 acre retail site with a sales price of $21.1 million and a child care use parcel on 1.7 acres for a sales price of $4.3 million.

Kim Tobler: Both sales have a profit margin of 72.5% before closing costs. You will note that at roughly $2 million per acre, the price per acre for the retail and child care sites is significantly less than the value we have been achieving for the residential and other commercial parcels in the project. But is reflective of the market for such uses. This is consistent with, but on the higher end of similar use properties in the market and is in line with what we have been projecting. Additionally, as I mentioned at the beginning, the Great Park Venture had an additional price participation revenue because the Luna Park home sales and collection openings were stronger than expected, and therefore we determined that the expected price participation consideration should be increased by an additional $30 million.

Speaker Change: Both sales have a profit margin of 72.5% before closing costs.

Speaker Change: You will note that at roughly $2,000 per acre, the price per acre for the retail and child care sites is significantly less than the value we have been achieving for the residential and other commercial parcels in the project.

Speaker Change: But is reflective of the market for such uses.

Speaker Change: This is consistent with, but on the higher end of similar use properties in the market and is in line with what we have been projecting.

Speaker Change: Additionally, as I mentioned at the beginning, the Great Park Venture and an additional price participation revenue.

Speaker Change: because the Lunapark home sales and collection openings were stronger than expected and therefore we determined that the expected price participation consideration.

Kim Tobler: As well as profit participation of approximately $6 million from the Ventures' other active residential programs. Turning back to five points' consolidated results. For the first nine months of the year, we have recognized net income of $56.6 million. These results included $78.1 million of total revenue made up largely of management services revenues from the Great Park Venture and equity and earnings from the Great Park Venture of $45.2 million. Consistent with our continued focus on managing our costs. As Dad mentioned, our third quarter SG&A expense was $11.9 million compared to the prior year, third quarter of $11.9 million and $12.2 million in the second quarter of this year.

Speaker Change: should be increased by an additional $30 million, as well as profit participation of approximately $6 million from the Ventures Other Active Residential Programs.

Speaker Change: Turning back to five points consolidated results.

Speaker Change: For the first nine months of the year, we have recognized net income of $56.6 million. These results included $78.1 million of total revenue made up largely of management services revenues from the Great Park Venture and equity and earnings from the Great Park Venture of $45.2 million.

Speaker Change: Consistent with our continued focus on managing our costs. As Dad mentioned, our third quarter SGA expense was $11.9 million compared to the prior year, third quarter of $11.9 million and $12.2 million in the second quarter of this year.

Kim Tobler: Now let me turn to liquidity and cash. As Dad mentioned, we ended the quarter with $224.5 million of cash as well as $120 million of availability on our revolving credit facility, resulting in total liquidity of $349.5 million. At the end of the quarter, our debt to total capitalization was 20.5%. For the quarter, we had positive cash flow of $7.1 million. No interest payments on our senior notes were due in the third quarter, with the next scheduled interest payment of $27.5 million to be made in November. The significant sources of cash have been equity distributions from the Great Park Venture of $38.9 million for the quarter, and $86.2 million dollars a year to date.

Speaker Change: Now let me turn to the Quiddity in cash.

Speaker Change: As Dan mentioned, we ended the quarter with $224.5 million of cash as well as $1205 million of availability on our revolving credit facility, resulting in total liquidity of $349.5 million. At the end of the quarter, our debt to total capitalization was 20.5%.

Speaker Change: For the quarter, we had positive cash flow of $7.1 million.

Speaker Change: No interest payments on our senior notes were due in the third quarter, with the next scheduled interest payment of $27.5 million being made in November.

Speaker Change: The significant sources of cash have been equity distributions from the Great Park Venture of $38.9 million for the quarter and $86.2 million a year to date.

Kim Tobler: The incentive management compensation of $10.5 million for the quarter, and $23.3 million a year to date. The significant uses of cash other than STNA and debt service have been development costs at Valencia of $29.3 million for the quarter, and $60.7 million a year to date, which is largely related to entitlement activities and preparing for the sales expected to close at the end of the year. In addition, we incur development costs at San Francisco of $5.3 million for the quarter, and $13.7 million for the year to date, that are largely associated with the rebalancing efforts and our litigation against Tetra Tech and the Navy.

Speaker Change: The Incident Management Compensation of $10.5 million for the quarter and $23.3 million year to date.

Speaker Change: The significant uses of cash other than SGNA and debt service have been development costs at Valencia of $29.3 million for the quarter and $60.7 million year to date.

Speaker Change: which is largely related to entitlement activities and preparing for the sales expected to close at the end of the year.

Speaker Change: In addition, we incur development costs at San Francisco of $5.3 million for the quarter, and $13.7 million for the year to date, that are largely associated with the rebalancing efforts and our litigation against Tetra Tech and the Navy.

Kim Tobler: As Dan mentioned, we have extended our contract to manage the Great Park Ventures development activity for two more years, from January 2025 through December 2026. We increased our annual base fee from $12 million a year to $13.5 million per year, and we will continue to receive 9% of each distribution made by the venture to the partners as an incentive management fee. As I noted last quarter, we are carrying a related party contract asset, which relates to the revenue we have recognized for the incentive management fee that we expect to be paid from the future distributions from the venture.

Speaker Change: As Dan mentioned, we have extended our contract to manage the Great Park Ventures Development Activity for two more years, from January 2025 through December 2026.

Speaker Change: We increased our annual base fee from $12 million a year to $13.5 million per year and we will continue to receive 9% of each distribution made by the venture to the partners as an incentive management fee.

Speaker Change: As I noted last quarter, we are carrying a related party contract asset, which relates to the revenue we have recognized for the incentive management fee that we expect to be paid from the future distributions from the venture.

Kim Tobler: As of September 30, that contract asset is carried at $106.7 million. Dan also mentioned another achievement that the Great Park Ventures completed during the quarter, as you may recall, when Five Point was formed in a row up of our three assets. Five Point's interest in the Great Park Venture was 37.5 percent of interest. That was subordinate to $565 million of distributions to the legacy interests, which generally didn't include five point. The $565 million was divided into two tiers: $476 million that was paid before any distributions would be paid to the common percentage interests, and $89 million that was to be paid from 10% of any equity distributions until it was fully retired.

Speaker Change: As of September 30th, that contract asset is carried at $106.7 million.

Speaker Change: also mentioned another achievement that the Great Park Venture completed during the quarter. As you may recall, when five point was formed, in a row up of our three assets.

Speaker Change: 5 points interest in the Great Park Venture was 37.5 percent of interest that was subordinate to $565 million of distributions to the legacy interests.

Speaker Change: which generally didn't include five point.

Speaker Change: The 565 million was divided into two tiers, 476 million dollars that was paid before any distributions would be paid to the common percentage interests.

Speaker Change: and $89 million that was to be paid from 10% of any equity distributions until it was fully retired. In June of 2021, the venture completed paying the first tier and five points started participating in the equity distributions.

Kim Tobler: In June of 2021, the venture completed paying the first tier, and five points started participating in the equity distributions, and the legacy interests continued to receive 10% of such distributions. This quarter, with the distributions made by the venture, the legacy interest has been fully distributed, and from this point forward, the common percentage interest will receive distributions equal to their percentage interest.

Speaker Change: and the legacy interests continued to receive 10% of such distributions.

Speaker Change: This quarter, with the distributions made by the venture, the legacy interest have been fully distributed, and from this point forward, the common percentage interest will receive distributions equal to their percentage interest.

Speaker Change: Now for some women at guidance.

Speaker Change: We are pleased with the third quarter performance which continues to be attributable to the strong activity at the Great Park Venture and our consistent focus on SGA and development costs.

Speaker Change: As Dan noted in his remarks, we have a number of residential land sales scheduled to close at Bolencia and the Great Park in the fourth quarter.

Speaker Change: Assuming that most or all of these sales close in December.

Speaker Change: We will expect to end the year with annual net income of between 120 and $140 million and a cash balance of between 320 and $350 million.

Speaker Change: And he fails to don't close in the fourth quarter would be expected to close in the first quarter of 2025.

Speaker Change: It remains critical for us to stay focused on our strategic priorities of generating revenue, controlling our expenses, and carefully managing our capital spend to match near-term revenues. And we are committed to those priorities.

Speaker Change: Thank you.

Speaker Change: We will now be conducting a question and answer session. If you would like to ask questions, please press star 1 or your telephone keypad. A confirmation tone indicate your line is in the question queue.

Speaker Change: And our first question comes from Alan Ratner, the Bellman and Associates.

Alan Ratner: Hey guys, good afternoon, congrats on the continued improvement here, it's great to see the consistency of results in quarter or quarter. You mentioned a few times looking into the future a little bit, maybe for the next.

Alan Ratner: Dage of growth for five points and I know this is something that even gone back to your IPO days there were a lot of

Alan Ratner: Discussion Strategies plans on how the company would evolve.

Alan Ratner: and I'm just curious if there's anything you might be willing to share with us at this point, you know, either specific deals or just conceptually kind of what the next solar growth for five point might look like, especially with a great park, you know, kind of maybe not at the end of its life cycle, but certainly closer to the end of the beginning at this point.

Speaker Change: Thanks Allen, appreciate the question.

Speaker Change: You know, the one thing if it doesn't come out, I am.

Speaker Change: Very optimistic that 5.1 is on a good path.

Speaker Change: and has a bright future. And what we have been able to execute on at the great part is really the model for where we look to go in the future. The one comment I would make is that we're not looking for additional legacy, or I just have called generational assets.

Speaker Change: Obviously, you know how long we have been involved at the Great Park and we, you know, both luncha and San Francisco are long-term assets and, you know, while we have those assets, we also know that generally, you know, merchant builders are looking for an asset-liter approach.

Speaker Change: and we think that there's a real opportunity for us to use the experience we have working with partners and managing, you know.

Speaker Change: Larger communities.

Speaker Change: The two actually build on that platform.

Speaker Change: and the work at other land that we can work with and work with builders on, but that is not, as I say, a generational project, we don't need another 25,000 unit project. I don't have anything I can point you to today, but I can tell you that we're really optimistic that there's really an opportunity for us there to grow this business. There's always going to be demand for land.

Speaker Change: That's helpful, and again, I know there's no specifics here, but just a big picture.

Speaker Change: Would this be within California, your backyard, your area of expertise, or do you see an opportunity for five-point even, you know, kind of take out a approach elsewhere on the country and would you be working, you know, primarily with Lenore in that situation, or is this something that is open to the old University of Builders, given kind of your experience?

Speaker Change: Well, so I've started to say that we would, you know, I think right now focus on California because that's for a rat, although we wouldn't say we wouldn't look outside of it.

Speaker Change: and we definitely look to work with a broad spectrum of builders.

Speaker Change: and not just Lenard and what we're looking to do is that we would invest in future land deals and a partnership form with these builders and we'll have obviously our limited investment but we'll also get management fees and promote for our expertise.

Speaker Change: So, you know, except it's really just building on our current model and hopefully expanding that base of folks that we can work with.

Speaker Change: And once again, is it think about our company as I look at it today, we are a land company, we're a horizontal company, we're not looking to be vertical, but we think we have a lot of expertise on that horizontal that we want to grow on.

Speaker Change: Perfect. I appreciate that.

Speaker Change: If I could ask a second one, just kind of thinking through the pricing power that you have in your communities where you're selling off today.

Speaker Change: You mentioned, rate by-downs and incentives from builders and we're seeing that obviously in our channel sex as well, that right now, it's a pretty...

Speaker Change: It's a healthy demand environment, but one where I would say it's fairly competitive from a incentive standpoint and I'm curious as you

Speaker Change: Think about what that means for...

Speaker Change: Land, residuals, and values as we kind of weigh that...

Speaker Change: the Titan Vintori situation from a lot perspective with the...

Speaker Change: seemingly lack of

Speaker Change: Pricing power on the home side, really for the time being.

Speaker Change: How did you see that filtering through the land values over the next 12 to 24 months? You've got a lot of deals coming to the market. You still feel like you have price and power of the ability to raise land prices even as home prices on a net basis are pretty steady for the time being.

Speaker Change: Well, I think first what I would recommend I would make is because we're in California. A lot of the pricing power we're seeing is really DRIVE some California's acute land shortage.

Speaker Change: and the time it takes to get entitled land and once again, you actually get a snapshot of a much broader market than we're working in, you know, in Irvine, we still have, you know, you're right about the builders are helping sales for another hand, we still have the builder self-pricing power in Irvine.

Speaker Change: So, you know, we haven't really seen anything that would a road land and as we are out bidding and talking the builders, we're seeing our land, you know, values, you know, hold up.

Speaker Change: and, you know.

Speaker Change: And because of that, we are able to do that acute shortage of land and home sites, we are able to get some price appreciation in our land from transaction to transaction.

Speaker Change: Now we'll try that, you know, yes.

Speaker Change: Irvine is always a unique piece of property as you know. You know, in Valencia, we don't have quite as strong a push.

Speaker Change: But once again, based upon what we have going on up there, our builders are able to get some price appreciation. So we're not really seeing any downward pressure yet on land prices. And once again, I think a lot of that is just the just acute shortage of land. There's just very few places for builders to get in total land that's ready to go in California.

Speaker Change: Got it. I do have one final one and then I'll get back in here, but I could ask it quickly. Thank you for your time. You mentioned product, kind of program segmentation and product segmentation, and obviously that's so important to these larger communities.

Speaker Change: Are you seeing any kind of shifts in demand from builders these days as far as prioritizing entry-level versus move up or...

Speaker Change: Acid adult, or, you know, kind of, you know, a task-thers, a detach, any kind of trends you could point to, just in terms of what you're seeing in hearing from the builders, where there's greater demand or maybe less demand.

Speaker Change: You know, I would tell you that it's been pretty constant here, but you know, one of the very, you know, a real similarity between Irvine and Valencia, they are both very family oriented communities. And the, um...

Speaker Change: and so it's about schools, you know it's about family, it's about safety and both of them have the very similar profile, especially around schools, so the product is really kind of remaining consistent.

Speaker Change: and you know, I think that the builders are always looking at maybe will size it a little bit differently but we're not really seeing a big movement away from one product segment or another.

Speaker Change: Great, I appreciate all the time. Thanks a lot.

Speaker Change: Thank you. Next question comes from Andrew Akhan, Private Investor.

Andrew Akhan: Yeah, thank you very much for taking my call. I have two questions. One, I believe the City Council of San Francisco

Andrew Akhan: Vote next week on Candlestick, and I am wondering whether you guys would be willing to break out the book that I use as San Francisco Venture.

Andrew Akhan: doing Hunter's point in candle stick. It's not required under segment to operating counting rules, but I think it'd be helpful as an investor to understand the book's value each one separately.

Speaker Change: Second of all, going back to your pros up from 2016, you guys mentioned that the tax basis of your land exceeded the accounting book value by half a billion dollars.

Speaker Change: I'm wondering, is that something that a five point would benefit a from or is that really covered in the tax receivable agreements by the parties that have contributed to law.

Speaker Change: Thank you very much.

Speaker Change: Visualized, that was a single project.

Speaker Change: Everything we've done up to this point has presented it that way.

Speaker Change: You bring up a good point of something that we often think about and consider and so we'll take that under consideration.

Speaker Change: and the like, but for the time being, we don't have a way to do that right now, and because the project is so closely related to each other with respect to the requirements under the DDA, we aren't inclined to do that at this time. But I recognize your question regarding that, and we will provide some additional information going forward to help investors with that.

Speaker Change: with respect to the tax basis since that tax basis is associated with the Valencia Project.

Speaker Change: where we have that additional tax basis.

Speaker Change: And that practices is owned 100% by the company. Therefore, it will all go to the benefit of the company. And isn't really reflected in the tax receivable agreement. The tax receivable agreement had more to do with built-in gains. That reduces the built-in gains that were potentially on those on that asset, but it doesn't. It's not directly related to it. Does that make sense?

Unknown Attendee: Yeah, that does, so you guys will be able to benefit from the additional basis in Columbia and have been. Yeah, we have been benefiting from it.

Speaker Change: Yeah, so you guys will be able to benefit from the additional basis in blood.

Speaker Change: and have been. Yeah, we have been in a city in front of you. Yes, okay. Thank you very much and you guys are doing a great job. We'll have to see the stock moving.

Unknown Attendee: Yes, okay, thank you very much, and you guys are doing a great job. Glad to see your stock moving. Thank you, Andrew.

Unknown Attendee: And just remember, if you would like to ask questions, please press star 1, or you will keep that.

Speaker Change: Thank you, Andrew and just for a reminder of you, I'd like to ask question, please press star 1 or you tell full keybacks. You will hear confirmation tone and that will tell you that you are in my for Q. One moment will probably pull for more questions.

Unknown Attendee: You will hear confirmation told me that we'll tell you that you are in my for Q, one moment while you pour for more questions.

Speaker Change: Thank you for watching.

Myron Kaplan: And our next question comes from Myron Kaplan, private investor; please proceed. Yeah, hello guys. How are you? Fine, Myron, how are you? Okay, thanks for taking a look.

Speaker Change: Thank you for watching!

Speaker Change: and our next question comes from my rent capital, private investor. Please proceed. Hello guys, how are you?

Myron Kaplan: Questions? So, overall, you things that are looking up, I guess. Well, I would say, I'd like to say better than that. I think we're on a great path to a bright future. But what I want to ask about this management agreement that you emphasize is the renewal of some important that you could use as a template for future deals and so forth. I don't quite understand; it's important. I understand that maintaining it is important financially, but as far as for future deals, maybe they're delivering. Well, I think, once again, we're very optimistic about the program and what we've been working on here.

Speaker Change: Hi, I'm Iron How You. Okay, thanks for taking the questions.

Speaker Change: So overall, you think they're looking up, I guess.

Speaker Change: Well, I would say I'd like to say better than that. I think we're on a great path to a bright future.

Speaker Change: But...

Speaker Change: What I want to ask about this management agree.

Speaker Change: and this year I'm precise as the renewal is so important.

Speaker Change: that you could use as a template for...

Speaker Change: Future deals and so forth.

Speaker Change: I don't quite understand it's important to it.

Speaker Change: I understand that maintaining it is...

Speaker Change: is an important financial aid, but...

Speaker Change: as far as for future deals, maybe good.

Speaker Change: and Daniel Alvarado.

Speaker Change: Well, I think, you know, once again, we're very optimistic about the program and what we've been working on here, but, you know, it's a great structure, it's a template we look at, you know, it's been very successful here, we look at it as a really strong template as we move forward. So, you know, it's kind of a model for future deals and won't be necessarily always the deal, but we just think it's a really good way to start for help you think about the company. And where we're going with future deals.

Myron Kaplan: But it's a great structure; it's a template we look at. It's been very successful here; we look at it in a really strong template as we move forward. So it's kind of a model for future deals; it won't be necessarily the always the deal, but we just think it's a really good way to start for help you think about the company and where we're going with future deals. And nothing's contemplated as you have to size the right. Correct. So I guess, I guess you've got a better sponsorship of land for sale in plenty of coming up, we hope, starting next year.

Speaker Change: and nothing, nothing's contemplated issue, ever.

Speaker Change: So I guess you've got the...

Speaker Change: of better... strong.

Speaker Change: Young Shoe of Land for Sale.

Speaker Change: and Blensha are coming up we hope starting next year.

Myron Kaplan: Yes. Yeah, everything is progressing as anticipated.

Speaker Change: Yes, everything is progressing as anticipated.

Myron Kaplan: How is the selection or the realignment of the new board of directors? How does that affect operations? You know, I don't think we don't look at it as impacting operations at all. So we're, I think we want to get along a great path. So we do appreciate your questions, but we're very, we think we're just in a good spot and heading in the right direction. And can those figure optimistic that you'll be able to have some kind of development activity begin, it may be in a year or so? Yes, I mean, once again, we're very optimistic on how that is progressing with the city and the county.

Speaker Change: and how does the selection of those?

Speaker Change: The realignment of the new...

Speaker Change: New Board of Directors, toutors, that affect operations.

Speaker Change: You know, I don't think we don't look at it as impacting operations at all, so we're, I think once again, we're on a great path, so we do appreciate your questions, but we're very,

Speaker Change: We think we're just in a good spot and heading in the right direction.

Speaker Change: and I can also pick your optimistic that you'll be able.

Speaker Change: will have some kind of development activity begin in May.

Speaker Change: in the year or so. Yes, I mean once again we're very optimistic on how that is progressing with the city and county.

Myron Kaplan: So that you're succeeding in rebalancing the entitlements and so forth? Yes, it's moving; it's moving in a very positive direction.

Speaker Change: that

Speaker Change: are succeeding and reap.

Speaker Change: Balancing the entire Almancin so forth.

Myron Kaplan: Alright, well, guys are doing a really good job. Congratulations so far. Thank you, Myron. Thank you.

Speaker Change: Yes, it's moving, it's moving in a very positive direction.

Speaker Change: Guys, are doing a really good job in graduation so far

Unknown Attendee: There are no further questions at this time.

Speaker Change: Thank you, there are no further questions at this time, I would like to turn the floor back to Dan Hedigan for closing remarks.

Daniel Hedigan: I'd like to turn the floor back to Dan Hedigan for closing remarks. 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. Thanks everyone. Thank you. This does conclude today's telecomments. We thank you for your participation.

Dan Hedigan: 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. Thanks everyone.

Speaker Change: I'm going to take a look at the picture of my friend, Daniel Hedigan, and I'm going to take a picture of my friend, Daniel Hedigan.

Speaker Change: Thank you.

Unknown Attendee: You may disconnect your lines at this time.

Speaker Change: This does conclude today's telecarbons. We thank you for your participation. You made this connect your lines at this time.