Q1 2025 Five Point Holdings LLC Earnings Call
Greetings and welcome to the five point Holdings LLC first quarter 2025 conference call. As a reminder, this call is being recorded today's call may include forward looking statements regarding five point's business financial condition operations cash flow strategy and prospects forward looking.
Statements represent five point's estimates on the date of this conference call and are not intended to give any assurance as to 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.
Unknown Attendee: Many factors could affect future results and may cause Actual activities or results are different materially from the activities and results anticipated These factors include those described in today's press release and Five Point's SEC 5. those in the risk factors section of Five Point Holdings. recent annual report on Form 10-K, filed with the SBA. Please note that Five Point assumes no obligation to update any.
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 would like to turn the call over to Dan Hogan.
Daniel Hedigan: Now I would like to turn the call over to Dan Hedigan, President and Chief Executive Thank you. Good afternoon and thank you for joining our call.
Dan Hogan: President and Chief Executive Officer.
Speaker Change: Thank you good afternoon, and thank you for joining our call I have with me today, Mike Alvarado, our Chief operating Officer, and Chief Legal Officer, Jim <unk>, Our Chief Financial Officer, and Leo <unk>, Our senior Vice President Finance and reporting Stuart Miller, our executive Chairman is joining us remotely.
Daniel Hedigan: I have with me today Mike Alvarado, our Chief Operating Officer and Chief Legal Officer, Kim Tobler, our Chief Financial Officer, and Leo Key, our Senior Vice President of Finance and Reporting.
Daniel Hedigan: Stuart Miller, our Executive Chairman, is joining us remotely. On today's call, I'll update you on our Q1 results and review the status of the company's current operations, including our teams focused during the quarter and our strategic priorities and expectations for the remainder of 2025. Michael then discussed the growth element of our operating strategy, after which Kim will give you an overview of the company's financial performance in condition with updated guidance remainder 2025.
Speaker Change: On today's call I'll update you on our Q1 results and review the status of the company's current operations, including our teams focused during the quarter and our strategic priorities and expectations for the remainder of 2025.
Speaker Change: Mike will then discuss the growth element of our operating strategy after which Tim will give you an overview of the company's financial performance and condition.
Speaker Change: <unk> guidance remainder of 2025.
Daniel Hedigan: We will then open the line for questions. Turning to the first quarter, I'm pleased to report another successful quarter for Five Point as we continue to build a program of consistent profitability. During the quarter, we generated stronger than expected net income of $60.6 million, which exceeded our guidance by roughly $10 million. Our Q1 results reflect our continued focus on generating revenue, controlling our expenses, and managing our capital spend. Here are some additional highlights from the quarter. First, our Great Park Venture closed on all four of our anticipated residential land sales. These programs included 325 home sites on approximately 23.6 acres to three different builders for an aggregate purchase price of $278.9 million.
Speaker Change: Then open the line for questions.
Speaker Change: Turning to the first quarter I'm pleased to report another successful quarter for five point as we continue to build a program of consistent profitability.
Speaker Change: During the quarter, we generated stronger than expected net income up $66 million, which exceeded our guidance by roughly $10 million. Our Q1 results reflect our continued focus on generic revenue controlling our expenses and managing our capital spend.
Speaker Change: Here are some additional highlights from the quarter.
Speaker Change: First our Great Park venture closed on all four of our anticipated residential land sales. These programs included 325 Homesites on approximately 23.6 acres to three different builders for an aggregate purchase price of $278 $9 million.
Speaker Change: Second as a result of the Great Park operations during the quarter <unk> received a $143 3 million as this portion of distribution and its incentive compensation payments.
Daniel Hedigan: Second, as a result of the Great Park operations during the quarter, Five Point received $143.3 million as its portion of distribution and its incentive compensation payment. Third, we finished the quarter with total liquidity of $653.3 million, comprised of cash and cash equivalents totaling $528.3 million, an increase on our cash over year end of $97.5 million, and borrowing availability of $125 million under our unsecured revolving credit facility. Alongside our successful first quarter, I'm also happy to report that we received an upgrade in our credit rating from S&P. In recognition of our consistent earnings, cash generation, and management of overhead, the company moved from B- to B with a continued stable outlook, and our senior notes were upgraded from B to B+.
Speaker Change: Third we finished the quarter with total liquidity liquidity of $653 $3 million comprised of cash and cash equivalents totaling totaling $528 3 million and.
Speaker Change: An increase in our cash over year, and up $97 $5 million and borrowing availability of 125 million under our unsecured revolving credit facility.
Speaker Change: Alongside our successful first quarter I'm also happy to report that we received an upgrade in our credit rating from S&P.
Speaker Change: In recognition of our consistent earnings cash generation and management of overhead the company moved from B minus to B with a continued stable outlooks and our senior notes or upgraded from B to B plus.
Daniel Hedigan: As we look ahead to the remainder of 2025, we recognize that we are currently navigating a challenging economic environment with market uncertainty created by shifting tariff policies, higher mortgage rates and associated affordability issues. Our job is to filter out the noise and stay focused on the underlying economic data at both the national and local level. We are carefully monitoring the results reported by the National Home Builders and understand that several are experiencing reduced margins. Our communities are located in California markets that are chronically undersupplied, primarily due to California's challenging and restrictive land use approval process.
Speaker Change: As we look ahead to the remainder of 2025, we recognize that we are currently navigating a challenging economic environment with market uncertainty created by shifting tariff policies higher mortgage rates and associated affordability issues are.
Speaker Change: Our job is to filter out the noise and stay focused on the underlying economic data at both the national and local level.
Speaker Change: We are carefully monitoring results reported by the National Homebuilders understand that several are experiencing reduced margins. Our communities are located in California markets that are chronically under supplied primarily due to california's challenging their restrictive land use approval process.
Daniel Hedigan: are recently closed sales, including one this past week at the Great Park, are continuing evidence that there remains strong demand for our home sites, even with builders facing the uncertainty of current market conditions. Notwithstanding this uncertainty, we believe it is still an opportunity to move forward on the implementation of growth initiatives to complement our three existing communities. These growth initiatives will build upon the operating strategy we have been executing on for the past few years. I have a few more remarks about that strategy shortly.
Speaker Change: Our recently closed sales, including one this past week at the Great Park are continuing evidence that there remains strong demand for our home sites, even with builders facing the uncertainty of current market conditions.
Speaker Change: Notwithstanding this uncertainty we believe it is still an opportune time to move forward on the implementation of growth initiatives to complement our three existing communities. These gross initiatives growth initiatives will build upon the operating strategy, we have been executing on for the past few years.
Speaker Change: Life of a few more remarks about that strategy shortly.
Daniel Hedigan: Let me turn briefly, however, to our current operating strategy. The key elements of the strategy are one, we're optimizing home site value within our existing three premier master plan communities for matching home site sales to current home builder demand. Currently, homebuilder demand remains steady, and we continue to maximize the value of our land and maintain the margins embedded in that value. to we're carefully managing our fixed costs and overhead even while we pursue growth opportunities. We're also constantly looking to reduce or mitigate some of the fixed costs that come with these larger master plan communities, and we're maintaining the lean operating structure that has defined Five Point for the past few years.
Speaker Change: So let me turn briefly however to our current operating strategy. The key elements of the strategy are one we're optimizing homesite value within our existing Threep Premier Masterplan communities are matching homesite sales to current homebuilder demand.
Speaker Change: Currently homebuilder demand remained steady and we continue to maximize the value of our land and to maintain the margins embedded in that value.
Speaker Change: Two we are carefully managing our fixed costs and overhead even while we pursue growth opportunities. We're also constantly looking to reduce or mitigate some of the fixed cost that come with these larger master planned communities and we're maintaining the lean operating structure that is defined five points for the past few years.
Speaker Change: We're matching development expenditures with revenue generation.
Daniel Hedigan: We're matching development expenditures with revenue generation. Each new development area within our existing communities is analyzed from a construction phasing standpoint as we work alongside our public partners to deliver our infrastructure so that we are not deploying cash too far out in front of the needs of the development. Finally, we're seeking growth opportunities through new acquisitions, joint ventures and strategic relationships to ensure a growing future for Five Point. Our focus will remain on these strategic elements of our operating platform as we produce recurring earnings along with sustainable long term growth. With that said, while we know there might be some uncertainty from time to time, we remain confident in our current year expectations.
Speaker Change: Each new development area within our existing communities is analyzed from a construction phase and shameful standpoint, as he looks to fall as we work alongside our public partners to deliver our infrastructure. So that we are not deploying cash too far out in front of the needs of the development.
Speaker Change: Finally, we are seeking growth opportunities through new acquisitions joint ventures, and strategic relationships to ensure a growing future for five point.
Speaker Change: Our focus will remain on the strategic elements of our operating platform as we produce recurring earnings along with sustainable long term growth.
Speaker Change: With that said, while we know there might be some uncertainty from time to time, we remain confident in our current and your expectations. My last call I indicated that we were expecting better earnings for 2020 five would exceed 2024 and that we anticipate at close to $200 million and net income with obvious caveat regarding the timing of development process.
Daniel Hedigan: My last call indicated that we were expecting that our earnings for 2025 would exceed 2024, and that we anticipated close to $200 million in net income, with obvious caveats regarding the timing of development processes within the County of Los Angeles. We currently believe that we are on track to meet our prior guidance while we will continue to monitor evolving market conditions as the year progresses.
Speaker Change: Within the county of Los Angeles.
Speaker Change: We currently believe that we are on track to meet our prior guidance, while we will continue to monitor evolving market conditions as the year progresses.
Michael Alvarado: can provide more detail on our guidance for remainder of 2025 during his remarks.
Speaker Change: Tim will provide more detail on our guidance remainder of 2020 five during his remarks.
Speaker Change: Yeah.
Speaker Change: I'd like to now touch on market conditions.
Daniel Hedigan: I'd like to now touch on market conditions. Although the Federal Reserve has cut rate by 100 basis points in September. Recently announced tariff policies have created upward pressure on interest rates and inflation, with key mortgage interest rates moving mostly higher since end of the quarter. Consumer sentiment is also being negatively impacted by the uncertainty surrounding tariff policies, which impacts consumer decisions on new homes' sales. Most of our gift builders still have the ability to facilitate sales. We have seen a modest decline in the pace of sales over the past few weeks. Although interest rates and consumer sentiment are key data points in the housing market, Five Point's California markets generally remain chronically undersupplied, and we are actively engaged with our gift builders on new home site sales.
Speaker Change: Although the federal reserve has cut.
Speaker Change: Rates by 100 basis points since September recently announced tariff policies have created upward pressure on interest rates and inflation with key mortgage interest rates moving mostly higher since the end of the quarter.
Speaker Change: Consumer sentiment is also being negatively impacted by the uncertain D surrounding tariff policies, which impacts consumer decisions on new homes sales.
Speaker Change: Most of our guest builders still have the ability to facilitate sales, but we have seen a modest decline in the pace of sales over the past few weeks.
Speaker Change: Although interest rates and consumer sentiment are key data points and the housing market five points, California markets generally remain chronically under supplied we're actively engage with our guests dollars on new homesite sales.
Speaker Change: Let me now provide you with some updates on our communities starting with the Great Park neighborhoods.
Daniel Hedigan: Let me now provide you with some updates on our communities, starting with the Great Park neighborhood. 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. During the first quarter, builders in our Great Park community sold 233 homes versus 143 homes in Q4 2024. We currently have 15 active selling programs in the Great Park neighborhoods, with five additional programs planned to open later this year.
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 first quarter builders and our Great Park community sold 233 homes versus 143 homes in Q4 of 2024.
Speaker Change: We currently have 15 active selling programs in the Great Park neighborhoods with five additional programs planned to open later this year.
Daniel Hedigan: With the existing and future planned programs, we'll be able to continue to offer a wide variety of housing options in Great Park neighborhoods. addition to our continuing homebuyer interest, we're still seeing demand from builders for our land at the Great Park. All the five residential programs I've previously identified as expected to close in the first half of 2025 have now closed escrow with the last sale closing one week ago. We have also completed the bidding and contracting for a group of nine new residential programs being sold to six builders totaling 572 homesites. These builders have completed a due diligence with the expectation that these land sales will close in the fourth quarter of this year.
Speaker Change: With the existing and future planned programs, we'll be able to continue to offer a wide variety of housing options and great Park neighborhoods.
Speaker Change: In addition to our continuing homebuyer interest, we're still seeing demand from builders for Atlanta at the Great Park all the five residential programs. Our previous identified is expected to close in the first half of 2025 have now closed escrow with a last sale closing in one week ago.
Speaker Change: We have also completed the bidding and contracting for group of nine new residential programs.
Speaker Change: <unk> sold the six builders totaling 572 home sites.
These builders have completed due diligence with the expectation that these land sales will close in the fourth quarter of this year.
Daniel Hedigan: The contracted sales prices are consistent with our most recent sales. As I mentioned last quarter, the City of Irvine completed state-mandated RENA general plan and zoning updates for the Great Park Planning Area, which will provide the Great Park Venture with the opportunity to convert some or substantial portions of its remaining commercial landholdings to residential uses. We're continuing to study these options and are in ongoing discussion with the city to consider residential uses consistent with the RENA program adopted by the city.
Speaker Change: The contracted sales price are consistent with our most recent sales.
Speaker Change: As I mentioned last quarter the city of Irvine completed its state mandated Rena General plan and zoning updates for the Great Park planning area, which will provide the great park venture with the opportunity to convert some of our substantial portions of its remaining commercial land holdings to residential uses.
Speaker Change: We're continuing to study these options and are in ongoing discussion with the city to consider residential uses consistent with arena program adopted by the city.
Speaker Change: Yeah.
Speaker Change: Next I'll move to Valencia or other active community.
Daniel Hedigan: Next, I move to Valencia, our other active community. As a reminder, Valencia is in the early stages of its development and sells many future phases of land delivery ahead of it, which will enable us to provide much-needed housing in the Los Angeles market. During the first quarter, home sales remained relatively steady as our gift builders sold 69 homes versus 74 in Q4. We currently have seven actually signed programs in Valencia. Additionally, we anticipate that another five programs will open during 2025, offering a greater diversity of home offerings for respective home buyers. During the first quarter, we took two new communities to market totaling 159 home sites and we're working with two builders to finalize their due diligence and earn a binding purchase and sale agreement.
Speaker Change: As a reminder, lunch it is in the early stages of its development. It solves many future phases of land delivery ahead of it which will enable us to provide much needed housing in Los Angeles market.
Speaker Change: During the first quarter home sales remained relatively steady as our guest builders sold 69 homes versus 74 in Q4.
We currently have seven actually signed programs in Valencia.
Speaker Change: We anticipate another five programs opened during 2025 offering a greater diversity of home offerings perspective homebuyers.
Speaker Change: Yeah.
Speaker Change: During the first quarter we.
Speaker Change: We took to numerous new communities to market totaling 159 home sites and we're working with to builders to finalize their due diligence and a binding purchase and sale agreements.
Daniel Hedigan: We currently anticipate these sales will close towards the end of the year. We also continue to work with Los Angeles County and other agencies on our regulatory approvals for our next development areas in Valencia that will allow us to deliver thousands of additional home sites in the county's severely undersupplied market. In total, these development areas are expected to consist of approximately 8,900 market-rate home sites and 183 net acres of commercial land, approximately 139 of which is expected to cater towards industrial-focused uses. Additionally, given the recent loss of dwelling in this L.A. County wildfires, we expect greater cooperation between officials and developers to exploit more housing supply to help mitigate the shortage.
Speaker Change: We currently anticipate these sales will close towards the end of the year.
Speaker Change: We also continue to work with Los Angeles County, and other agencies on a regulatory approvals for our next development areas in Valencia, they'll allow us to deliver thousands of additional home sites in the county severely severely under supplied market.
Speaker Change: In total these development areas are expect to consist of approximately 8900 market rate homes sites and 183 net acres of commercial land.
Speaker Change: 139 of which is expected to cater towards industrial focused uses.
Additionally, given the recent loss of dwelling is L. A county wildfires, we expect greater cooperation with officials and developers to X by more housing supply to help mitigate the short term shortage.
Speaker Change: Turning to San Francisco.
Daniel Hedigan: Turning to San Francisco, as you may remember from our last call, the city and county and other applicable regulatory agencies gave us final approval to rebalance the entitlements between our two San Francisco communities, Candlestick and the Shipyard. We're currently working on our engineering for the next phase of infrastructure with the expectation of starting construction early next year. As we work on these plans, we continue to explore opportunities to bring in a strategic partner for this mixed-use bayfront community.
Speaker Change: As you May remember from our last call the city and county, and other applicable regulatory agencies gave us final approval to rebalance the entitlements between our two San Francisco communities Candlestick and the shipyard. We're currently working on our on our engineering for the next phase of infrastructure with the expectation of starting construction early next year.
Speaker Change: As we work on these plans we continue to explore opportunities to bring in a strategic partner for this mixed used bayfront community.
Yes.
Speaker Change: Yeah.
Speaker Change: Let me conclude by saying that while the housing and financial markets are adjusting to new policies and consumers are trying to gauge the impact of these policies on their home buying decisions.
Daniel Hedigan: Let me conclude by saying that while the housing and financial markets are adjusting to new policies, and consumers are trying to gauge the impact of these policies on their home buying decisions, We will remain focused on prudently managing development and sale of land within our master plan communities. land is still about location and scarcity. We have well located land and extremely supply constrained markets. In addition, our balance sheet and liquidity have us well positioned to work through the current market conditions and to preserve the value of our land holdings while we opportunistically explore growth opportunities.
We will remain focused on prudently managing the development and sale of land within our master planned communities.
Speaker Change: And there's still about location and scarcity and we are well located land in an extremely supply constrained markets. In addition, our balance sheet and liquidity have us well positioned to work through the current market conditions and to preserve the value of our land holdings, while we opportunistically explore growth opportunities.
Daniel Hedigan: Additionally, we remain ever focused on managing costs and controlling overhead as we grow our business in an efficient manner.
Speaker Change: Additionally, we remain ever focused on managing cost and controlling overhead as we grow our business in an efficient manner.
Michael Alvarado: Now let me turn it over to Mike who will discuss Five Point's growth opportunity. Thanks, Dan. Let me briefly update you on our efforts in pursuing growth opportunities for five As you heard us report on our last call, the land light strategy that a number of publicly traded homebuilders have gravitated towards has given Five Point the potential opportunity to work alongside the builders in a win-win scenario that would allow the builders to follow their land light strategy and Five Point to play to its strength in a land development business. To that end, we have been assessing acquisitions that fit into both short term and mid to long term land delivery models.
Speaker Change: Now, let me turn over to Mike, who will discuss five points gross opportunities.
Mike: Thanks, Dan Let me briefly update you on our efforts in pursuing growth opportunities for $5.
Mike: As you heard US report on our last call. The land light strategy that a number of publicly traded homebuilders have gravitated towards is given five point the potential opportunity to work alongside the builders in a win win scenario.
Mike: Allow the builders to follow their land land light strategy and five point to play to our strength in Atlanta development business.
Mike: To that end, we have been assessing acquisitions that fit into both short term and mid to long term land delivery models.
Michael Alvarado: In uncertain market conditions like we have today, unique opportunities often present themselves around land that can enable Five Point to create outsized return. Five Point is uniquely positioned to do this, given its expertise and experience in a land development business. Regardless of the size and projected development timeline for new acquisitions, like many of the public builders, we intend to acquire new assets in an asset light structure where we are bringing in third party capital in a joint venture arrangement that will allow us to expand the reach and diversity of our platform. As I have mentioned previously, this model is one in which we would own an equity interest in the venture, provide management services to the venture, and have the ability to earn an incentive promoted interest for excellent performance.
Mike: And uncertain market conditions like we have today unique opportunities often present present themselves around land that can enable five point to create outsized returns.
Mike: Five point is uniquely positioned to do this given its expertise and experience and a land development business.
Mike: Regardless of the size and projected the development timeline for new acquisitions like many of the public builders, we intend to acquire new assets and an asset light structure, where we are bringing in third party third party capital and a joint venture arrangement that will allow us to expand the reach and diversity of our platform.
Mike: As I have mentioned previously this model as one in which we would own an equity interest in the venture.
Mike: Provide management services debenture and have the ability to earn an incentive promoted interests for excellent performance.
Michael Alvarado: bringing in capital partners reduces our capital investment and gives Five Point opportunities to move to an asset lighter balance sheet model under a well crafted partnership program. It is not lost on us that capital may be slow to make investment decisions in this current environment. But the need and demand for housing in many job centers around the country will continue to drive the deployment of capital into this market segment. Capital also likes to invest with companies whose management teams have extensive experience with embedded systematic financial and operational controls that can be trusted when investing their capital.
Mike: Bringing in capital partners reduces our capital investment against five point opportunities to move to an asset lighter balance sheet model under a well crafted partnership program.
Mike: It is not lost on us that capital may be slow to make investment decisions in this current environment.
Mike: But the need and demand for housing in many job centers around the country. We will continue to drive the deployment of capital into this market segment.
Mike: Capital also likes to invest with companies, whose management teams have extensive experience with embedded systematic financial and operational controls that can be trusted when investing their capital.
Michael Alvarado: Five Point has the management experience and expertise, along with public company level financial and operational controls, which can and has led to extraordinary achievements like what we are seeing with our existing Great Park venture. Indeed, the Great Park Ventures members have seen rising returns over the last several years, driven by a combination of our management of the asset and the active engagement of the partners. We believe this is a business model that we can take advantage of as we look at other opportunities for future growth of the company.
Speaker Change: Five point has the management experience and expertise.
Speaker Change: Along with public company level financial and operational controls, which can and has led to extraordinary achievements like what we are seeing with our existing great Park venture.
Speaker Change: Indeed, the gray part ventures members have seen rising returns over the last several years driven by a combination of our management of the asset and the active engagement of the partners.
Speaker Change: We believe this is a business model that we can take advantage of as we look at other opportunities for future growth of the company.
Speaker Change: Well, we don't have any transactions to report at this time, we still anticipate sharing new opportunities with you before the end of the year.
Michael Alvarado: While we don't have any transactions to report at this time, we still anticipate sharing new opportunities with you before the end of the year.
Kim Tobler: Now let me turn it over to Kim to report on our financial results for the quarter. Thank you, Mike. As Mike and Dan have shared, we are proud of how we concluded our first quarter by exceeding our guidance.
Speaker Change: Now, let me turn it over to Ken to report on our financial results for the quarter.
Ken: Thank you, Mike as Mike and Dan have shared we are proud of how we concluded our first quarter by exceeding our guidance while at the same time, we've been monitoring the markets closely as we look forward to the coming quarters, and our land development activities and anticipated land sales later this year.
Kim Tobler: Well, at the same time, we've been monitoring the markets closely as we look forward to the coming quarters and our land development activities and anticipated land sales later this year. First, as Dan noted, S&P recently reviewed our credit rating and determined it was appropriate to improve our ratings. I appreciate the time and effort S&P put forward to understand our structure and strategy and the confidence they have expressed in our ability to execute on our plans for the next 12 months.
Ken: First as Dan noted S&P recently reviewed our credit rating and determined it was appropriate to improve our ratings I. Appreciate the time and effort S&P put forward understand our structure and strategy and the confidence they have expressed in our ability to execute on our plans for the next 12 months.
Ken: I'm now going to review our first quarter financial results, then I will conclude by updating the guidance of what we are expecting for the remainder of 2025.
Kim Tobler: I'm now going to review our first quarter financial results, then I will conclude by updating the guidance of what we are expecting for the remainder of 2025. In the first quarter, we recognized $60.6 million of net income. This is made up of the following components. We recognize $71.4 million of equity and earnings from our unconsolidated entities, $70.9 million of which came from the Great Park Venture. The equity and earnings from the Great Park Venture was attributable to net income of $206.3 million, which resulted from land sales revenue of $278.9 million. and a 75% gross margin.
Ken: In the first quarter, we recognized $66 million of net income. This is made up of the following components.
Ken: We recognized $71 4 million of equity in earnings from our unconsolidated entities $79 million of which came from the Great Park venture.
Ken: The equity in earnings from the Great Park venture was attributable to net income of $206 $3 million, which.
Ken: <unk> from land sales revenue of $278 9 million.
Ken: And it and a 75% gross margin.
Kim Tobler: The venture also had $6.4 million of price participation in Papa Revit. Five Point added $12.6 million of management services revenue, $9.2 million of which is associated with the incentive compensation from the Great Park.
Ken: The venture also had $6 $4 million of price participation in Papa revenue.
Ken: Five point added $12 $6 million of management services revenue $9 2 million of which is associated with the incentive compensation from the great Park.
Kim Tobler: Our first quarter SG&A was $14.8 million, and finally, we recognized $9.5 million of tax expense.
Ken: Our first quarter SG&A was $14 $8 million and finally, we recognized $9 $5 million of tax expense.
Dan Hogan: Well, a few words about our liquidity and cash as Dan mentioned, we ended the quarter with $528 $3 million of cash as well as $125 million of availability on our revolving credit facility, resulting in total liquidity of $653 3 million at the end of the quarter our debt to total capitalization.
Kim Tobler: Now a few words about our liquidity in cash. As Dan mentioned, we ended the quarter with $528.3 million of cash, as well as $125 million of availability on a revolving credit facility, resulting in total liquidity of $653.3 million. At the end of the quarter, our debt to total capitalization ratio was 19.2%, and our net debt is effectively zero. During the quarter, we generated net cash flow of $97.5 million, the significant components of which were cash inflows of $112.9 million from the Great Park Venture distributions and $30.4 million from incentive compensation payments. This was offset by project related costs at Valencia and San Francisco and SG&A cash outflows of $51.1 million combined.
Dan Hogan: Ratio was 19, 2% and our net debt is effectively zero.
Dan Hogan: During the quarter, we generated net cash flow of $97 $5 million.
Dan Hogan: Significant components of which were cash inflows of over a $112 $9 million from the great Park venture distributions and $34 million from incentive compensation payments.
Dan Hogan: This was offset by project related cost at Valencia in San Francisco, and SG&A cash outflows of $51 $1 billion combined the.
Kim Tobler: The remaining net positive cash flow of $5.3 million was from miscellaneous sources.
Dan Hogan: The remaining net positive cash flow of $5 $3 million of some miscellaneous sources.
Dan Hogan: Now, let me update the guidance that I gave you concerning our expectations for the remainder of 2025.
Kim Tobler: Now let me update the guidance that I gave you concerning our expectations for the remainder of 2025. We currently expect to have just under $10 million of net income for the second quarter. with the balance of our anticipated earnings weighted towards the end of the year. You'll recall that we previously indicated that we expect to have net income for the full year of close to $200 million with the caveat that processes within the county of Los Angeles would function as we hoped going into the year. While there is plenty of noise in the markets, we have not had any indications that would cause us to modify our guidance at this time.
Dan Hogan: We currently expect to have just under $10 million of net income for the second quarter.
Dan Hogan: With the balance of our anticipated earnings weighted towards the end of the year.
Dan Hogan: You'll recall that we previously indicated that we expect to have net income for the full year of close to $200 million with the caveat that processes within the county of Los Angeles would function as we hoped during the going into the year. While there is plenty of noise in the markets. We have not had any indications that would cause.
Dan Hogan: Cause us to modify our guidance at this time.
Kim Tobler: As it relates to our cash and senior debt, we are continuing to monitor the debt markets and the economic environment generally, and we remain ready to effect a refinance transaction for our senior notes, including a pay down of principal when we deem it prudent to do so.
Dan Hogan: As it relates to our cash in senior debt, we are continuing to monitor the debt markets and the economic environment generally and room and we remain ready to effect a refinance transaction for our senior notes, including the pay down of principal when we deem it prudent to do so.
Dan Hogan: With that let me turn it back to the operator, who will now open it up for questions.
Unknown Attendee: With that, let me turn it back to the operator who will now open it up for questions. Thank you.
Dan Hogan: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Unknown Attendee: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your confirmation tone will indicate your line is You may press start to remove. Participants Using Speaker Equipment and may be necessary to pick up the handset before pressing the button.
Dan Hogan: A confirmation tone will indicate your line is in the question queue you.
Dan Hogan: You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Unknown Attendee: One moment, please, while we pull Our first question.
Dan Hogan: One moment, please while we poll for questions.
Dan Hogan: Our first question.
Speaker Change: Our first question comes from the line of Kenneth pounds with Castleberry Advisory. Please proceed with your question.
Kenneth Pounds: Our first question comes from the line of Kenneth Pounds with Castleberry Advisory, please proceed with your question. Good afternoon, gentlemen. A very good quarter.
Speaker Change: Hi, good afternoon, gentlemen, a very good quarter.
Daniel Hedigan: The governor mentioned that perhaps there'd be some layers of regulation taken off or some speed up because of, you know, even the more acute housing situation. Would that potentially benefit year two development?
Speaker Change: The Governor mentioned that perhaps there'd be some layers of regulation taken off for some speed up because of so even the more acute housing situation would that potentially benefit.
Speaker Change: Your two developments.
Speaker Change: Hi, Kenneth Thanks for the question and the answer is absolutely.
Daniel Hedigan: Hi, Kenneth. Thanks for the question. And the answer is absolutely. Anything we can do to expedite process in California is supportive of us delivering housing.
Speaker Change: And anything we can do to expedite processing California's supportive of us delivering housing.
Daniel Hedigan: Is there anything like finite on there? Have you seen any like changes in rules or timelines? There's been a lot of discussion in Sacramento, but we haven't seen anything concrete yet. But there also is a lot of legislation this year, because there is an increased focus every year on the lack of housing supply in California. So where I don't have anything today I could share with you, there is a lot of activity that we're monitoring in Sacramento.
Speaker Change: Is there anything like finite on there have you seen any like changes in rules or timelines.
Speaker Change: There's been a lot of discussion in Sacramento.
Speaker Change: But we haven't seen anything concrete yet, but there also is a lot of legislation. This year because there is an increased focus every year on the lack of housing supply in California. So we're I don't have anything today I can share with you. There is a lot of activity that we're monitoring.
Monitoring in Sacramento.
Speaker Change: Great talked about San Francisco, and I guess, starting next year do you have Oh when would you perhaps have some capex plans or more of a budget for next year for that.
Unknown Attendee: Great.
Kenneth Pounds: You talked about San Francisco, I guess, starting next year, do you have, when would you perhaps have some CapEx plans or more of a budget for next year for that? Yeah, Kenneth will will like this is Tim will likely start giving some insight on that towards the end of the year early next Okay, thank you. Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah, Janet will license as Kim will likely start, giving some insight on that towards the end of the year early next year.
Speaker Change: Great. Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of.
Ben Fatter Ratner: Our next question comes from the line. Ben Fatter Ratner with Space Summit Capital.
Speaker Change: Then fatter ratner with space semi capital.
Ben Fatter Ratner: Please proceed with Hi, just for the record, I'm calling in a personal capacity, not for any firm. So you're, you have cash roughly equal to your debt. Every week that goes by, there's a drag that costs shareholders money. Why aren't you being more proactive in reducing the debt while you wait for market conditions? I just don't see the point of sitting with so much cash right now when you have a negative carry. Can you comment?
Speaker Change: Please proceed with your question.
Speaker Change: Hi, just for the record I'm I'm, calling in a personal capacity not for any firm.
Speaker Change:
Speaker Change: So you're you have cash roughly equal to your debt every week that goes by there is a drag the cost shareholders' money.
Speaker Change: Why arent you being more proactive in reducing the debt.
Speaker Change: Will you wait for market conditions, I, just don't see the point.
Speaker Change: Upsetting with so much cash right now when you have a negative carry.
Speaker Change: Can you comment.
Speaker Change: Yeah, Ben this is Kim.
Kim Tobler: Yeah, Ben, this is Kim. You know, the challenge that we face is the 200 basis point cost of paying down the debt. And there was a short period of time when it made it seemed to make sense if we could have refinanced at a lower rate. But given the way the markets have moved, It doesn't seem prudent until that premium is removed late in the year. So just to say, as we said, we're monitoring the markets. We recognize that it is a bit of a carry, but we're also earning quite a bit on the cash.
Speaker Change: You know the challenge that we face is that 200 basis point cost of paying down the debt.
Speaker Change: And there was a short period of time when it made it seemed to make sense.
Speaker Change: We could have refinanced at a lower rate.
Speaker Change: But given the way the markets have moved.
Speaker Change: It doesn't seem prudent until that debt.
Speaker Change: That premium is removed late in the year. So just to say as we said we're monitoring the markets.
Speaker Change: We recognize that it is a bit of a carry but we're also earning quite a bit on the cash we're in a good return we're in over 4% on the money we have.
Speaker Change: And.
Ben Fatter Ratner: We're earning a good return. We're earning over a very significant dent in the ability to do that. So we're looking at it. But on that on that point, just to push back, I mean, you can earn about 4% on cash, it costs you over 10% in coupon, so you're spending $30 million. of negative carry, the cost to take that out would be 10 million bucks. I mean, I'm not suggesting you take out the whole thing. But I just the math, the math on taking out some of it now I think is accretive. I don't I don't see why you would incur you know, a six point Delta.
Speaker Change: That's.
Speaker Change: 200 basis points on the full amount makes a very significant dent in our the ability to do that.
Speaker Change: So we're looking at it.
But on that on that point just to push back I mean, you can earn about 4% on cash and cost you over 10% in coupons, so you're spending.
Speaker Change: $30 million.
Speaker Change: Of negative carry.
Speaker Change: The cost to take that out would be 10 million Bucks I mean, I'm not suggesting you take out the whole thing.
Speaker Change: But I just.
Speaker Change: The math the math on taking out some of it now I think is accretive I don't I don't see why you would.
Speaker Change: Incur.
Speaker Change: You know a six point.
Speaker Change: Delta.
Kim Tobler: for seven months when you can take it out right now at 102. It just it seems like cost effective to do so. But I just I wanted to go on record saying that. Yeah, I appreciate it, Ben.
Speaker Change: Four seven months when you can take it out right now at 102, it just it seems like.
Speaker Change: Cost effective to do so.
Speaker Change: I wanted to go on record, saying that yeah.
Speaker Change: I appreciate it.
Dan Hedigan: So, in terms of just the Great Park land sales that you did, it's amazing, the numbers just keep going higher. It looks like it was around $12 million per acre for this last land sale. When you say that the additional land sales will be in line with what occurred, just to be clear, you're saying that $12 million is now the future number, or is it kind of the $10 million that you had talked about previously?
Speaker Change: So in terms of just the Great Park land sales that you did it's amazing the numbers just keep calling higher it looks like it was around $12 million per acre foot.
Speaker Change: For for this last.
Speaker Change: Land sale.
Speaker Change: <unk>.
Speaker Change: When you say that the additional land sales will be in line with what occurred is just to be clear, you're saying that 12 million is now the future number or is it kind of the 10 that you had talked about previously.
Dan Hogan: Dan This is Dan.
Dan Hedigan: Ben, this is Dan. The blended number on the last four sales that closed where I gave you the information revenue is about 11.8 million. We are still seeing sales in that area, I would not start suggesting that 12 is the new standard. But you know, our most recent sale and other bids we have out there are consistent with that 11 million number.
Dan Hogan: The blended number on the last four sales of close where I gave you. The information revenue is about $11 8 million we're.
Dan Hogan: We are still seeing sales in that area I would not start suggesting the 12 as the new standard, but you know our most recent sale and other bids we have out there are consistent with that 11 million number.
Speaker Change: Okay, and then just in terms of the commercial land.
Dan Hedigan: Okay, and then just in terms of the commercial land, and the ability to put for the potential ability to convert it into residential. What do you think the timing looks like, in terms of having the go ahead from from the city of Irvine to re entitle that land for residential purpose? You know, Ben, we're in kind of ongoing discussions on that topic. And I don't think I can really put a time frame for it. Just know that we are actively involved looking at it. and we'll have more information later this year. Okay.
Dan Hogan: And the ability to or the potential ability.
Speaker Change: To convert it into residential.
Speaker Change: Why do you think the timing looks like.
Speaker Change: In terms of having the go ahead from from the city of Irvine to re entitle that land for residential purposes.
Speaker Change: You know Ben we're in kind of ongoing discussions on that topic and I don't think I can really put a time frame for it just know that we're actively involved looking at it.
Speaker Change: We'll have more information later this year.
Speaker Change: Okay, Alright, great. Thank you appreciate it and great quarter.
Unknown Attendee: All right. Great. Thank you. Appreciate it. Great quarter. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Andrew Oakland: Our next question comes from the line of Andrew Oakland, a private investor, please proceed. Hi guys, thanks for taking my call. I apologize if I can find this somewhere in the 10k. But how much commercial land do you have left in We have doing a map, we have 100 acres of commercial land between four sites that we constantly look at, we call lots two, seven, 10 and 11. Okay. And there would be some obviously that couldn't all sold in this way. left for open space and stuff like that. Is that Well, those are actually all of our open space and other obligations and that type of land have already been met through other obligations.
Speaker Change: Our next question comes from the line of Andrew Okay, a private Investor. Please proceed with your question.
Speaker Change: Hi, guys. Thanks for taking my call and I apologize if I can find that somewhere in the 10-K, but how much commercial land do you have left entitled and Irvine.
Speaker Change: As far as acres.
Speaker Change: So.
Speaker Change: We have.
Speaker Change: I'm doing the math, we have 100 acres of commercial land between.
Speaker Change: Four sites that we constantly look at what we call a lots to 710 and 11.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And there would be some obviously that couldnt all.
Speaker Change: He sold them. This way there's got to be some left for open space and stuff like that is that fair.
Speaker Change: Well those are actually.
Speaker Change: All of our open space and other obligations and that type of land have already been met through other obligations. So these are these are gross acres, though you don't get 100% efficiency in the sense that you do have streets parks. Some other things that would go into them on a residential basis.
Unknown Attendee: So these are these are gross acres, though, you don't get 100% efficiency in the sense that you do have streets, parks, some other things that would go into them on a residential basis. Okay. Are you willing to give away like, was that like 80% or something? You know, generally speaking, I just as a matter of course use 85 Okay, thanks a lot for center efficiency.
Speaker Change: Okay are you all.
Speaker Change: Going to give them what was that like 80% or something.
Speaker Change: Not.
Speaker Change: Generally speaking I, just as a matter of course use 85.
Speaker Change: Thanks, a lot percent efficiency.
Unknown Attendee: Great quarter. Thanks a lot for answering my question. Thank you.
Speaker Change: Yeah, great quarter. Thanks, a lot for answering my question. Thank you.
Yes.
Speaker Change: Thank you.
Myron Kaplan: Our next question comes from the line of Myron Kaplan, a private investor. Please proceed.
Myron Kaplan: Our next question comes from the line of Myron Kaplan private Investor. Please proceed hi, Hi, Ken.
Myron Kaplan: I can't do well, Myron. So really, the Great Park is a gift that never stops giving. Absolutely. We're very grateful for the work that's been done there.
Speaker Change: Yeah.
Speaker Change: Good well Myron.
Speaker Change: So really the Great Park is the gift that never shopped forgive me.
Speaker Change: Absolutely, we're very grateful for the work that's been done there.
Speaker Change: Yes.
Speaker Change: Very good quarter.
Speaker Change: So I guess the plan is at the end of the refi that.
Myron Kaplan: So I guess the plan is at the end of the year to re Yeah, if the markets are open, if you've been following the high yield markets, it's a bit challenging out there right now. paywall. You could pay off the bond and probably Unknown Speaker Yeah, we're looking at all those options, my Anyway, very good.
Speaker Change: Okay.
Speaker Change: Wait for the.
Speaker Change: Two points should come off.
Speaker Change: Yeah, if the markets are open.
Speaker Change: <unk> been following the high yield markets.
Speaker Change: It's a bit challenging out there right now.
Hello.
Speaker Change: You can pay off.
Speaker Change: On.
Speaker Change: And probably work.
Speaker Change: A very small issue of 202.
150 million and then you have the revolver.
Speaker Change: Yes.
Speaker Change: Yeah, we're looking at all those options Margaret Yeah, I mean, I don't see how the market scan refuse yet.
Speaker Change: Anyway, very good I guess.
Myron Kaplan: I guess, Valencia, you're going to try to gear up. Yeah, we're trying to get a reasonable pipeline that gives us the strength to have multiple years of product available to give us a longer pipeline. And we're working hard on that process.
Speaker Change: Are you going to try to Europe.
Speaker Change: Yeah, we're trying to get a reasonable pipeline that gives us the strength to have multiple years of product available to give us a longer pipeline and we're working hard on that process.
Myron Kaplan: Well, the Palisades fires and stuff, does that augment the thrust behind? Well, I think that the fires, the recent fires have created need. We're still sorting out the impacts it has on the government approval process.
Speaker Change: The palisades fires and stuff.
Speaker Change: Ben.
Speaker Change: The thrust behind that or is it.
Speaker Change: Okay.
Speaker Change: Uh-huh frozen.
Speaker Change: Well I think that the the fires the recent fires have created need.
Speaker Change: We're still sorting out the impacts it has on the.
Speaker Change: The government approval processes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Yes.
Speaker Change: Yes.
Speaker Change: It is but we'll have more to say about that later in the year as well.
Myron Kaplan: is but we'll have more to more to say about that later in the year as well. Thanks, Myron. Thanks.
Speaker Change: Okay.
Speaker Change: Well done thanks.
Speaker Change: Thanks Mara.
Speaker Change: Thank you.
Speaker Change: And we have reached the end of the question and answer session I would like to turn the floor back to Dan had again for closing remarks.
Unknown Attendee: And we have reached the end of the question and answer session.
Daniel Hedigan: I would like to turn the floor back to Dan Hedigan. Thank you. On behalf of our management team, we thank you for joining us on today's call and we look forward to speaking with you next quarter. Thank you.
Speaker Change: Thank you on behalf of our management team. We thank you for joining us on today's call and we look forward to speaking with you next quarter.
Speaker Change: Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Unknown Attendee: This concludes today's conference and you may disconnect your line. Thank you for your participation.
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