Five Point Holdings

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. Because forward-looking statements relate to matters that have not yet occurred, These statements are inherently subject to risk and uncertainties. Many factors could affect future results and may cause Five Points' actual activities or results to differ materially from the activities and results anticipated in forelinking statements. These factors include those described in today's press release and Five Points' SEC filings, including those in the Risk Factor section of Five Points' most recent annual report on Form 10-K filed with the SEC. Please note that FivePoint assumes no obligation to update any floor listing statements. Now, I would like to turn the call over to Dan Hedigan, President and Chief Executive Officer.

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, Kim Tobler, our Chief Financial Officer, and Leo Key, our Senior Vice President of Finance and Reporting. 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 team's focus during the quarter and our strategic priorities and expectations for the remainder of 2025. Mike will then discuss the growth element of our operating strategy, after which Kim will give you an overview of the company's financial performance and condition, with updated guidance for the remainder of 2025. We will then open the line for questions. Turning to the first quarter, I'm pleased to report another successful quarter for FivePoint as we continue to build a program of consistent profitability. During a 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. 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. 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 payments. Third, we finished the quarter with total liquidity of $653.3 million, comprised of cash and cash equivalents totaling $528.3 million, an increase in 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+. 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. While 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. or 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 opportune time 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, Michael will have a few more remarks about that strategy shortly. 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, from matching home site sales to current home builder demand. Currently, home builder demand remains steady, and we continue to maximize the value of our land and maintain the margins embedded in that value. Two, 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 Points for the past few years. 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 are seeking growth opportunities through new acquisitions, joint ventures, and strategic relationships to ensure a growing future for FivePoint. 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. 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. Tim will provide more detail on our guidance for the remainder of 2025 during his remarks. I'd like to now touch on market conditions. Although the Federal Reserve has cut 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. Consumer sentiment is also being negatively impacted by the uncertainty surrounding tariff policies, which impacts consumer decisions on new home sales. Most of our gift 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. 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. Let me now provide you with some updates on our communities, starting with the Great Park neighborhoods. 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 of 2024. We currently have 15 active selling programs in the Great Park neighborhoods, with five additional programs planned to open later this year. 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. In addition to our continuing home buyer interest, we are still seeing demand from builders for our land at the Great Park. All of 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 home sites. These builders have completed their due diligence with the expectation that these land sales will close in the fourth quarter of this year. The contracted sales prices are consistent with our most recent sales. As I mentioned last quarter, the City of Irvine completed state mandated RHNA 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 land holdings 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 RHNA program adopted by the city. Next, I'll move to Valencia, our other active community. As a reminder, Valencia is in the early stages of its 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. During the first quarter, home sales remained relatively steady as our gift builders sold 69 homes versus 74 in Q4. We currently have seven actively selling programs in Valencia. Additionally, we anticipate that another five programs will open during 2025, offering a greater diversity of home offerings for prospective 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 enter into binding purchase and sale agreements. 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 markets. 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 units in LA County wildfires, we expect greater cooperation between officials and developers to exploit more housing supply to help mitigate the shortage. 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. 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 in an extremely supply constrained market. 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. Additionally, we remain ever focused on managing costs and controlling overhead as we grow our business in an efficient manner. Now let me turn over to Mike who will discuss FivePoint's growth opportunities.

Thanks, Dan. Let me briefly update you on our efforts in pursuing growth opportunities for FivePoint. As you heard us report on our last call, the land-light strategy that a number of publicly traded home builders have gravitated towards has given FivePoint 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 FivePoint to play to a 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. In uncertain market conditions like we have today, unique opportunities often present themselves around land that can enable FivePoint to create outsized returns. FivePoint 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. Bringing in capital partners reduces our capital investment and gives FivePoint 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. FivePoint 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. 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. Now let me turn it over to Kim to report on our financial results for the quarter.